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>"The junk bond part ("staking", etc.) definitely was." Might you or someone else explain what staking is? Is this an overloaded term in crypto? I know that th

>"The junk bond part ("staking", etc.) definitely was." Might you or someone else explain what staking is? Is this an overloaded term in crypto? I know that there is proof of stake that is used for consensus but I'm guessing this is not the same thing? Is staking a Defi offering?

Animats 4y ago
"All you need to know about crypto staking"[1] That's what they tell the suckers. [1] https://hitbtc.com/blog/all-you-need-to-know-about-crypto-staking/ https://hitbtc.com/blog/all-you-need-to-know-about-crypto-st...
- deleted 4y ago
  [deleted]
imustbeevil 4y ago
"Staking" means locking your coins on a platform/chain for some period of time (like a year). So, Tera or Celsius offer 20% APY for locking your coins there for a year, then when everything tanks and they go bankrupt everyone who locked their coins there loses everything. It's a "junk bond" because the idea is that you only get paid at the end of the term, and at that point the bond is statistically unlikely to pay out. Like most financial schemes, it really has nothing to do with the crypto, other than that it would be illegal to operate platforms like this with real money, since we created regulations decades ago to protect people from this.
- bogomipz 4y ago
  Thanks these are helpful in understand that PoS the consensus enables the the financial instrument known as "staking." Would the following be a correct summary then? By holding more tokens you become a preferable verifier node because you hold more tokens. And the way you hold more tokens and burnish your reputation as a verifier is by borrowing those assets from the actual owners and then paying the asset owners double digit interest? Is this correct? The idea is that you will make enough in transaction fees on the network to payout something like 18% interest to asset owner and still make a profit? If so this seems wildly circular.
  - ditonal 4y ago
    The person who replied to you originally is confused. "Staking" originally meant participating in a proof-of-stake consensus and you get rewarded by the network with the new blocks that are mined. All the Terra / Luna / NFT / exchange "staking" was people latching onto DPoS to make their schemes sound more technologically sound. Its an overloaded term at this point thats nearing meaningless unless you are clear you mean actual proof-of-stake.
    - deleted 4y ago
      [deleted]
    - tomjakubowski 4y ago
      > people latching onto DPoS to make their schemes sound more technologically sound overloading technical jargon for marketing, just on its own, seems like a strong scam signal. or at least a signal to stay away
    - hnthrow1010 4y ago
      It is really not surprising that the term got overloaded when the underlying principle is the same: put money down, do nothing, then come back and your money is magically multiplied. It is as blatant a scam as they come, except the scam is built directly into the consensus protocol itself.
      - PretzelPirate 4y ago
        The principals aren’t the same. In DPoS, you literally do nothing other than lend your coins out. In PoS, you run and maintain a node that runs the rules of the network to secure it. If your node is down, you’ll leave rewards as punishment. If you run the wrong client or don’t upgrade, you’ll get slashed if any consensus rules change. You also have to pay for electricity, bandwidth, and have to have monitoring in place. PoS is like running your own whitelabel SaaS offering.
        SilasX 4y ago
- ditonal 4y ago
  This is not accurate, but the problem is that staking got way overloaded. Staking should mean partcipating in a proof-of-stake network by using your stake to participate in block validation or delegating to someone else. In most cases you don't need to lock anything and at no point do you hand control of your funds to someone else. The problem is that many grifters then came to use "staking" to mean all sorts of different things with the only thing being in common is, get some rewards. But I've seen things like BlockFi get described as "staking" when really its just giving your money to control of someone else and earning interest on it.
  - thematrixturtle 4y ago
    You're arguing that it should mean something else, but GP explained quite accurately what it actually means today.
    - codehalo 4y ago
      He didnt. UST placed in Terra Anchor for the promised 20% was not staked or locked. You could withdraw at any time. Really, this site needs to stop choking on the crypto ignorance. This has been going on for more than 13 years now.
      - deleted 4y ago
        [deleted]
- vba616 4y ago
  I'm surprised you compare it to a junk bond. It sounds pretty much like a CD aka "Certificate of Deposit" which is a product sold by banks. Is there an entire generation that doesn't know anyone who ever bought a CD from a bank? These days they are a joke, but still shown on bank web pages. Here is the list of rates from a regional bank near me: 5 Year CD 0.10% 4 Year CD 0.10% 3 Year CD 0.10% 2 Year CD 0.10% 18 Month CD 0.10% 12 Month CD 0.10%
  - tomjakubowski 4y ago
