Staking as a Service

Transcript

a pleasure to welcome everyone on behalf of the crypto valley association my name is emily lorenz i'm on the board of the cba and in my daytime job i work for ledger's b2b arm so many from the community and the members have asked about staking an event on staking as a service because just looking back the past quarters there have been more and more proof-of-stake chains um proof-of-stake is uh showing up and i believe that because we have many ecosystem players and members of the crypto valley association who are playing an active role in staking as a service

we are going to dive into that with block daemon and with bitcoin swiss with edge and nod and with kraken and in the first part of this uh session constantin i will hand it over to you because you're going to share a bit about um the current hype and also um what is what you guys do at blog game one so over to you yeah thank you so much and i'll try to keep this very brief and informative for everyone let me make sure i'm screen sharing correctly here we go you should be able to see the screen i'm assuming uh okay great

now i kind of changed the name of this presentation sorry just briefly uh mostly because when we talk about staking really what we're doing with talking about um economical network protection and so uh staking in in its most simple form is an economical system tied to a technical one that allows for network integrity to be managed over time and i'll talk briefly about it um i'm the ceo and founder of block daemon just as means of introduction we're the largest independent node operator in the world we run 5000 full nodes for financial institutions to send transactions to crypto networks

and so we provide high availability api infrastructure so exchanges custodians financial services companies can hammer transactions through blockchain networks without being impeded by the inherent network complexities and cardiac nature of those networks we also run around 500 validators across 20 proof of stake networks um we're normally a wide level provider meaning we often you don't know that it might be us who runs a node we um you know allow for people to [Music] you know name the validator and we run it on their behalf and we run public block demon validators in the network and so

um and so we're we're fairly adept in part automation part manual uh processes where security requires it um to run uh nodes with very high slas insurance and iso certification et cetera et cetera and so when we talk about staking so i'm going to touch on these four little dimensions here uh sticking as a service as a use case the emergency of sticking as a service quick dive into some historical dates um reasons to believe in staking as a service and early adopters who currently are in the space um and so um the so i'd be fairly swift and so uh current hype uh i mean you know ultimately in a simplistic way

and feel free to read through this and we'll share those slides um the the big thing is you know great example currently that's being had is around bitcoin's energy consumption um and we're abstracting away a lot of complexity here proof of stake secures networks not by compute and energy power but by value which means by delegation of tokens connected to nodes and the more tokens are connected to a node or delegated to a node the more powerful the node is in the network and it gets to decide what blocks and transactions go into the network so rather than having a compute exercise that by definition becomes more complex and energy consuming over time proof of

stake is purely based on economical reputation of the node participants which is measured by most networks amount of stake that's delegated to these networks and so for companies like us for example when someone wants to large institutions want to delegate to us we actually sign contracts with them we offer insurance etc etc and so when they look at the different list of potential nodes to delegate against they will do due diligence and our reputation is really what makes people choose us over others mostly on the fee side you'll find that prices tend to converge

to to the same i don't think they necessarily go down but obviously a lot of this is public information and so the prices are fairly consistent that's often not a huge differentiator the differentiators the adjacent services by staking providers but so sas is low risk and low energy consumption and because it's um so staking as a service here it starts as an unfortunate abbreviation of the sad term is a really interesting economical tool as well you have to think of um staking networks as bonds financially and so when the treasury in

the country submits bonds ultimately they take liquidity out of the market for a fixed yield and staking networks do the same and so they the whole concept around staking is that the network wants to lock in liquidity for a particular yield over time and so for the physical network or protocol foundation often it's a very economical means to also manage demand and and so there's a lot of different statistics that go into staking yields one is the minimum staking requirements per node the total amount of tokens that are staked all will indicate

you know what percentage of yield uh people can earn and because it's fun and macroeconomics and interesting speculators love that type of area it's an area where inside knowledge can create a lot of alpha and so there's always a strong speculator interest vcs specifically have pumped a ton of capital into the ecosystem by pre-purchasing tokens at discounts um and then you know ultimately there's a lot of room for uh derivative products as well on top of it and so the current hype is really a factor of uh these networks technically

going live a lot of capital uh physically going into these networks and then the joy and fun of you know fast growth or decline that comes with it so there's definitely a very strong speculative part to this at this current moment in time these networks as uh will become a lot more stable over a longer time period right so once you start to have derivative products um you have lending functionality and probably in five to ten years the volatility will be a lot less but in the first couple of years normally these networks see a ton of volatility historically um you know proof of work obviously

we've touched on it was the first sort of big mechanism in validating transactions on blockchains proof of stake is sort of generation three um and so the the you know there's a couple of examples here if you're not familiar with it cosmos genuinely i think is the largest early one that was around there's been a lot of great work done by those guys that a lot of the other protocols learned and lean from the larger ones now that you hear a lot about a polka dot and then there's really the the big big thing that's uh the elephant in the room here is eth 2.0 because it is traditionally a proof of work that's migrating to proof of stake so

