The Proof-of-Stake model has been around since 2012, when it emerged as an alternative way to achieve consensus than Bitcoin’s computationally heavy Proof-of-Work. However, it’s taken until now for PoS to take off, spurred by the launch of staking on high-profile platforms including Ethereum 2.0, Polkadot, and Cardano.
Despite epic price rises since the start of the year and the fact that it’s the second-biggest cryptocurrency by total market capitalization, Eth2 lags behind competitors in the staking rankings. So, why isn’t Ether (ETH) the number one staking cryptocurrency?
A brief history of proof-of-stake
Back in 2012, Peercoin developers Sunny King and Scott Nadal proposed a PoS proposal as part of a hybrid consensus model. In 2013, the Nxt genesis block hailed the first pure proof-of-stake blockchain, which Blackcoin rapidly followed in early 2014. At that time, crypto was still relatively niche, and consensus models, in general, were still not necessarily the contentious issue they would become in subsequent years.
After Ethereum launched in 2015 and development activity rapidly gained momentum, many projects wanted to emulate its success. However, Ethereum’s scalability challenges — resulting from its dependence on proof-of-work — quickly became a known issue. Therefore, core development teams started examining other consensus models, attempting to put their own spin on their predecessors’ work.
Delegated proof-of-stake emerged as one variation on proof-of-stake, pioneered by Dan Larimer. EOS, Tron (TRX), Lisk and others continue to use DPoS to this day. However, the model has come under widespread criticism for introducing too much centralization of control into blockchains.
Tezos (XTZ), which launched on mainnet in September 2018, devised a PoS consensus model involving delegation that overcomes some of the most critical challenges of the EOS-style DPoS consensus. Dubbed “liquid proof-of-stake,” the model allows XTZ holders to delegate their validation rights to other token holders. Validating nodes, or bakers, on the Tezos network, can use delegated funds as a contribution toward the minimum 10,000 XTZ required to become a baker.
Liquid proof-of-stake varies from the EOS-style DPoS in that there is no fixed upper limit on the number of validating nodes that can participate in the network. Neither is delegation a requirement for someone to become a baker on Tezos, whereas in the EOS model, someone can only become a block producer based on delegation.
2020 — Staking takes off
Tezos can take the credit for being among the first platforms to popularize staking, even achieving institutional buy-in to staking thanks to a collaboration with Bitcoin Suisse. However, in 2020, several key developments in PoS blockchains saw staking take off, providing new income opportunities for crypto users.
In May, Polkadot launched on mainnet after spending several years in development. Only weeks later, Cardano launched the Shelley iteration of its mainnet, allowing stakers to participate for the first time, albeit with no other functionality yet live.
It’s worth pointing out that each of these platforms has its own purpose and goals. Ethereum stands true to its original vision of becoming a “world computer,” whereas Polkadot was developed with interoperability and economic scalability in mind. Cardano prides itself on its peer-reviewed research foundations.
However, what they have in common is that they’re all PoS platforms and all launched staking features in 2020. Currently, they also all make up the top staking platforms, with Ethereum trailing in fifth place, having similar staked value to Algorand. Avalanche comes in third place right before Algorand but presents a bigger staked value that’s closer to Cardano’s and Polkadot’s rather than Algorand and Ethereum.
Arthur Breitman, one of the early architects of Tezos and a proof-of-stake advocate, told Cointelegraph that although PoS is…