Staking Rewards: Is Crypto Staking Killing Decentralisation? - Mirko Schmiedl & Tobias Jung. Ep. 602

Transcript

The economics just don't work in group of stake. We have no way of really incentivizing decentralization and then it always naturally consolidates to the biggest players that have the most resources because there's no onchain mechanism to really incentivize smaller validators because you you can't prove that the small validator is only run by one person. But it's still a massive opportunity like there's just bitcoin lying there that you can borrow at that like low cost. uh the percent of the crypto market cap that's secured by proof of work and then by proof of stake and I had done this slide before in presentations a year ago 32% was secured by proof of stake and now it was like 20%. we see just a huge amount of assets are struggling. I mean all the growth

came from new networks to a large extent, right? New networks and and of course price growth as well to some extent. Both of those have not performed so well, right? So you basically have an industry that hasn't been growing much or even shrinking. If you're looking to stake your crypto with confidence, look no further than Chorus 1. More than 150,000 delegators, including institutions like BitGo, Panta Capital, and Ledger, trust Chorus One with their assets. They support over 50 blockchains and are leaders in governance or networks like Cosmos, ensuring your stake is responsibly managed. Thanks to their advanced me research, you can also enjoy the highest staking rewards. You can stake directly from your preferred wallet, set up a white label node,

restake your assets on IGEN or Symbiotic, or use the SDK for multi-chain staking in your app. Learn more at chorus.1 and start staking today. This episode is proudly brought to you by Nosis, a collective dedicated to advancing a decentralized future. Nosis leads innovation with circles, Nosis Pay, and Metri. Reshaping open banking and money with Hashi and Nosis VPN. They're building a more resilient privacy focused internet. If you're looking for an L1 to launch your project, Nosis Chain offers the same development environment as Ethereum with lower transaction fees. It's supported by over 200,000 validators, making Nosis Chain a reliable and credibly neutral

foundation for your applications. Nosis DAO drives Nosis governance where every voice matters. Join the Nosis community in the Nosis DAO forum today. Deploy on the EVM compatible Nosis chain or secure the network with just one GNO and affordable hardware. Start your decentralization journey today at nosis.io. Welcome to Epicenter, the show which talks about the technologies, projects, and people driving decentralization and the blockchain revolution. I'm Susan and I'm here with Brian Crane. Hey Brian, what's up? Hey, you look uh you look wide awake. Uh yeah, I'm I'm highly awake.

It's very early here on day two of staking summit and we're joined by none other than man. All good. All good. Yeah. And Toby and uh so this is the fourth staking summit. Fifth fourth baking summit. Yeah. Yeah. Or you can you can say the fifth if you count like the first uh rooftop meetup in Lisbon uh which is 20 people but yeah it's the the fourth real one. Okay. and Mira is the one who created it all. Very impressive. Yeah, it's a it's a team effort obviously. Yeah, I've been to three and I' I thought all of them were really good. Uh but this one is like pretty big uh compared to say like the one you had in Bangkok. That's the last time we talked and I think uh this conversation

will be like a good kickoff point from that la last conversation in in November where we we talked a lot about meme coins which are not in the like not a thing anymore. Uh but also you know bitcoin restaking and bitcoin staking and uh symbiotic had not gone live yet. So I think there's a few things we can sort of pick up on. Uh but um yeah, overall what has been your uh like what's been the main thing that people have been talking about here at the conference? Um I think it's really about uh Bitcoin staking has evolved the narrative. It's more about like sustainability now. Um so everything is more back to the fund fundamentals I feel. Um it's not about yeah just hyped up. Uh it's more about okay how can we

actually create sustainable yield at the moment. Um and I think we have to do a lot of work there. It's the same with like shared security. It's also evolving more and more um and going in the direction of like okay how do we create extra use cases for staking and not just uh repurpose economic security which no one needs maybe it's going to pay for I mean I think what's an interesting thing to look at just how how this is to illustrate how this is not working at all today is if you look at a is around $4 billion worth of bitcoin that's deposited in a at a deposit rate of like 0% literally or like 0.03% something the amount and you can borrow

bitcoin on a for like 0.5% interest. So it's very very cheap. Um but only like 10% of all the bitcoin that's being deposited is being borrowed. So like there's basically almost no demand, right, for people who to even borrow, you know, at 0.5% interest. And obviously if you could earn yield on Bitcoin in any meaningful way, people would do this, right? They would be borrowing Bitcoin, but but no one's doing it. So I I think you can see that kind of like, you know, we're just very very far. It's like a bunch of points and air drops and stuff people can get, but you know, I think we've all seen those. uh you know I think the