perfect example of what i'm talking about is you have the second largest cryptocurrency migrating from a proof-of-work mining and minting service to a proof-of-stake service stake economical system and that will be a huge inflection point to our industry because ethereum at this point really is seen as a sort of fairly standard asset besides bitcoin and the liquidity and volume required for ethereum means that for the first time rather than starting a new proof-of-stake network from scratch we're actually switching a network that already has the enormous liquidity an enormous ecosystem enormous d5

functionality available so it'll be an absolute super gow of an event um if you're into um you know predicting also the economics behind it it's a lot more complex because there's a lot more history there the main reason why ethereum is doing it is ultimately um you know there's a there's really two factors one is energy consumption the other one is speed and ability of the network to reach consensus and to actually validate transactions will also increase over time so there's an interesting other component to it let me see okay um so yeah so there's different folks in this ecosystem there's

crypto exchanges and apologies to brian for naming finance here we should have referenced kraken obviously since they're part of this i'll make sure to rectify it uh kraken is actually a great example of an exchange that allows people to earn yields uh that is actually also a bank and fully regulated and so uh you know compared to a binance maybe as a sort of shout out here is kraken as a crypto exchange that people can hold assets in and also earn interest on these assets without having to run their own notes without incurring any of the risk ultimately that's associated to a proof of stake networks um there are uh institutional crypto asset custodians

um fireblocks one of our partners for example um is someone if you're that also offers custodial services you can host your tokens there and then earn yield you can't trade your tokens so one of the fun things that something like kraken does is liquid staking so you can actually hold tokens and sell them and earn interest with institutional assets normally that are sit on custodians there's a whole period to pull out assets different use case for different folks might have different return rates there's venture capital firms uh blockchain great example there's a bunch of them they buy tokens they hold enormous amount of power in these networks there are normally early

investors and so think of them as see these in these protocols that can wield a ton of influence specifically early on when a network goes live these guys will onboard their token holdings onto validators those tend to be very important in the network um and over time you see that filled out and then there's guys like us who provide staking infrastructure right and so we're a non-custodial company um and so we try to work with um you know all the different categories of companies you see here to actually provide the core level node infrastructure and validators right and so um all of these entities might or might not decide to run their own notes they might outsource they the stack composition

um looks um very very different um and so the biggest thing absent here are the actual foundations and protocols uh edge node antigonus here is a great example of actually an entity that's you know super active obviously in the space and someone we actually treat like an institution um we see them as a potential customer um and obviously they're kind of the think of them as the treasury in federal reserve of a protocol right and so they uh see look at the health of a network holistically um they might use funds to stimulate certain activity in the network to solve certain problems in the network where they feel like hey

there's technology that would aid the well-being of the foundation and the network will pay someone to build it and so they are a very important stakeholder in that um you know what's kind of fun about it uh first one i'd say it's actually not really correct uh consistent yield uh yield is not really consistent in the sense of like a bond necessarily as a derivative product it can be but yield actually is normally calculated by each protocol a little differently some protocols also reward certain node behavior over time and so there's different indicators that make for good yield and so we shy away from guaranteeing

yield for example mostly because there are also factors that you can't control which is how much tokens of the total free amount i actually stake to a network might indicate the yield mostly because if enough tokens are sucked onto nodes you have limited liquidity yield might go down because the protocol foundation might want to have more liquidity for example and so there's a lot of factors that make this inconsistent um but obviously um you know there's also the other side of it where something like east 2.0 economically when a small fraction of tokens is connected to nodes you can make xor you know you can make 15 20 of yield and so

um it changes the barriers to participation are low compared mining which is true you can just hold tokens and delegate to a particular um to a particular uh validator in these networks so it's a very very short on-ramp to really kind of a d5 type of product or actually nah it's actually probably the wrong term but um it allows you to earn yield on tokens even if you hold a small amount without incurring a lot of risk depending on the validator you choose there are slashing is a scary big word in proof of stake when nodes misbehave certain things happen a lot of networks carry the risk of punishment and the punishment is normally given out by the foundation

in respect to uh the danger a fault in the node has created in the network so you know the largest ever slash we've seen was a five percent slash from cosmos for a double signing event um i sometimes feel it's a little bit like you know when we uh take off our shoes before we board on a plane something bad happened and it creates obviously a lot of panic by people and like hey five percent of all tokens is a lot if i have 10 million bucks that's 500 000 it scared away a lot of institutional investors initially who legally can't put their principle at risk so for example you know they they invest in a network as a vc and if there's a huge risk that you might lose your principal

tokens in an unclear amount legally often some of them choose not to participate in these networks and so the community uh the foundations companies like us have worked really hard to provide insurances um and limit exposure to some of the larger providers in the space in order to have a healthy uh network setup and so you know there's ways now to do this without risk and the quality keeps on getting better and better and so um yeah and so i i stop here i feel i've talking for a long time um and so yeah so thank you so much for listening i stopped screen sharing