    CDs are FDIC insured. If the bank goes under, you keep your funds (up to the insurance limit). Cryptocurrency accounts "staked" to a given exchange don't enjoy that benefit, as many people are now learning. I'd also recommend anyone shop around for CD rates. Those are hardly representative of what you can get at, say, Ally. (2.75% APY on a 5 year)
    - Animats 4y ago
      It's a high risk junk bond with deceptive retail packaging to make it look like a safe bank certificate of deposit. The suckers are supposed to think it's a CD. As long as the underlying market goes up, it behaves like one. If the underlying market goes down... It's a crappy bet, because the upside is limited while the downside can take you to 0.
    - fny 4y ago
      You're still getting ripped off. Don't buy CDs from ally. You can buy treasury bonds directly from the US government for north of 3%. See treasurydirect.gov.
  - deleted 4y ago
    [deleted]
  - OJFord 4y ago
    It 'sounds like' any bond right, but compare the rates. One pays 20%, one pays 0.1%. One is 'junk', one would deserve as many As as Moody's has to offer. (I don't think they actually rate them? Not from the US. But in some hand-wavy approximate way, they're as good as US gov bonds since they're similarly backed. (Actually why do you have both CDs & 'treasuries'? Monetary/fiscal separation sort of thing?))
- imustbeevil 4y ago
  Since I don't want to have to respond to all of the cryptos misunderstanding what staking means, you can also just google it: https://www.coindesk.com/learn/crypto-staking-101-what-is-staking/ https://www.coindesk.com/learn/crypto-staking-101-what-is-st... > Similarly, when you stake your digital assets, you lock up the coins in order to participate in running the blockchain and maintaining its security. In exchange for that, you earn rewards calculated in percentage yields. These returns are typically much higher than any interest rate offered by banks. https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/what-is-staking/ https://www.fool.com/investing/stock-market/market-sectors/f... > The unstaking process may not be immediate; with some cryptocurrencies, you're required to stake coins for a minimum amount of time. https://academy.binance.com/en/articles/what-is-staking https://academy.binance.com/en/articles/what-is-staking > Enter Proof of Stake. The main idea is that participants can lock coins (their “stake”), and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block.
renonce 4y ago
The original meaning for "staking" is that, for PoS networks, you put some coins, say ETH, to run a network validator, who secure the network by producing valid blocks, and in return you get a profit in that same coin (the network prints coins at a fixed rate per year, say 10% ETH, to attract validators). The coins are needed to prevent sybil attacks (i.e. preventing someone to running infinite validators and attack the network). So if you own 1% coin you can only run 1% validator and won't be able to flood the network. However running a validator is hard, requires custom servers and hardware, so people simply delegate them to another validator, who does the validation on their behalf and distributes the reward to its delegators. In essense, you earn 10% ETH simply by voting a validator. Note that this IS safe and in most cases, people do get their coins and profits back and it's very secure. You can't lose money in the sense that you won't lose ETH. There are ill-minded people to steal people's funds, but that's not the general case. Since most people only cared about the profit part, the term "staking" has since changed meaning to become anything that requires you to put coins in and get coins back. Staking UST is one case: you lend UST to the protocol and withdraw UST at any time, and the protocol prints you UST at 20% APR. There are lending protocols, airdrops requiring you to stake something, providing liquidity to collect fees, etc. And for simplicity they all become "staking". Note that while staking is secure, it doesn't change the argument about how ETH is just junk bonds. If they offer 3% return per year, it's essentially printed money and the currency's value would decline 3% per year as well. If they lock you in for a longer period (ETH staking locks you in indefinitely until The Merge goes live for half a year), you are kept from selling your ETH and these coins are already worthless once they are unlocked. Buying ETH for staking is essentially providing liquidity for people selling ETH so they can make a quick profit.
- bogomipz 4y ago
  This is really helpful thanks. I had a couple of questions. You mentioned: >"So if you own 1% coin you can only run 1% validator and won't be able to flood the network." Is this the reason that companies are pay interest is because the more coins they hold means their validator percentage in the network and so their profits go up? Also you mention: >"However running a validator is hard, requires custom servers and hardware, ..." I was under the impression that PoS meant there was no need for special/custom ASICs in the same way that PoW mining has. Is that not true? What types of custom servers and hardware is necessary for participating in PoS validation?
tim333 4y ago
There was an interesting take on that stuff in "Sam Bankman-Fried and Matt Levine on How to Make Money in Crypto" https://archive.ph/41hMi#selection-3923.0-3923.13 https://archive.ph/41hMi#selection-3923.0-3923.13 Staking is roughly what he calls putting something in the box in that story