times where you can make a ton of money from like point farming doesn't seem to be doesn't seem to be the case right now. So yeah, I think it it's going to be hard road to get like staking yield to Bitcoin. Yeah, yesterday um we also had a panel with the Lombard uh guy on it and he also mentioned something similar. people do not want to like people want to hold on to Bitcoin and they are just not yet um enough yeah sustainable yield opportunities in the space so they are comfortable even putting it into such an ARVO contract where they're just earning such yeah small yeah basically there's nothing um exactly so that's just a the

only reason why you put it into the other contract is because then you can borrow against it right yeah you can take a leverage like yeah you can take borrows and sales, right? So, but then you're not earing yield on Bitcoin. Yeah. But I think people don't necessarily need the yield. So, I guess it could even scale way higher than the 4 billion that we have right now because there's a infinite demand for leverage as well in crypto, right? Well, infinite. It's not infinite. It's 4 billion. Like once we get back into the bull market, it will again but it's still a massive opportunity. like there's just bitcoin lying there that you can borrow at that like low cost. So if you are able to yeah structure a

product around it uh or arbitrage um in some kind of way yeah I feel like yeah this market sure but you know to say oh there's I don't know how many trillions of gold and like no one's earning yield on gold if you convey yield on gold it's a massive opportunity like sure just bought like um2 billion of like gold reserves right for the x aut token um so I wonder what they are cooking as Oh, what's the um what do you think is the opportunity here with regards to Bitcoin? I mean, like if you think about it, you know, this Bitcoin is is not being is not being utilized. It's not being borrowed. So, there's like all this Bitcoin that's just sitting there.

Um is this sort of a bearish sentiment on Bitcoin or people are not longing it or like borrowing against it to like sort of loop or leverage? There's no bearish Bitcoin at all. people just like Bitcoin and there's not much else to do with it. Yeah, they're Bitcoin. I also think like the market is still maturing. It used to be a whole asset for a long time and now it's uh yeah um like people are building uh yeah opportunities around it. Yeah, I think it's about unlocking even more utility for Bitcoin now and finding like interesting use cases. So um we're working on this loop BTC product for example where we're looking to like source from RWA years and then

arbitrage with the like 0.5 from a um and then it can create like a really interesting um basically like um lending out BTC to market makers um and then you can earn like a fixed income on it for like five to 6% and then you can arbitrage that with the lending markets where you get it for 0.5. So when you loop that you can go to like 15% plus in very sustainable APY. How can you loop? So wait you I'm I'm giving my Bitcoin to some market maker which is always a under or is it it's not a it's an underolateralized loan. It's collateralized loans. It's collateralized or what would they put up

as collateral? Um, I mean this is uh I think yeah they they would have to figure it out like in the details but they're working with like uh big OTC desks in New York um and yeah putting out the details how to source these RWA yields. It's a it's a product that's still relatively early uh in the development. Um but there's a there's huge demand for people that are um doing the basis trade with Bitcoin basically. So they can generate like a very good yield on BTC and then um yeah they can earn or like pay 7 to 8% on it I think in fixed income. I think the idea would be to collateralize the NBTC token right and

then borrow RP BTC against it. NBTC rep WBTC. Yeah. So the uh the RWA yield um will be sourced or like will be tokenized uh in a NBTC token um and that can then be arbitrage with the rep BTC. So you basically tokenize the uh the RWA yield. Oh so you token RWA you mean the thing that the OTC desk pays you right? Yeah right. So, so the OTG desk gives like whatever it makes up some coin and then uh you put that in a pool and borrow WBC against Yeah. So you um you deposit BTC

or red BTC in a contract. Um they take that BTC, lend it out um to a market maker, form the basis trade and generate the RWA stuff as collateral. Um yeah. Yeah. I mean the the BTC is still there, right? So um yeah, they have the I mean if the but market maker presumably needs to use it, right, for trading, right? Yeah, but they have the um like the position is still there. It's not going anywhere.

Well, you don't know that, right? Well, yeah. I mean, this is the it's like the position is still there when you lend to three arrows, too, right? Yeah. But it's all transparent and they work with like uh big trading desks and so on. So um this is more about I think the idea is to create a product um that sources from like offchain yields um where there's so much opportunity in the market right now. And um the more we can like bridge this gap um between Trefi and DeFi, I think this poses like so many possibilities um if we do that like in a transparent way um and obviously have like good security and transparency metals in place. one kind of actually I think potentially sustainable way of

earning yield in bitcoin you know is you put bitcoin into a or something like that and you borrow stable coins against it which you know I think cost you four or 5% or something and then you use those to earn a higher yield like maybe you can earn 10% of the stable coins but like that seems pretty doable and then you could sell off the difference bitcoin yeah it just depends for What risk can you earn the 10%, right? Yeah. Yeah, sure. Yeah, I like that. It's uh you should build that as a product. Yeah.