oh and i think there might be questions i think yeah that's right first of all clap clap clap constantly and i found that very informative and please everyone do ask questions i see that uh brian already answered one and there is one for the panel for later so we keep their sales question for later i love that you touch base on slashing as well because i also do have a question or two later to that and let's transition over to to the panel um there is no specific question here for now but i'm sure you will get later questions so we are going to dive into the nitty-gritty of

uh what our guests are really doing when it comes to staking and i would love if all of you introduce yourself and just say that how how were you involved in staking as a service and what is what you do what is what you're passionate about in or failed teagan can we please start with you yeah absolutely my name is tegan klein and i am the co-founder and business lead of edge and node we're working on the graph and so my passion really lies within the crypto space it's really consumed me but i think more deeply just in creating a new internet and new financial system and really kind of empowering individuals so that the value that they bring can be compensated to measure it

to that value which i think in kind of the traditional space where there's a lot of centralized intermediaries in between that that can get lost and the graph is a protocol with a work token so within the graph network you can actually stake tokens which block daemon is actually an indexer within the graph network along with many others and so as a delegator you can actually delegate to those indexers thanks so much fabienne you want to go next yeah thanks so much for having me my name is fabian hetiger and i've been since eight years since 2013 co-founder of bitcoin swiss and my current role is

head of innovation at bitcoin swiss we first got involved or heard about the concept of staking in 2014 when vitalik butrin and charles hoskinson and gavin wood moved to tsuk switzerland to do their ethereum crowd sale and these days are still very early days and and in 2017 we assisted the tesos ico in their 232 million us dollar crowd sale and there we had demands from our clients to stake their teslas which they bought through us and we built a product for for staking and in august 2018 we then

launched a staking tesla's product and built a great team of individuals uh uh to to further support the product and yeah so at the moment we are 250 people and uh several business lines brokerage custody and one which is growing very rapidly is of course the staking product yeah thanks thank you so much brian you're up next hi i'm brian hoffman i'm the crypto platform product lead at kraken um i'm gonna do like typical crypto natives do and i'm gonna try and one up

fabian and say i've been working in the space for nine years not just eight years no um but yeah i'm mostly working on the open source side i ran a project called open bazaar for about seven years and started a company called obi-wan working on that and i recently joined kraken at the end of last year and i'm really excited to be there and able to take the massive resources we have at that company and and really work on expanding beyond kind of traditional centralized exchange business really working hard to take my background and embrace decentralized applications and protocols and and figure out ways we can work better together and i think staking

really touches that uh pretty pretty significantly so i'm glad to uh that you guys invited me to talk today fantastic pleasure to have you and lucky kraken was to have you and constantine do you want to just chime in what did you do before before um being the ceo of block demon that's a good question um uh so we started block daemon around three and a half years ago really to kind of create a mixed blend of a heroku slash hybrid cloud offering for crypto nodes um and uh prior to that i had a you know really a sas platform entrepreneur um and then you know the decade before i've had a

few different platform businesses which taught me how fun databases are and how complex network architecture should operate and that was sort of the delta between that and what i found in like sort of 2017 when i started running some notes with friends was what ignited the desire to start block daemon i've been in the space probably for six seven years actively uh as an advisor and uh and uh uh you know kind of sort of hustler uh the crypto space obviously is fairly uh incestuous and i've always worked on different projects i've been in bitcoin i guess since 2012 fish um

not enough to be significant uh but had enough to start block daemon um and uh so i've always been super interested in it and been passing around for a while so yeah and i started actually uh interesting well i don't know if that's interesting at all actually i'm originally from germany and i started in telecommunications so my first love was mobile networks which actually you know and i want to bore people but mobile networks actually have a lot of similarity on network complexity um to decentralized networks because there's a lot of different hubs in a mobile network like you have nodes for example and you need to interconnect them and blah blah blah but that's where i learned a lot of the stuff that i can also now apply at blockchain fantastic thanks so much for sharing so

in the preparation of um or with the questions for the panel i looked more into edge and node and the graph and and if you could share a bit more tegan that what is the relation between between the two i figured that agent node is the team behind the graph and then also that for instance if me as a delegator want to maximize the use of the graph network like how do i do that what's what's in for me yeah so progressive decentralization decentralization has always been the goal so at one point there was just one the graph and then with the launch of the graphs network in december the graph became this decentralized protocol that kind of everyone owns and no one owns that's making

open data a public good and with that we've kind of rebranded to edge and node and edge and node is one of the many companies within the graph ecosystem but edge and node is focused on the graph kind of similar to like how consensus was for ethereum and so as a delegator that's a great question so as a delegator you can earn passive income on the graph ecosystem by allocating your stake to an indexer and then the indexers do that hard work in processing the queries and they share a portion of the grt which is the graph token that they earn with you as the delegator so i'm actually a delegator i have spread my delegator across many

different indexers and i think the most difficult thing to do as a delegator is really decide who you're going to index to or who you're going to delegate to and so each indexer has their own token economics they have their own sorry economic model that they set and so each one shares a different percentage of those fees that they earn with you thank you so much and if you like cool logos then you know that's a good uh differentiator for joking excellent so um the next question is i have a few preset questions and then we will dive into the the audience questions uh it's it's to fabian and brian because you've been