Animats 4y ago

"All you need to know about crypto staking"[1] That's what they tell the suckers. [1] https://hitbtc.com/blog/all-you-need-to-know-about-crypto-staking/ https://hitbtc.com/blog/all-you-need-to-know-about-crypto-st...

deleted 4y ago
[deleted]

imustbeevil 4y ago

"Staking" means locking your coins on a platform/chain for some period of time (like a year). So, Tera or Celsius offer 20% APY for locking your coins there for a year, then when everything tanks and they go bankrupt everyone who locked their coins there loses everything. It's a "junk bond" because the idea is that you only get paid at the end of the term, and at that point the bond is statistically unlikely to pay out. Like most financial schemes, it really has nothing to do with the crypto, other than that it would be illegal to operate platforms like this with real money, since we created regulations decades ago to protect people from this.

bogomipz 4y ago
Thanks these are helpful in understand that PoS the consensus enables the the financial instrument known as "staking." Would the following be a correct summary then? By holding more tokens you become a preferable verifier node because you hold more tokens. And the way you hold more tokens and burnish your reputation as a verifier is by borrowing those assets from the actual owners and then paying the asset owners double digit interest? Is this correct? The idea is that you will make enough in transaction fees on the network to payout something like 18% interest to asset owner and still make a profit? If so this seems wildly circular.
- ditonal 4y ago
  The person who replied to you originally is confused. "Staking" originally meant participating in a proof-of-stake consensus and you get rewarded by the network with the new blocks that are mined. All the Terra / Luna / NFT / exchange "staking" was people latching onto DPoS to make their schemes sound more technologically sound. Its an overloaded term at this point thats nearing meaningless unless you are clear you mean actual proof-of-stake.
  - deleted 4y ago
    [deleted]
  - tomjakubowski 4y ago
    > people latching onto DPoS to make their schemes sound more technologically sound overloading technical jargon for marketing, just on its own, seems like a strong scam signal. or at least a signal to stay away
  - hnthrow1010 4y ago
    It is really not surprising that the term got overloaded when the underlying principle is the same: put money down, do nothing, then come back and your money is magically multiplied. It is as blatant a scam as they come, except the scam is built directly into the consensus protocol itself.
    - PretzelPirate 4y ago
      The principals aren’t the same. In DPoS, you literally do nothing other than lend your coins out. In PoS, you run and maintain a node that runs the rules of the network to secure it. If your node is down, you’ll leave rewards as punishment. If you run the wrong client or don’t upgrade, you’ll get slashed if any consensus rules change. You also have to pay for electricity, bandwidth, and have to have monitoring in place. PoS is like running your own whitelabel SaaS offering.
      - SilasX 4y ago
ditonal 4y ago
This is not accurate, but the problem is that staking got way overloaded. Staking should mean partcipating in a proof-of-stake network by using your stake to participate in block validation or delegating to someone else. In most cases you don't need to lock anything and at no point do you hand control of your funds to someone else. The problem is that many grifters then came to use "staking" to mean all sorts of different things with the only thing being in common is, get some rewards. But I've seen things like BlockFi get described as "staking" when really its just giving your money to control of someone else and earning interest on it.
- thematrixturtle 4y ago
  You're arguing that it should mean something else, but GP explained quite accurately what it actually means today.
  - codehalo 4y ago
    He didnt. UST placed in Terra Anchor for the promised 20% was not staked or locked. You could withdraw at any time. Really, this site needs to stop choking on the crypto ignorance. This has been going on for more than 13 years now.
    - deleted 4y ago
      [deleted]
vba616 4y ago
I'm surprised you compare it to a junk bond. It sounds pretty much like a CD aka "Certificate of Deposit" which is a product sold by banks. Is there an entire generation that doesn't know anyone who ever bought a CD from a bank? These days they are a joke, but still shown on bank web pages. Here is the list of rates from a regional bank near me: 5 Year CD 0.10% 4 Year CD 0.10% 3 Year CD 0.10% 2 Year CD 0.10% 18 Month CD 0.10% 12 Month CD 0.10%
- tomjakubowski 4y ago
  CDs are FDIC insured. If the bank goes under, you keep your funds (up to the insurance limit). Cryptocurrency accounts "staked" to a given exchange don't enjoy that benefit, as many people are now learning. I'd also recommend anyone shop around for CD rates. Those are hardly representative of what you can get at, say, Ally. (2.75% APY on a 5 year)
  - Animats 4y ago
    It's a high risk junk bond with deceptive retail packaging to make it look like a safe bank certificate of deposit. The suckers are supposed to think it's a CD. As long as the underlying market goes up, it behaves like one. If the underlying market goes down... It's a crappy bet, because the upside is limited while the downside can take you to 0.
  - fny 4y ago
    You're still getting ripped off. Don't buy CDs from ally. You can buy treasury bonds directly from the US government for north of 3%. See treasurydirect.gov.
- deleted 4y ago
  [deleted]
- OJFord 4y ago
  It 'sounds like' any bond right, but compare the rates. One pays 20%, one pays 0.1%. One is 'junk', one would deserve as many As as Moody's has to offer. (I don't think they actually rate them? Not from the US. But in some hand-wavy approximate way, they're as good as US gov bonds since they're similarly backed. (Actually why do you have both CDs & 'treasuries'? Monetary/fiscal separation sort of thing?))
imustbeevil 4y ago
Since I don't want to have to respond to all of the cryptos misunderstanding what staking means, you can also just google it: https://www.coindesk.com/learn/crypto-staking-101-what-is-staking/ https://www.coindesk.com/learn/crypto-staking-101-what-is-st... > Similarly, when you stake your digital assets, you lock up the coins in order to participate in running the blockchain and maintaining its security. In exchange for that, you earn rewards calculated in percentage yields. These returns are typically much higher than any interest rate offered by banks. https://www.fool.com/investing/stock-market/market-sectors/financials/cryptocurrency-stocks/what-is-staking/ https://www.fool.com/investing/stock-market/market-sectors/f... > The unstaking process may not be immediate; with some cryptocurrencies, you're required to stake coins for a minimum amount of time. https://academy.binance.com/en/articles/what-is-staking https://academy.binance.com/en/articles/what-is-staking > Enter Proof of Stake. The main idea is that participants can lock coins (their “stake”), and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block.