But I think there's just like so many opportunities in Bitcoin and I think the space has to evolve more towards things that pay like real yield and not just yeah staking where obviously in staking the the year continues going down I think over time and yeah it will be hard to to source very sustainably just from inflation rewards obviously. So so for you Mira also focusing a bit more more on Bitcoin now with this. Yeah, that's kind of a big focus for you. Bitcoin. Yeah, I mean, I've been excited about Bitcoin for a long time and I think having a sustainable yet product on Bitcoin, it's a huge opportunity. Um, and we are creating this product um that

we are still scoping out and the final details and so on, but um we see this as something that can yeah really help to unlock like the next big wave of ADC staking and sustainable yields basically. And so you guys are also going from um you know because so far it's kind of like ADA and uh events to more like yield products creating yield products. Yeah. So um the idea is to create products like looping products and we've tried that with loop type now and it was um pretty good. Um we launched it like one month ago have like 20 million TBL in it now and the great thing it's like fully complementaryary to um all the validators we work with

validators with this uh community code structure. So um if the validators deposit into the board we make sure that like all the stake is looped into their validator position. Are you using a ST hype? Uh yes. Yeah. Yeah. What's hype? Yeah, Thunderhead is like a small team that's been like a lot of different um linguistic and yeah and they have this feature community codes um where validators onboard and um if someone uses the validators community code then um the underlying stake is entirely attributed only to this validator basically and when we then uh we also introduce this uh community codes for

the looping product. So we have a community code and then we make sure that the underlying stake is entirely nooped with this validator. Yeah. Maybe to um loop this back to why Bitcoin what what we are seeing um for example um with staking I think you guys are seeing it as well at Chorus stake tends to be quite sticky. So um when is the opportunity the biggest? It's in the beginning of either a network launch right when nothing is staked yet. So you really want to penetrate the market uh really early um become a big uh ecosystem player and yeah try to get that uh initial stake because it really um yeah tends to stick to your validator

liquid staking protocol or um yeah DeFi protocol and then going back to Bitcoin, it looks like this opportunity seems very similar to a new network launch because right now we have like Bitcoin is just lying around on so many wallets. So, it's not really staked and it's not really sticky to a specific um yeah, yield opportunity yet. So, being early in this market and providing a great sustainable yield opportunity um to get this initial um yeah deposit and sticky stake happen um is right now a big focus at staking awards and that's why we're also shifting um our looping product focus into this direction.

Yeah. So there's there's a high stickiness to to Bitcoin being deployed into various like yield generation products. There's generally speaking a high stickiness in staking. So once you are staking, you're just not thinking about it anymore because in your head you're you're thinking yes, this is like now a productive asset. Uh I'm just earning my price of yield. I do not need to switch it. Um it's a cost to to switch it again. You need to make more research, right? So if you're just providing a really good um yeah sustainable product out of the go um where people can put it right if you get this initial transaction um yeah um others will have to make big investments also to to move like staked BTC from from potential

depositors. So yeah the opportunity in the beginning is is the highest and the market is right now maturing and developing so you want to be part of it. Yeah, I wanted to talk a little bit about the maturation of the staking market a little bit and I'm glad that you're here. Um, yesterday there was this talk um on M&A and the staking ecosystem. I don't know if you thought I miss it. I mean I've talked with JP a bit about it but um I I unfortunately missed it. Yeah, I mean you know JP you also done some uh acquisitions in the staking ecosystem. Um I was also talking to LLO yesterday uh from Kilm and we were discussing sort of consolidation in the staking ecosystem and what the future

might look like and it seems like you know there are a lot of indications that the staking ecosystem um as it matures uh will consolidate and that uh many staking providers you know will e either get acquired uh or will acquire smaller staking providers and so I'm curious you know what you all think that the staking ecosystem might look like in you know 5 to 10 years. Um you know right now it's quite decentralized I would say and like there is a wide range of types of actors from you know homestakers to kind of ecosystem community partners to large institutional providers like like chorus and likes of kiln and figment etc. So yeah, what are your thoughts on of how

the staking ecosystem emerges from here and like what is the role of say asset managers uh exchanges neo banks in this uh in in this in the long term? Yeah, I mean so I I did a talk yesterday and I included this slide which had uh the percent of the crypto market cap that's secured by proof of work and then by proof of stake and I had done this slide before in presentations but then it was interesting to see the data again you know cuz uh I saw I checked and it was like a year ago 32% uh was secured by proof of stake uh of in in the you know the rest is mostly