around and sticking for quite some time like like many or all of you here but if you could share some metrics that you know what is the amount of of um assets taked to date uh for your companies how many assets you take also what what is the value proposition of your company like why would i rather want to go with bitcoin swiss instead of kraken um yeah a few a few insights would be interesting for everyone okay well i don't know which one will go first but i guess i'll jump in um yeah so kraken currently we have uh eight on-chain assets that we support

staking for and uh don't ask me to name them i can't i don't have it memorized but trust me there's eight um and i believe we're we're just north of five billion dollars worth of tokens being staked on the platform um this year alone we've paid out uh just about 30 million dollars in rewards to our clients and um that's already surpassed all of last year's uh rewards for customers so that's that's pretty exciting and we obviously plan to expand uh the assets that we're offering for staking throughout the rest of the year so it's

going to be pretty exciting fantastic thanks so much fabian you want to share as well please yeah sure um so we have uh seven different cryptocurrencies which we offer uh staking services um at the moment it's uh north of one billion us dollar which our clients take with us the most popular or where we have the largest staking amount is polka dot and then it's followed by eve two and cardano and tezos and then we are also staking kuzama cosmos and daesh and on the how much we paid out i i don't have like the full number in made was around

11.2 million swiss francs and yeah we we operate our business out of switzerland and this comes with a quite advanced crypto regulation which is uh which requires a lot of work to be uh put into and and yeah that's that's the main effects thank you so much for elaborating on this so before we we go on with my question to you constantly about slashing because you touched base on that a bit and you said that we are too afraid of this uh and and the act happened

once after at a higher stake with cosmos so let's just take quickly one from the audience and i like this one from nicola she's asking that how do you qualify sticking from the legal point of view who are you asking me um whoever wants to wants to answer this up for grabs i mean i can only talk to uh uh as i said i think of them a little bit like bond offerings so from a legal perspective a company like us we try to be prepared we actually have chief compliance officers security audits

we kyc the biggest chunk of our customer base in anticipation that we might be regulated at one point in time and so i don't you know i'm not a expert but i would say that as a company we have the policy to always err on the side of regulation um and so we've built infrastructure to allow us to do that i think when you look at the definition in the u.s of what requires a money transmitter license you'll find that staking hits it pretty head on which is if you offer any technical product that earns yield on a security like

product you need a money transmitter license so the jury is out on where that will go but if you read that definition um you will see that you know it sounds a lot like staking would qualify for it over time and so i think us but that doesn't have to be a scary thing i think regulation is helpful um and obviously there's a lot of different territories there's different ways to handle it we operate platforms uh all around the world um to reflect on it but from our perspective uh we treat it uh fairly seriously thank you so much so when it comes to slashing

then when you what what is when you lose the assets due to the wrong behavior or or um if something happens to the validators in the validator does uh something what what is not um welcomed by by the network then then what is what you guys do how you handle this and i remember fabian that you you had a really good response to that or shared the plans of bitcoin swiss so maybe we can go with you and then with constantine and then brian if you want to chime in here you're welcome too yeah thanks a lot um so we invested in a lot of smart minds on the

i.t infrastructure side but also now staking experts to do the best to prevent slashing but on the specific question it depends what's causing the slashing event if it's caused by um by something which is wrong with the network on a global scale and or if it's uh caused by something where the clear responsibility was by a bit consists not being careful but in general we assess it on a case-to-case basis and we're monitoring the all our notes super well so that's the the topics there

yeah and so that makes actually a perfect sense so uh uh that's how we think we think about it similarly so as block demon we cover all slashing related events we provide insurance to our customers um and a lot of them are even institutional mostly because we're actually uh one for most of these networks um because we run such a large amount of validators across so many different protocols we try to be foundation members of all these different networks and join associations um to actually uh or technical steering communities to really educate and evolve the community around what slashing should look like in order to aid the network

and so we're very familiar with the different level of risk involved across every different protocol and we actually set up insurance funds to cover we've never had a slashing incident occur um and so it's touch wood you know but and theoretically if you like statistics you do this long enough you will have one right like i mean it's impossible to not and so um over time and so i think the um and so you know for us we found an economic way to take that risk off the table for entities that works with us um but uh yeah to fabian's point um there's a lot of degrees to slashing so they're slashing of like 0.000

which is probably the most common for like an uptime related incident or the validator doesn't respond as fast as it should but it's mostly very minor um and so and then there's degrees of it right and the late hardest one is obviously double signing which ultimately jeopardizes ledger integrity which means if you try to push in a faulty transaction uh example would be let's put in a transaction that says constantine owns 10 million dots but he doesn't but we try to get it in the ledger so um that it looks like i do then that's a serious threat that's actually criminal behavior um very often and uh and so those are the one the incidents that the network

