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|Author: Block Beats BlockBeats 0x29

If you pay attention to the trend of the blockchain world, you will definitely find that POS is one of the hottest topics this year. Ethereum has started to turn to PoS. Cosmos, Tezos and other public chain projects with heavyweight PoS consensus mechanisms have been or will be launched this year. Under this trend, many teams have started full-time node business.

In early February this year, Staked.us, a start-up company focused on providing services for PoS institutions, completed a seed round of financing of 4.5 million US dollars. Well-known investment institutions in the blockchain industry such as Pantera Capital and Coinbase Ventures participated in the investment. Obviously, some capital giants have already begun to lay out the PoS blockchain economy.

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Source: block123

What is a PoS blockchain? PoS is a novel consensus mechanism. In this blockchain network, the most basic job of a node is to pack transaction information into blocks and maintain network operation. Its function is like a miner in a PoW consensus mechanism blockchain, such as Bitcoin and Ethereum miners, but PoS miners do not need to stack computing power, ordinary servers are enough.

EOS is not a typical representative of PoS. EOS is actually a blockchain with a DPoS consensus mechanism. After the tokens held by users are mortgaged, they cannot directly obtain income, and the income is obtained by the node team. Because EOS prohibits dividends, the node's dividend strategy can only be carried out secretly. On PoS blockchains represented by Cosmos, Polkadot, and IOST, users can directly obtain corresponding dividends after mortgaging their tokens to nodes.

Attracted by the high returns, many institutions and celebrities in the industry have announced their participation in the election, and a large number of players in the currency circle have also begun to pay attention to the business of PoS nodes. In order to explore more about PoS nodes, we interviewed the Node Pacific node team that focuses on PoS chain governance and the Wetez wallet team that specializes in PoS blockchains.

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node cost

"Nodes are the blood of the public chain." Catherine (CEO of Node Pacific) told BlockBeats.

Node Pacific is an international team specializing in public chain nodes and community governance. Like many teams, EOS is the first public chain project that Node Pacific participated in as a node, and then continued to work on BTS, IOST, Lambda, IrisNET, CMT, Meetone, etc. have become nodes on nearly 20 chains, and are one of the teams that specialize in the business of nodes.

Generally speaking, to become a node on the PoS chain, the user must first mortgage a certain amount of tokens (specially used for staking), and the user can become a node when the mortgage threshold required by the system is reached. After starting to implement the node function, the system will send rewards to the node. Generally, the reward amount is proportional to the number of tokens mortgaged by the user.

Increase the degree of decentralization, package transaction data into blocks, and maintain network stability. These are the basic functions of nodes, and only one server is needed to complete this work. In addition to these superficial things, Catherine believes that in order to make the public chain project develop better, nodes actually have to do a lot of work that others cannot see. "Other costs depend on what value can you bring to the chain?" Catherine said.

The "other costs" that Catherine refers to are their community governance experience. Starting from EOS, Node Pacific began to focus on community governance. Starting from handling EOS community token loss cases, holding community governance meetings, and now becoming the main initiator of more and more PoS community governance, a lot of their costs have been spent on community governance.

More than one person agrees with this view. We once talked about this issue with Jeff from the Wetez wallet team. He believes that if most of the nodes in a chain have only completed the basic work of producing blocks and only hold the rewards obtained by staking tokens, then the chain’s Development is very problematic. "The ecological incentives of this chain may be wrong." Jeff said.

In Jeff's view, a healthy ecology is that nodes can develop applications, and the entire chain will benefit from this, as well as token holders. This is a virtuous circle. This actually coincides with Node Pacific. Catherine also said that the team is developing a DApp on community governance, hoping to reduce human workload through smart contracts and make community governance more convenient and efficient.

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node income

The income of nodes is basically based on the issuance of tokens in the system, so the issuance rate of tokens is a key indicator. Different PoS chains have different issuance rates. For example, IOST is 2% per year, and Cosmos is 7%-20%.

Theoretically, the higher the issuance rate, the more rewards the nodes get. However, it is actually very risky to use an excessively high issuance rate to attract node players. The premise is that the underlying construction must keep up, that is, the technology and community activity of this project can support the price. If the bottom layer is not good, the result of using a high issuance rate to attract users will only be a price collapse.

What about the income of these PoS chains?

"Currently, EOS is still the most profitable, after all, the price is the highest." Catherine said. Node Pacific is now ranked 36th among EOS nodes, with a daily reward of about 318 EOS. But if you don't look at the price, just look at the yield?

"A yield of 2%-25% is relatively normal." Jeff said. Wetez wallet has been paying attention to several mainstream PoS projects. According to the data, the annualized rate of Tezos is about 7%, that of Cosmos is about 7%, and that of Irisnet is about 18%.

The foreign Diar research team summarized the current PoS projects, estimated and drew the rate of return chart (please see the figure below), the highest is the Horizen blockchain (excluding excessive LPT), the rate of return is as high as 30%, and the lowest is The Neo blockchain has a yield of 3%. After Ethereum transforms into a PoS consensus mechanism in the future, its yield will be about 4.45%.

Then there is another question, should ordinary users participate in entrusting the coins in their hands to nodes?

In a pure PoS chain, ordinary users can entrust coins to nodes, so that nodes can get more rewards, and the extra rewards will be distributed to the delegators.

Now many users have entrusted their coins to nodes. In the previous discussion with Jeff, he found that there is an obvious trend at this stage. Those nodes that seem to have security features can get more delegations , such as Cryptium on Tezos, such as Certus and Bitfish that won the Cosmos contest. Because of the security features, users can entrust coins to them without worrying about problems.

The Diar team also sorted out the total mortgage and delegation rates of tokens in the current PoS chain.

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The future form of the node

Since users choose "security features" as a trend of PoS delegation, wallets seem to have a natural node-based advantage.

As we all know, security is an essential feature of wallet products, and wallets have a large number of user groups, it seems that they are the most suitable nodes; and conversely, will some teams that have become nodes, in order to attract more? Users, what about doing wallets? In the development of the PoS chain, will wallets and nodes become one?

First of all, the trend of node teams making wallets is not very established in Jeff's view. He believes that a dedicated technical team is needed to make a wallet. Before the PoS economy has really developed, the coins entrusted by nodes are actually limited to a few chains. Currently, excellent nodes with large entrustments mainly emphasize security. It is more likely to provide services for operating nodes for institutions because of its security features.

The wallet team started to build nodes because of a large number of users. This is already a trend and has already happened, such as Cobo Wallet and so on. If the exchange is also regarded as a wallet, Huobi also has a Huobi mining pool node, and Coinbase and Gate.io have also provided PoS token entrustment services. Because they have traffic, they can naturally do node entrusted business, which is a natural advantage.