Bitcoin right and now it was like 20%. Right? So we've seen a big um I mean you know we we we see just a huge amount of assets are struggling and you know you have some some that are thriving you know I mean Salana is doing pretty okay and you know sooie and there's like a few but you know even ethereum struggling and but then you know the long tail of assets really struggling right so you you have basically uh some pockets of crypto doing well I think mainly bitcoin stable coin coins maybe uh but a lot of it is not and of course staking I mean all the growth came from new networks to a large

extent right new networks and and of course price growth as well to some extent uh but you know both of those have not performed so well right so you basically have an industry that's kind of hasn't been growing much now or or even shrinking Um, now what would it take for that to change, right? I mean, you you maybe would have to see uh I mean, of course, you could have some temporary change or or, you know, some change just in the price side, which, you know, will of course be great for existing players. It would still make it hard for someone new to really come in and benefit much. Uh I think for new people or new companies to

come in, you'd have to see uh maybe really a lot of new networks launching again. Uh that like actually get a lot of traction and um and I don't think that's going to happen uh anytime soon like I don't think it will happen in the next few years. uh like you know we see fewer new network big network launches you know when we we look at like I mean 2021 2022 yeah I mean if you look at like our thing you know of course there's a variety of networks that we're going to launch but you know of like really high expectation ones I mean monad comes to mind then there's like not that much else uh so you know I think that's just uh and then you've had in staking you've had an industry that

was very easy to enter Right. Like the initial barrier to entry is very low. Yeah. So in a lot of companies came in and then you have kind of this you know huge supply of companies and you have an industry that's been kind of shrinking a bit for for a while and of course that's a very challenging situation. It means a lot of companies are you know not in a great position or like they're and so yeah I think some kind of degree of oh and then then some other things right. So new networks have tended to have smaller validator sets at launch, right? So you know maybe 10 or 15 or 30 or something like that. So even then

just getting in is like harder. And then you've also had the the thing where now some networks are saying oh maybe investors cannot stake or maybe there's rec lower staking rewards or there's no staking rewards no staking rewards right or like or like the all the same rewards are locked or like they do all this stuff which you know I think is a little bit um desperate and doesn't make too much sense if you ask me but it's kind of like this reaction of like oh I mean we're afraid right we're afraid of the market we're afraid there's no buying demand so we try to kind of like cut off

all the sell pressure and but of course that that is also uh reduces the ability for staking companies to generate revenues so yeah I think I think all of these make it challenging and then at the same time I the integration into you know wallets yeah fintex stratpiece all of those things becomes more important and I think that's expensive to compete in right you know because you have to invest a lot in product you have a lot invest a lot in BD and compliance and uh uh you know brand there's a lot of things you have

to invest in a lot so I do think that you're going to have a situ situation where, you know, there's only a handful of companies that, you know, can really compete there and they can do okay. None of them are going to do like amazing until things change, right? Until maybe the market changes. But then I think a lot of others are just, you know, they don't really have a very viable business, right? So then we we've also seen, right, a bunch of you mentioned um um you know, M&A and stuff, right?

So, we have seen some of those uh, you know, we haven't really seen any large staking out positions like for a while, but we've seen bunch of small or kind of struggling ones um, sell uh, more recently. Yeah. Yeah, that's a great overview. I mean, um, sorry. Go ahead. Yeah, I just want to say I I think obviously it's going or there will have to be much more differentiators for stake price. It's becoming much more uh, important to have an edge, I think. And I'm not sure how many edges you think there are, but I think there's probably at least three.

Either you have like very good distribution um as an edge or you have um like the geography can be an edge um if you can be like the leader in a certain country and maybe also like yeah claim that market and have like good contact with regulators or whatever. Um or it's like a um the third edge would probably be like strategic. Um that's what you what you said like a lot of uh networks are just launched with a small set and they just bring people on that are like um fully aligned and strategically helping the product grow as well. So it's not necessarily about like generating rewards or for them to set it up as a business but it's more okay they already used the product and

they helped to grow um maybe they invested themselves in some form or another um and then they also run a validator for it basically. So it's like either distribution, strategy or geography. Yeah, I would say also say the the validator meta has changed completely. Like if you were like a top five like competing with other top five validators maybe 3 to five years ago for like a slot in a like in the um yeah network what is uh just launching. um compared to now where you're competing maybe with 20 25 to 30 or even more um providers because everybody is just

improving and on the infrastructure level itself I would say the the difference in performance is uh is very little. So you have a lot of providers in the space that are um very very similar when it comes to yeah uh the infrastructure basically what is important to secure a network and you really to yeah like to build on Merkos's point you really need to um differentiate um and you also really need to will probably um do some very calculated bets um on networks that you um deem to be winners, Right. Um because in order to get into the active sets, you need to to offer some additional