really wants to protect itself against uh and then when it comes to network outages as fabian said that makes perfect sense we're the same we don't insure the network you know we're not saying like if something happens to the complete network for example um you know that's beyond our ability but everything that's in relation to our performance or nodes um we generally confer but it's a complex game there's insurance policies now available by some reinsurance companies um and there's efforts in the work uh and then you know a lot of companies set up their own little balance sheet wallet to cover potential slashes thank you very much so my next question

is on governance and and basically if there is a governance event or referendum the weight of the companies like some of your some of the companies here on the panel have a pretty significant um impact and could determine the outcome of a certain decision how are you planning to cope with this and i spotted alizon frank's question here which is uh which is it does tie into this uh significantly that it says that there is an argument that sticking as a service reintroduces centralization due to speaking as a service provider sting that they have a role in defending and maintaining a decentralized ecosystem

take it away who who wants to take this sure um yeah i mean i think uh you know coming from you know a company like kraken who's single-handedly the largest eth uh staker on the entire network um we get this question a lot um very very concerned participants we we get it from protocol developers as well uh the you know parity and polka dot have expressed concerns that were too heavy heavily involved in the in the ecosystem and like what is that impact uh to the overall goal of decentralization i mean i think obviously we have a business motivation to be

as large as we can but we also don't want to destroy the things that make these networks valuable to begin with currently we don't support uh the ability for our clients to actually uh determine votes in governance processes um we want to change that and so you know towards the end of the year or maybe you know just beyond that we plan to introduce ways for for them to actually participate in governance votes currently we we pretty much just stay neutral and we'll just uh vote abstain if if necessary um and we haven't had any issues to deal with there on that but um yeah i mean i think it does raise some serious questions around

centralization and um you know i think constantine mentioned a little bit about how the the protocol um you know engineers will sometimes try to do different things to balance that out um and then obviously new protocols will be designed around any kind of attacks or or threats to that model but yeah i think the question remains to be seen and hopefully it stays balanced in the future yeah that's also one quick thing we've acquired a company called looney that actually had a really cool governance interface for cosmos really with the idea to sort of allow individuals to participate in governance easily um it's complex because we're really a b to

b to c company like how do you pass that on to our institutional customers but obviously uh that's a huge issue yeah i'd be curious what pagan makes of this actually yeah totally so i think with decentralization you need some sort of governance to kind of oversee it otherwise it gets super chaotic and so how we've handled it is again with like progressive decentralization so the graph foundation actually has a 10 person governance council and each two people represent a group of the community so for example two people are from the initial graph team two people are from like the token holder supporters um two people are from the indexers and so each of those two people represents the community

and so their job is to make sure that they're listening to the stakeholders within their section and bringing those voices to the forefront and then over time that technical council will likely turn it into a dao and grow much wider but i think i'm just a firm believer in progressive decentralization i think if you decentralize too early it gets a little bit too messy and it's difficult to um i guess to bring it to the fruition that you are envisioning for the future thank you so much for for that uh for adding that teagan um so the next question is um is relating to related to something what

what uh many of the listeners have some of some of the folks who are attending today are part of proof of stake chains and what if they would want to list their token on kraken i said not only list but but staking could be offered for these pos tokens what is the process uh for bitcoin swiss and also for kraken to to allowing this and what are the major obstacles uh and then what is slowing this down yeah one port is definitely the regulatory classification of the token and then it's about the client demand we want to build products which are in demand of our clients and

then we have a lot of opportunity cost because there's so many things cool things to build but only a limited amount of people being able to build it and at the moment we are scaling up the team quite drastically so if you're a developer or product owner or staking engineer check out bitcoins.com careers and uh yeah we we have ambition to to grow and have more firepower to to build amazing products that's uh that's the main main points thanks so much and this this response to uh christoph's question christoph oberoch uh just asked that what kind of skills are requested to start working

in your companies so one of them one of these skills is that they have skills but then of course this isn't this is just one uh type of profile the folks that bitcoin swiss are looking at and and if any of you wants to chime into here if you're recruiting remotely yeah so for bitcoin swiss we are mostly recruiting in in switzerland zug but also in denmark copenhagen where we have the office and then for us it's important that the people are excited about crypto and have drive and there are good team players and then of course specific on the job if you're a developer then you should be a skilled

developer if you're into it you should be a good uh it infrastructure specialist and depends a lot on the road but yeah good team players and uh really living the spirit of crypto the decentralization the all of these aspects is super important thanks so much who's not excited about crypto here right sorry constantine uh go ahead yeah no one thing i want to say is like i mean obviously same like everyone else we're expanding our team vastly on infrastructure in general i think what i find really interesting um as a sort of next evolution of infrastructure is really the interconnectivity of all these protocols even into staking so bridging transacting into networks um

and so for us smart contracts uh are super fascinating i think there's a huge demand for people who know how to uh build complex uh defy type of products cross chain um if that's uh something you know people are interested in there's an abundance of roles with us with a lot of other companies but i think that's gonna scale up drastically and if you're a data center engineer and you've done devops before by nature you're good to you have the potential to be a good node operator you know and so we hire we're decentralized also if anyone's listening come join the revolution i don't know thank you very much i want to just go

