Plenty of stakeholders in the blockchain ecosystem think Proof-of-Stake (PoS) consensus, wherein users “stake” money in specialized wallets to secure a network in exchange for staking rewards, is the future of cryptocurrencies. The biggest development in the arena is yet to come, namely Ethereum’s planned transition to PoS that begins in early 2020.
In that sense, the dawn of staking as a financial activity is only just beginning.
Stake Capital, a firm focused on tapping financial possibilities around staking rewards, is combining its bet that staking is a novel, fruitful kind of passive investment with a decentralized autonomous organization (DAO) structure to offer a new kind of investment opportunity to decentralized finance, or DeFi, investors.
Meet Stake DAO
On November 25th, Stake Capital introduced Stake DAO, a so-called “revenue-sharing DAO” built atop the company’s staking services, so as to enable the DAO’s “token holders to continuously receive staking rewards.”
Notably, Stake Capital already provides staking services for over a dozen PoS cryptocurrency projects, including Cosmos, Tezos, Loom, and Livepeer. Under the new DAO format, participants will be able to lock in crypto collateral — think ETH, XTZ, or ATOM — to earn Stake Capital Token (SCT).
After a specific period, SCT will be dispensed proportionally to users depending on how much their staked collateral earned in that span. SCT holders can then stake these tokens via Stake Capital’s website in order to collect their slice of the DAO’s shared staking rewards.
In Alex Masmejean’s Stake DAO announcement post, he explained the model was about bringing new possibilities to the fore:
“This will allow anyone to claim future Stake DAO income earned from our service fees, under the form of regularly dispersed rewards. We are also introducing a novel way to leverage locked collateral in external DeFi markets, providing both liquidity and DeFi composability to staked assets on our platform. By further decentralizing our services to the wider crypto community, we want to align Stake Capital users with us by letting them become DAO members, sharing profits as well as key decision making processes.”
Why DAO? An “Organizational Revolution” at Hand
There’s healthy debate in the DeFi ecosystem as to which areas DAOs could be useful and where they might be gratuitous. Fostered by community skeptics and proponents, these debates have led to a general expectation that new DAO projects should justify their efforts on the basis of things like experimentation or profitability.
In his aforementioned introductory post, Alex Masmejean explained Stake DAO’s position on the matter, noting that in decentralized autonomous organizations the project’s backers saw an “organizational revolution” forming that would lead to new types of “self-sovereign communities.”
In that vein Stake DAO was pressing forward, Masmejean said:
“By reducing coordination costs, we strongly believe that DAOs will enable self-sovereign communities to emerge, leveraging the wisdom of online crowds. After a successful past year at Stake Capital, gradually decentralizing our internal business processes and incentives to the public feels like the next logical step. We are thrilled to participate in this organizational revolution, and hope to gather as much feedback from the community as possible.”
And while it remains to be seen what is in store for Stake DAO on various levels, the organization undeniably has arrived at a fertile time where staking is concerned, namely ahead of the high-profile “Ethereum 2.0” rollout.
Relatedly, the field of Staking-as-a-Service got a big recent boost when U.S. crypto exchange giant Coinbase launched Tezos staking services on its main platform, allowing anyone holding XTZ on the exchange to earn staking rewards. That move alone shows that big stakeholders in the space are already angling to capitalize on what they see as a major unfurling trend.
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