services, maybe some yeah value added services or kind somehow add value to the ecosystem because just infrastructure I feel like is not enough anymore. And um I also strongly believe that the yeah it won't be enough in the future. Uh otherwise you'll just like be competing over price and then basically running the infrastructure for free. You think the infrastructure then that just basically gets commoditized and validators are basically only competing on price like uh I mean yeah or they have to already have some strategic yeah exactly yeah I mean yeah I think that's probably the case for like the basic

infrastructure provision um but there's also the case I think where staking itself will become more specialized into like performing certain tasks and actions so um for example like in Bitenzo it's a totally different ecosystem. But to run a validator on Bit Tenzo, you actually need to set up like a real data center. You need to like really um perform some work um like you need to do this um what is it called that they do in in Bitenzo um but they basically validate these subnets um and they perform like all these AI AI models uh running basically as a validator. So it's like it's an actual task that creates value as well. Um it's more like it's going more back into the direction

of proof of work maybe where you where you perform not just st like not just stake but it's it's a bit more work and I think there there will be more use cases as well probably on the on the infrastructure side I think there can be I mean you know we we have a sort of a small like research team and and you know we we have gone like sometimes we go very deep on some networks to optimize performance and rewards which can make a meaningful difference But it tends to be uh first of all on a lot of networks yeah you can't there's really not much to do and on other networks it's not worth doing anything right so then it's really like I mean right now our effort on that front is you

know mo just focus on um Salana and and bar chain a bit and bar chain also there's actually very like are the difference for us in the rewards we've been earning on the mijiki proof flick anything is it's actually very meaningful right so that's a big difference between like uh so we spend a lot of time you know some optimizing that um and you know salana I think there's also you know meaningful differences you can achieve but then it takes a lot of work right because you have to really dive into it and you have to research it and understand it and then maybe you start modifying the client uh so but but I think that can be uh you know there can

meaningful differentiation there. But yeah, you have you have to go very deep. Uh and and of course that's expensive, takes a lot of uh resources. Yeah, you guys recently cut a couple of networks that uh you were Yeah, we we cut like this was the biggest uh network. How many networks? I think like 15 or something. Oh wow. That's a lot out of what G 60. We were like I think running around six maybe over 60. So I think now we will go down more to like 50. I mean we're still in the like the whole offboarding thing takes a bit of time too. Yeah. Um I think we'll probably do another round like afterwards look at uh maybe a few more networks. So is it just

a profitability question there or are there other things that come into Yeah, it's profitability mainly. Yeah, it's just a lot of networks where you know the just the token was doing poorly and and maybe also the economics were not very good and and you know we were just not making any money and and there didn't seem to be any you know prospect to get to um yeah so yeah so I mean and I think for us it's you know it's definitely a part of wanting to focus also more on, you know, the big networks that make a big difference, right? This mean this kind of comes back to my earlier point about about consolidation. So, it looks

like you guys are consolidating on the on the bigger networks. Um, and there's like consolidation is a different level, right? There's like consolidation of say at the broader level of the ecosystem of stake within a certain number of of uh of very professional uh actors that have distribution. There's also consolidation at the individual provider level where you're consolidate like large those large actors are going to want to consolidate around big networks that have um profitability where like token price is going to be maintained and um and so it it kind of feels like and then consolidation also at the network level where you know those large networks may launch with smaller validator sets uh in

order to like prevent too much inflation of the token in order to prevent like the sell pressure etc. So like there's consolidation at every level basically. Does this all of this this picture together does it just point to a world where there's like networks are less decentralized where there are fewer validators fewer validators on each network uh and fewer large validators uh or sort of meaningful sort of enterprisegrade validators um securing most of the ecosystem. Yeah, I think so. Absolutely. uh now maybe there's different reasons for it right one is that the you know econ the decentralization is you know it's kind of expensive right it's expensive to pay

a lot of validators enough so that you know makes sense track of them coming in and with token prices not doing well new network struggling right people are like ah I want to like save that cost and then I think the other thing is that people just don't care that much about decentralization, right? Big people don't care much is like 200 violators or 30 violators or like it it doesn't really seem something that's like a huge determinant of success. So then people are like well we can uh this is a place where we can save cost. That's sort of an existential crisis sort of question isn't it? Because I think the entire point of the industry, the entire the