back on this other string where um i didn't uh give the chance or like we took this question about recruitment but brian i would love if you also responded to what are the the steps to add new pr points and then allow them to be stayed on kraken yeah i feel like the relevant answer would be to say it depends on the level of the quality of the meme associated with your project but um but realistically yeah like it's a very complex process we you know we have a lot of things to uh evaluate before we decide whether or not to list or to provide staking for a certain asset i think constantine and fabian made some

really good points around regulatory status if there's anything clear about that already from the get-go a lot of times it can be around fundraising strategies that teams have because that's scrutinized pretty heavily and then obviously since this is a staking as a service panel it's technical challenge to actually manage those nodes properly and provide high value services for our clients you know some some blockchains are just more challenging to to support from an engineering outlook i mean one of the questions someone asked was whether or not kraken supports

staking through our own internal processes or if we use third-party staking providers and the answer is yes both we use both because you know some of these we can put a million coins on one validator node and manage it ourselves and other times we need a data center of those kinds of things so it vastly varies and i think that um you know all that has to be considered when you decide to provide that service and and we want to make sure that clients get high yield no slashing and just really high quality staking services thank you very much for that

comprehensive elsewhere so constantine the next question is to you and we fairly or like briefly touched on this already but when it comes to network security uh network custody and and how can we make sure that these networks are decentralized and run in the right territory in the right way right yeah so there's a term we like or we like to throw around called network custody not a great term confuses people tremendously but i like the concept which is uh you know because we operate nodes that's one way how we think about ourselves ultimately um we want to protect the protocols by running top quality

nodes and uh there's uh you know different and tekken refer to it there's different requirements in terms of node infrastructure based on the life cycle of a project um which is why the ethereum pos launch is so interesting but very early on um it's probably not a good idea if you're too decentralized because uh you know you need to actually get to a decision to go to mainnet um that actually gets made by people so and an immediate set of rules gets laid down and so you need to have something to go live uh and then over time you can incorporate more and more people to change and manage the network but the most efficient mainnet launches

we've seen um and i wanna obviously again you know there's always bitcoin which was a little different but uh other ones where they start from a point of centralization and then move towards decentralization and that means that the node infrastructure that's required afford to achieve respective decentralization at the moment in time for protocol looks different and so we're an entity that is very good in the beginning and very good at the end and so we're very good with initial decentralization because we obviously run very high security nodes they perform really well we have 24 7 customer support so when a network launched that's very helpful because you really want to make sure

that people the network works um that people can respond quickly to problems um and then we build two links that we make available to the you know initially to exchanges custodians other folks and then ultimately to the community but there's this intermittent period where we might run a lot of nodes and that's creates some risk in the network the way we mitigate it is that we at least try to take other risks off the table one of them is as you've referred to correctly a data center point of failures and so when this is not managed like ethereum was always a good example um way back a couple of years ago it's an argument i loved making was you know that like 80 percent of all the ethnos were on aws

east which is one amazon data center and you know that thing actually goes down once in a while data centers can catch fire there might be stuff going on and so it creates a single dependency on an individual data center where geographic event could take out a network so in the most simple form is because we automate a lot of this hybrid cloud stuff we can actually move nodes from aws to azure to ibm to google and our own bare metal rep really really quickly so we provide failovers across regions and data centers now the risk that comes with it is that we still as an entity might control a lot of nodes but on the pure infrastructure layer we increase

decentralization over time and so um so we're very good in this early phase uh for respective protocols um and i think we're very good in the long tail once our tooling is open and you have a lot of notes we don't want to run all nodes but we want to run the institutional backbone of the network right and so yeah anyway fantastic thanks so much we have some really good questions uh we will we will take um in five uh seven minutes but uh as next i would love to ask teagan that what's on the roadmap for you guys like what's uh what where the next

actually today a really big announcement came out that the dapps the adapt subgraphs have actually migrated to the decentralized network the first wave of 10 so query fees are flowing so the indexers are all getting to work i'm sure constantine's team is super busy um but that's huge so grt like the dapps have committed to paying for queries in grt to reduce friction for their users which is really exciting and then we have a big product launch coming up uh in the pipeline within the graph ecosystem to really kind of bring the graph to its full form which is wild that it's not there yet um but really excited for that congratulations

super super exciting times for you and thanks so much for for being here during such a busy time so pleasure to have you so um i would love to take more of of the audience questions as i said but maybe as a closing question from my side for each of you that what is the future of staking as a service and um will we will we only see uh now proof of work or sorry proof of stake uh coins uh coming up or out and and bitcoin will be the only proof of work or or how do you see um the field evolving

i think rick definitely won as like the largest proof of work blockchain i think it's great that bitcoin focuses so much on security i know the like the bitcoin core devs were pushing for tap root for months and months and months so and they just made sure they you know crossed every t and dotted every eye so i think that's great and then i'm really excited to see ethereum become one of the largest proof of stake chains i think that's really exciting for the industry but i think things will constantly be innovating i'm sure there'll be many other proof of you know fill in the blanks in the future yeah i i think um i think it's likely that bitcoin will never change uh it's its algorithm [Music] just mostly because it's its main value

