Coinbase’s foray into ‘Staking as a Service’ via their Coinbase Custody arm grabbed headlines across the cryptocurrency landscape when launched.
Representative of an ongoing departure from standalone, traditional custodial services, the move is part of a broader branch of developing narratives around Proof-of-Stake (PoS) blockchains that are launching.
However, even if staking does become a widespread service down the line, its long-term effects on the developmental role of governance in PoS networks is uncertain.
The move towards staking services is not strictly limited to Coinbase either; several firms are gearing up for a potential rush of institutional clients into the promising returns touted by staking crypto assets.
Expanding Custodial Services and Hopeful Returns
Staking as a service has fueled positive speculation about the appealing returns from idle crypto assets that suffered heavily during the extended bear market. Institutions have been hesitant to jump into the crypto markets for a variety of reasons, and the uncertainty of altcoins and their poor performance following the meteoric highs of late 2017 likely contributed significantly to their uncertainty.
At a high level, staking as a service is basically when a firm (i.e., a crypto asset custodian) posts the ‘stake’ or ‘bond’ required to validate transactions and receive the requisite return via a PoS-based protocol network.
Staking requires that network tokens are locked in a ‘hot’ wallet which functions as the collateral for validating transactions, and also allows staking participants to participate in the governance of a network.