entire point of blockchains broadly is decentralization and and um and no centralized control. It's sort of I think the the economics just don't work in proof of stake as well. Like there there's still we have no way of really incentivizing decentralization as well. there's no economic lever uh for someone that's running a small value data and like if there like a lot of protocols have tried I guess um but they haven't succeeded in it and then it always naturally uh consolidates kind of to the biggest players that have the most resources um because there's no onchain mechanism to really incentivize smaller validators because you you can't prove that a small validator is only run by one person like

um and I think as long as we don't solve that problem. It will always tend to keep consolidating. Do you think it's a problem that can be solved at some point? Yeah, I think so. I mean, I do I think it could only be solved if you have some kind of identity offchain, you know, like cuz otherwise you just you just I mean in a way other people have the have exactly as you pointed out, right? They have tried to design proof stake systems that are like you know decentralized. I mean look Ethereum in a way right they're like oh every 33 val but like you just run thousands of val tens of thousands

of validators it doesn't uh or or like you know others like you know polka dot or a bunch of others right they're like oh we have you know um every validator in the set earns the same rewards and and maybe at some point they assumed this was going to lead to you know having you know all these different entities, but no, they just run you run a bunch of validators, right? Uh I don't think there's any way to prevent this. Uh the only Yeah, you'd have to really have some sort of I like, you know, a bit like what the Salana Foundation does with their delegation program, right? where they basically say

like okay you know we're going to do some kind of verification make sure these are individual you know organizations and then we're going to split the state now I think my understanding is actually in their case they're even thinking of getting rid of this or or reducing this right cuz they're kind of like well does that make a lot of sense cuz now there's a lot of validators whose only business is this uh Salana on a foundation stake that they make a bunch of money on otherwise no one cares about them, no one's heard of them, no one's staking with them. Uh so I think they starting starting to unstake from uh people who don't have other

delegations cuz they're like this doesn't make you know also like what does it really how does it really benefit the network? Yeah. Not very clear. like, okay, you can you can tout some metric and say, oh, you have more validators, more decentralized, but it's kind of meaningless. Yeah. And then you're basically just sort of like paying service providers to run your network. Yeah. Yeah. I think um so um Larry uh from uh you guys know Larry and Dango previously, Deli. So it their their network they're basically they're like doing away with all this and they're just like validators are invoicing Dango and they're paying them

for to run the service. Yeah, sure. But the issue is I know there are like some people doing something like that but then the issue is they will like you know I don't know pay something like what like you know 3k a month or something for a while like you know some amount that you know maybe higher than the cost of just running the infrastructure but is like nowhere near enough to actually you know have a reasonable business, right? So there's no that's not a future that um I mean that's not a future that's

going to you know allow uh people to organize great conferences like staking rewards taking some. Yeah. actually. But from decentralization perspective, is it hard to run the infrastructure there? Because like €3,000 a month or dollars a month, that might incentivize somebody to just run it in their home, right? It's still like a reasonably high amount. Of course, like a professional infrastructure uh provider that has like a huge team won't won't take this opportunity because there are just so many other opportunities. But uh there's also like a benefit in uh in having like a plannable income each month when you have like right like when you have like your cost and your your invoice versus

like some token that might moon in the future right this is also like a strategy that some validators are running right they are supporting early they don't know what happens to the network in the hopes that it's like yeah they made their analysis and they think it's going to be big at some point basically like a VC right um so yeah it's just a different approach that offers the opportunity to run a plannable business. And I used to work at at Telecom where we were also running a a staking business. And plannability is um extremely important also for like adoption of the more web 2ish players in the whole space which some might like and others might not like. that um just

having like a volatile token every month where you don't know um what you have in 6 months is very hard if you have to do like financial plans for over a whole year um versus when you have like a something you can invoice uh which is nice if you have like a company um that is like listed um it actually isn't too bad of an approach. Yeah. But I think here the maybe like the issue is that you know you in in in this in this example you may have just like a network of kind of at home semi-professional validators and you'll never have the you know institutional type validators the likes of of chorus that are able to offer distribution to you know neo banks

and asset asset uh pro um yeah like is in the end you you now make 30k where even if you have like I How many networks would you of that kind would you need to be able to support like a reasonable size team that has you know I don't know does all the things that uh say like you need like a a huge am like way more than they exist and know so I I think it's not yeah but you're making the argument just for an institutional grade operator set do you need an institutional grade operator set with providers that have like 100 people teams or every network. Maybe you do not have a network that is meant for a neo

bank adoption, right? Maybe it's just like Yeah, maybe there are some other use cases. Sure. Um yeah, totally it can be. Of course, like there's Yeah, it's like about the decentralization, right? Of course, there's a cost if you want to have like a super decentralized network. You cannot have like 100 institutional grade providers supporting it. I mean, the issue of decentralization here is also like what does it mean exactly, right? Because if this this guy now says like okay I'm working with these 10 parties and you know they write me an invoice and I pay them some dollars like it's uh it's of course also very very far from uh you know the kind of decentralization that and then they all