proposition is that it doesn't really change that often and um and i think that it will likely drive a lot of focus and energy on well reducing energy consumption and making it more sustainable we're already seeing that that play out as far as proof of stake algorithms go as well and from a security perspective i think if you want to be completely you know unbiased and agnostic about the whole idea you know it's still yet to be proven if the security model is equivalent to what bitcoin is doing with proof of work i think it's still experimental in my mind there's a lot of uh research and development being done in that it's exciting to see the growth there

though so um we're cautiously optimistic and i think there's a lot to that's going to be coming down the road and for us as a business the future of staking as a services we're just going to do a hell of a lot more of it cheers to that yeah for us as brian already mentioned uh before like the governance aspect is very important because if it consists having a large share of the staking market we want to enable our clients to cast their votes on on protocol improvements and on the question if bitcoin bitcoin will be the only non-proof of stake

yeah it's super hard to predict the future in crypto everything is evolving uh so rapidly and we are here pretty uh technology agnostic when something new comes up we listen to our clients what they want and then we try to build cool products around it so that's that's our standpoint there but yeah thank you so much constantine you have something to add no i mean i think that sounds all about right uh lots of innovation i think it's great that bitcoin functions as a base layer uh using a different economical structure

that other protocols can connect and stand on ultimately and so i think that super exciting i find it in general super exciting what's going on i like the whole proof of stake stuff because ultimately it's how do we manage a community right and how do we reward behavior in a community and how do we use economics to inspire the right behavior if you think about democracy and where we are as nation states and as a global community um understanding and learning about the efficiencies of these systems is going to be hugely applicable to all sorts of problems in the world and so i kind of find it like the the big thing of like separation of state and money

and the role that cryptocurrencies bring and how these currencies protect themselves from attacks and influence from huge organizations and governments is going to be of continuous interest and you know so we're we're just starting one question thank you thank you very much for all your answers uh one question from aaron um ties nicely into this because he's asking uh do you believe that sticking could become a popular hatch against inflation i think that is already actually happening or it is hajj if you will and what might happen to

assassins taking as a service and lending borrowing protocol once we see a market crash similar of the one in 2008 i mean that's a complex question for i don't know i mean probably the other guys might be more suitable to answer it um i i like defy and derivatives on these chains because i think it actually deal will provide a lot of insurance for crashes um and so if you think about derivatives there's this line right like there's derivatives who insure and provide a lot of protection if it's imbalance but if it's a loop-sided derivative upside network like it was in 2008 where you had a particular product

uh exposing one particular side of the market to enormous risks then uh that can be dangerous but i think um we've had incidents like this happen uh with bitcoin in the last four weeks where bitcoin collapsed 50 but nobody needed a bailout you know and so i i you know i don't know like i feel like you know the crypto community and we're used to uh these sort of tough uh swings as well yeah i think that the hedge against inflation is crypto it is these different protocols so i'm optimistic yeah i i agree i mean i think we're already seeing it in some of these countries where they have

ridiculous inflation um where it's valuable um you know i i think there is one caveat there i mean i think we like sometimes to pretend like crypto is completely independent of traditional markets and in the world economy and that's not always the case and i think it would be a pretty dramatic hit to the overall industry if there were to be a big crash like that but um as this huge you know multi-trillion dollar market gets bigger and bigger and bigger that impact becomes less over time and uh yeah you can never go wrong investing in crypto if you're if you're trying to avoid inflation thank you very much there is a question

from um brute relating insurance maybe maybe this is mostly for you uh constantine that is taking insurance available for all tokens and what is the approximate insurance cost in percentage terms is there a scenario that the insurance does not cover lots of questions i can tell you how we thought about it when we tried to do our own insurance product which is ultimately complex risk calculation and likelihood of particular incidents um over time um and uh and so the way we've done it mostly is that you need to hold native tokens because it's impossible to predict the price volatility also

when an incident occurs so i think structurally um the most important part is to keep native tokens and you know connect them to the yield earning of the general network uh because slashes in general are also tied to the general yield a network earns at um and so it's important that you have a reservoir of tokens and then you know ultimately on the insurance side we've run our own insurance products for a while um i think the cost is currently i can't give you a particular percentage amount because i've seen a lot of different models and a lot of them are actually in hard usd and so

but usd obviously is also a factor of the different prices affecting the tokens and so there's two companies who offer institutional insurances as traditional insurance companies we've seen and um you know they're still very early um and so we we like start thinking about our own insurance products just because it's fun but the the there's always going to be some cap right like legally uh uncapped liabilities um are not something anyone likes even insurance companies right like so you can cover certain types of risks i think you'll never cover 100.