renonce 4y ago

The original meaning for "staking" is that, for PoS networks, you put some coins, say ETH, to run a network validator, who secure the network by producing valid blocks, and in return you get a profit in that same coin (the network prints coins at a fixed rate per year, say 10% ETH, to attract validators). The coins are needed to prevent sybil attacks (i.e. preventing someone to running infinite validators and attack the network). So if you own 1% coin you can only run 1% validator and won't be able to flood the network. However running a validator is hard, requires custom servers and hardware, so people simply delegate them to another validator, who does the validation on their behalf and distributes the reward to its delegators. In essense, you earn 10% ETH simply by voting a validator. Note that this IS safe and in most cases, people do get their coins and profits back and it's very secure. You can't lose money in the sense that you won't lose ETH. There are ill-minded people to steal people's funds, but that's not the general case. Since most people only cared about the profit part, the term "staking" has since changed meaning to become anything that requires you to put coins in and get coins back. Staking UST is one case: you lend UST to the protocol and withdraw UST at any time, and the protocol prints you UST at 20% APR. There are lending protocols, airdrops requiring you to stake something, providing liquidity to collect fees, etc. And for simplicity they all become "staking". Note that while staking is secure, it doesn't change the argument about how ETH is just junk bonds. If they offer 3% return per year, it's essentially printed money and the currency's value would decline 3% per year as well. If they lock you in for a longer period (ETH staking locks you in indefinitely until The Merge goes live for half a year), you are kept from selling your ETH and these coins are already worthless once they are unlocked. Buying ETH for staking is essentially providing liquidity for people selling ETH so they can make a quick profit.

bogomipz 4y ago
This is really helpful thanks. I had a couple of questions. You mentioned: >"So if you own 1% coin you can only run 1% validator and won't be able to flood the network." Is this the reason that companies are pay interest is because the more coins they hold means their validator percentage in the network and so their profits go up? Also you mention: >"However running a validator is hard, requires custom servers and hardware, ..." I was under the impression that PoS meant there was no need for special/custom ASICs in the same way that PoW mining has. Is that not true? What types of custom servers and hardware is necessary for participating in PoS validation?

tim333 4y ago

There was an interesting take on that stuff in "Sam Bankman-Fried and Matt Levine on How to Make Money in Crypto" https://archive.ph/41hMi#selection-3923.0-3923.13 https://archive.ph/41hMi#selection-3923.0-3923.13 Staking is roughly what he calls putting something in the box in that story