run it in heads now or something. Yeah. Um you mentioned Caligam and uh so you there was um there was a talk I think yesterday or a panel with someone from Yeah. Teleosing in uh in staking as well. Yeah. So what's the play there? Wait, what is that? Toss. Yeah, like dodge telecom. Oh, there telecommunication companies. Yeah. And we actually have like a a sponsor here as well, right? Um SC bar and like Neo protocol is doing a lot. So yeah, actually I I can I can take that one. Why why ters are moving? Because actually telecom um I think we were the first in the space and a lot of other telos are now uh joining as well following um what uh Deutsche Telecom is

doing and basically the argument that we sold internally so people were not uh because we got actually challenged a lot internally with like crypto is a scam and stuff but at the end of the day um from tech perspective it's a it's an infrastructure play right so you're an infrastructure provider for um for the internet right you're digging all the up the ground, putting all the cables in there, then you're an infrastructure provider for for mobile and then yeah, what's the next big thing? These guys also need to to position themselves for the future. It's like web 3 um internet of ownership. Ownership basically, it's a huge argument for blockchain. And then you want to be infrastructure provider for blockchain. It's still a very um

tiny business compared to the overall telco business, but you want to have a foot in the door in case it becomes uh bigger. Um and yeah, that's basically like the an infrastructure play. So what what networks does do telecom validate? I'm not sure what they do because they also I think they had to cut some networks because of profitability is actually a problem. Um but definitely uh back when when I was there like Ethereum um I think Pola dot Adam and Cello actually they they had this um like in the beginning a big focus on on mobile like um connecting your wallet to like the the mobile phone number. So that was

also like strategic thing. Um chain link was big for them. Oh yeah. chain link is actually yeah like it is uh yeah I think the biggest uh I mean that makes sense and I for for DA telecom or any telco you know who operate data centers and like have the infrastructure basically in house it sort of makes sense it's like it's like a low lift to you know go run a couple of validators on like some servers running in you know in some data center that they have it's actually also from decentralization perspectives I think a strong argument because like you have the hyper decentralizer there, right? You have like your own internet cables, your own cloud. Um, I think nobody else was on open telecom cloud. Uh, and uh, yeah.

Um, so yeah, there's definitely an argument that these guys are also decentralizing even though they are like these big players that are monizing everything. Um, yeah, on blockchain that's going to be hard and and especially they have distribution as well. I think that's one of the key points. Go telecom and like other telecom providers like everyone using them on their phone. So it's a it's a huge distribution and brand and then you know they could of course like try to have a crypto wallet and stuff like that. Exactly. And some some telos also um have like so for example in France Orange also has a bank right and so there's sort of uh have different verticals uh in addition to

the the sort of telecom um aspect so that distribution can be sort of like internalized as well. Yeah, I think it's very exciting. we probably see more of that like um networks willing to onboard for for brand and distribution and um it's kind of a symbiotic relationship I guess symbiotic talking about symbiotic great great transition um so we have about about 10 minutes left so yeah since last time we talked uh we did together with Felix and Symbiotic had not yet launched mainet um so yeah I guess at a high How excited are you about uh about Symbiotic come to the

market and you know more broadly what do you think restaking looks like in a year from now? Uh my my perspective on on re restaking is that like the narrative has kind of deflated a little bit since last year since I layer launched and um there's questions about like sustainability. Yeah, I mean I I think there's a they they're changing their focus now, right? I guess from the positioning they don't want to call like no one wants to call it restaking anymore. I think evening and and Babylon like everyone is kind of away from restaking because that narrative is kind of washed out now and symbiotic I think I say universal

staking now. Um and it kind of makes sense. I think this is like the the use cases that um those networks like symbiotic have to unlock to really create sustainable yield. And it is coming as well with um projects like this um cap money uh where you basically have a a yielding stable coin and you stake into asset managers and if they produce the target APY for the stable coin then they get rewards and if they don't then they get slashed. Um so it's really going more in the direction of um just economic um alignment um between different actors online and um I think that's very exciting like for the staking space like there's so much use cases that we haven't unlocked for staking in general yet. You look at

staking from a from a first principles it's just like um putting capital or like guaranteeing some sort of digital uh or economic work to be done and getting a guarantee for it. So you get a guarantee that someone um gets a certain work done whatever that is generating a yield or whatever um and you do that in a trustless way um which is pretty pretty fascinating I think and I believe there's like millions of use cases that are still uh totally underexplored in that direction and I would love for for these projects like laya symbiotic baron everyone to like to unlock these use cases um and help us to create a more efficient way of how we collaborate

online and how we shape our economy. What kind of use cases are you most excited about? Yeah, I mean for example this like year generation I think this uh could be a big thing um just getting guarantees um that a certain year is done because then you have a real um yeah you you get a guarantee that's almost like and and there's no risk because uh if the year is not generated then they get slashed. Um, so you um you not just trust the product when they claim they have whatever APY or something, but uh you know you're going to get it and there's no risk of even losing your collateral. For example, if you have someone on the other hand, you could get slashed if um if your collateral or your yield um doesn't sustain basically.