thank you for for taking this and answering to it so maybe i will pick two more and um and then we we come to the end of this fabulous session so what is the reason why so many custody providers either do not offer speaking services which would be a natural extension of their business offering yeah i think it will be just uh um a question of time uh it's uh yeah all the service providers are looking into it and some of them like kraken and and ourselves uh as platforms where you can trade and

and stake looked into it very early built a team around it and very very early on it and some companies put their focus in other areas to improve their service offerings and yeah it's just a question of time until every uh sophisticated service provider in the area of crypto like an exchange or broker offers resources taking capabilities and the connected governance aspects of it otherwise i think it's difficult to to survive yeah and i think one one big reason also is that it's actually really complicated and so uh the rationale what companies

like us exist is because we obviously take that away but we've also had to build our platform and evolve to a level where we can actually work with a custodian and say hey here's 20 protocols you can earn uh you can offer your customers to stake for at a particular fee the reason why it's so complicated is because of the flashing component and the non-linear community driven innovation in a lot of these projects you actually need an expert engineer who's in the discord channels who's in the community of a respective protocol in order to really offer a high degree of performance over time and so the answer isn't like i just call up five random engineers not like yo can you please uh you know spin up

ten polka dot validators and let's put a billion on it and see how it goes um that'll be pretty disastrous for most entities and so i think the you'll find that the node operation and complexities involved in these new networks um actually is complex and a lot of these networks like the graph uh for example actually run really extensive test nets pre-launched to onboard node operators where people run drills and get trained for months and months and months before we go to mainnet and so for entities that haven't done that or aren't doing that for a living to start from scratch is actually very difficult which is why companies like us exist and why we're doing well is because we abstract that complexity

away thank you very much i will take two more questions and then i let you all go so thomas hubner has asked if if he could have um your linkedins but i think thomas you can you can totally find all these fine folks on linkedin and just send them a dm um if if someone is against this then please let me know a dear panelist and then i would love to take the first question as the last because um this is an interesting one so considering that we still have a long way to go to um to reach global regulation when it comes to staking

how does each company approach staking as a service be attractive to new clients uh in specific or specifically traditional banking clients and constantine you recently uh closed your series a congratulations to that and if i'm not mistaken waldman was one of the one of the biggest investors yeah i mean we did we're we're a little bit of a weird venture company mostly because we're um actually hugely profitable and so uh we've not raced for a while mostly because we've could handle our organic growth we're you know cash flow positive for uh you know since last year and and have been growing aggressively

obviously uh the onset of an and a continuous evolution of the staking world also meant that we're you know earning more and more over time so we have an interesting flywheel as a commercial model um and so when we raised money we weren't really looking for money to kind of run the operations of the company we were mostly looking for strategic partners that we want to co-develop with and so goldman sachs is one of those entities it's a strategic investment for them and i think it's actually a huge deal because we're the first investment they've made into a company that earns a good chunk of their revenue via tokens and so there were a lot of regulatory hurdles to be

crossed and i think it's really a statement to the intent of goldman to also offer these type of yields to their customer base over time obviously they have a lot of different interests in the space they own commercial banks they have private well equity wealth trading desks i mean there's a whole suite of things they could be doing and i'd say that goldman is probably more advanced than most people think um in uh and pushing the boundaries there um and uh and so we've always looked for a mix of crypto native and institutional investors and we try to use our cap table really as a tool to log in partnerships um over time and we found that that works really well

and so we're we're going to continue on that path but from our side i i can't even tell you like how much the institutional interest has grown um in this particular segment of the market frankly i mean it's it's been insane over the last 12 months i'd say that any large-scale financial institution is investigating crypto um or running a crypto offering uh with very serious intent at this point in time absolutely um i can also confirm that from my day day job but fabian and brian would you guys also do you want to chime in here yeah i you know at kraken i think um

staking is actually a product that i think a lot of you know many of our customers don't really understand it they they don't necessarily like understand the nuances of like what yield is and they're not they're not like full hundred percent degens you know like jumping on the platform so i think that there still is like a learning curve that we're working through here and i mean it's getting better day to day but um you know i think it only gets better through education producing really good content for people to to better understand these technologies and it's got it it's got to get much better much quicker because there's so many other types of uh d5 capabilities that are

way more complex and are coming and um you know we want our customers to kind of evolve with us as the platform grows and and learn these things so that they can take advantage of it and and it can truly be an alternative financial uh suite of tools rather than have to go and and you know deal with mutual funds and all that stuff we'd rather than be in our crypto world yeah and many of our clients are very crypto native they have been in a for a long time in in crypto and they uh or most of them or a big chunk of them invest very large amounts so they they research

their field very carefully and they they look uh very closely into the the the into our staking offering and the the biggest thing in demand is governance features and more staking currencies that's for sure from from our side thank you so much there are still a few questions which uh which which are not answered um we um partially touched on these and um if if you guys email info at crypto valley uh dot swiss with this question

we are really happy to to get an answer for you from the speakers i would i want to be mindful of your time and would love to thank all of you and i hope you guys are ready for the continuation of this uh beautiful bull run and i clap clap my hands for you teagan for brian constantine and fabian thank you so much for being part of this thank you so much thank you thank you thanks so much was very interesting and a lot of fun thanks bye for now have a good one guys i got