Yeah. I mean I think on a on a high level um you know I en layer had a lot of expectations right a lot of hype then people deposited a lot of E into it in anticipation that like hey we're going to make significant extra yield from it you know which at first was the points uh and then there was the layer air drop and you know I think that that seemed to have worked pretty Well, um but you know that's over now, right? So now it's the I can uh pay some extra staking yield, right? Still if you stake ETH, but that is like 0.6% right

now. So let's say you make 3% from Eve staking, you make 0.6% from from extra LRTs were paying incentives, but I think all of those have run out. So you don't make anything from the LRT. And then the ABS's basically don't pay anything. And I think there's a very strong uh aversion for many ABS to pay anything because like if you let's say you compare to something like Salana, Salana pays staking ws uh in Salana to people who hold Salana, right? They're Salana investors. Most of these people like more Salana, right? They want to have

Salana, right? So staking wars doesn't necessarily mean people are going to sell anything, right? They may sell some of the for taxes and you know there was the whole like economics uh debate around the Salana inflation proposal but fundamentally you know if you pay your staking rewards to people in your native assets who already hold your native assets it's kind of like works pretty well. But if you pay your staking rewards to people who are just staking ETH and they want more ETH APY, like for sure they're going to sell all of it, right? Like uh or the LRTs may even do it automatically on people's behalf. So I think there's a bigger version from ABS's to pay any rewards.

So so so basically those are kind of like zero, right? So you have 3.6 six now roughly if you're reststaking ETH. The other thing is there's a huge amount of leverage in the system. So uh people mostly staking with LRTs. Most of the LRTs I think something like 60 to you know 80% is deposited in a because people will get you know stake E get like easy E or something or uh Ether E put it into a borrow E loop this right of course that also means that when you unwind this the TVL you know someone may be staking you know 1

million but then the TVL will go down by 10 million or I don't know how much how much but you know it's a lot right so I think um and that's also a little bit where you have I think one of the challenges around Ian layer because for a long time they were like hey look we have so much E in there we're doing really well we're killing it but of course that also means on the flip side if the E balance going to come down it's going to look really bad right And then that might depress the iggon layer price which further reduces the you know the yield people make and and more incentivizes people to unwind it. So my guess would be that uh

you know you're going to see the TVL for layer come down a lot and and then in the end for it to really make sense and in the long run right you need the ABS yield. So this is the only thing that's kind of like real and sustainable and yeah I think that's going to be hard to get. Um now I think the I I I guess I layer has gone in that direction too but I think the symbiotic approach of people having being able to stake their own tokens I think is a bit more uh sustainable right so let's say if you like and then you say you have a chain and people can stake ENA and USD or

something and then like you you probably want to incentivize that a lot more than you want to incentivize like Eve stake. Uh, of course that still rem then raises the question okay about you know what would a symbiotic token do and why would it have any value and so it still raises you know a lot of questions remain uh but yeah I think I think you are going to see a big deflation of this whole restaking narrative and I think it's going to people are going to be like oh this is dead uh now don't think necessarily is dead right in the long run it makes some sense like I mean it is pretty reasonable to say hey we want

to have some economic value that's being secured uh that's being used to secure one thing to secure multiple things at the same time and like I I think that kind of um pattern is something that makes sense uh so I think there's going to be there's going to be something real there in the long run but I I think my guess would be restate is going to have a you know very hard time in the next you know like two years at least and it's going to be hard to come back as well so that's what happens to all the project when they launch with a high FTV or with layer maybe launch with a high TVL so to say um once this goes down it creates a psychological kind of looks bearish and

it's quite it's really hard to come back from that uh instead of if they didn't have much TV but grew more organically and maybe at this point they It shouldn't have had so much TV probably for Yeah, exactly. It becomes more of a liability, right? I mean, it looks fantastic and you know, okay, they could like raise at very high valuations and stuff like that, but like I think it's something that then like hits you when it when it goes the other direction. Yeah, guys, uh I think we should button this up. Thank you so much. Fascinating. And u Yeah, congrats on another great event. Thank you for having us. Been a pleasure.