Introduction The Decentralized Finance (DeFi) Revolution is taking over traditional finance (TradFi) and centralized exchanges (CEX), with billions in...
DeFi Chat is a series of educational & informative interviews with world professionals in the Crypto / Blockchain / DeFi / Web3 communities. We aim to provide digestible content in multiple mediums such as video, audio (podcast), and written (blog) form!
Adriana has shared her knowledge about the Proof of Stake consensus mechanism, how #Staking differs from #Lending & some thoughts toward #ETH #Merge. From this interview, she also introduced what #Blockdaemon has helped institutions enter the #blockchain industry.
Note: This transcript was automatically generated by artificial intelligence (AI) and therefore typos and grammatical errors may be present.
00:00 – 01:08: Introduction
Lachlan: Hi everyone. And thanks for joining. This is episode two of DeFi Chat. I’m here today with Adriana from Blockdaemon. Adriana and I actually went to IE University together in Madrid, Spain and met up at Consensus in Austin last month and thought she would be a great person to have today so that we can sort of go over what Blockdaemon does… you know,… what is staking, why do institutions use this and why would they benefit from going with Blockdaemon. So yeah. Thanks for coming on today Adriana, do you mind sort of introducing yourself?
Adriana: Of course thank you so much for having me. So I work for Blockdaemon and I’m a Technical Account Manager for the MIA region.
Adriana: And simply what Blockdaemon does is we connect institutions or pretty much anyone that wants to connect to blockchain. So we enable access with one integration. And that’s our mission just to bring blockchain access to anyone who wants it.
01:10 – 04:06: Understanding Proof of Stake
Lachlan: Sweet. So, yeah, I mean, just before we sort of go into staking, some people might know about proof of stake, but it might be beneficial for us to just go over that quickly. Do you mind sort of explaining what is proof of stake and how that relates to staking?
Adriana: Sure. So proof of stake: just very simply in high level, it’s a consensus mechanism. So if you think of Bitcoin that was actually proof of work. Right? And what proof of stake what it introduces is it’s a different way to incentivize people of why they would enter a network and why they would want to see… a network succeed.
Adriana: So the way it differs a little bit is with proof of work you validate transactions in return, you are mining for rewards, but in proof of stake to actually participate in the network, you have to literally stake your tokens. It’s loaning your tokens to the network, right?
Adriana: And in return, the incentive to do this is that you’re earning a reward. In the form of tokens back. So, you know it was designed to make blockchain a little bit more decentralized to not de-incentivize these pools, these mining pools. And also it’s just, when you, when you also stake your own tokens to a network, you also have the incentive to see that network grow and improve, right?
Adriana: Because you literally have your own tokens in it. So the incentives are much better aligned than other consensus mechanisms.
Lachlan: So if I had a higher stake in Ethereum than others, essentially, I would be more likely to be elected to basically validate transactions and get rewarded. And I would be punished if I validated a false transaction, right?
Adriana: Correct. That’s right. That the main risk of staking is what you are saying like the double transactions. So that is one of the main risks of staking. But so the way Ethereum works in staking is that the more validators you have in the network, the higher chances your validator is chosen. To validate these transactions.
Adriana: So Ethereum works a little bit differently than other protocols. It’s always the minimum to stake and the maximum is 32 ETH and it’s really about probability. So the more validators you have in the network the higher chance you’re chosen to validate these transactions and earn rewards.
04:08 – 05:26: The difference between Lending and Staking
Lachlan: So if I’m lending out my Ethereum to others to get staken rewards, how is this different from me lending out my Ethereum, for example?
Adriana: Right. So you know when you stake your tokens. As I mentioned a little bit before, you’re loaning your tokens to the network. To be part of a network validate transactions and get a reward in return.
Adriana: Lending works a bit different in that, you lend your tokens. And not necessarily to a protocol itself, but to these lending pools and different like decentralized finance platforms, for example, a very famous one is like Aave. So you would lend your crypto to earn an interest in return and it’s essentially doing peer to peer lending, right?
Adriana: So when you stake, you’re lending your tokens to the actual network. You’re not lending your tokens to someone else. So, I think even though you are getting incentivized to do both things, I think the end user is different.
Lachlan: Okay, so lending involves sort of two parties: Myself and Counterparty. Staking is just one party: Myself.
Adriana: Exactly. Cool!
05:29 – 10:23: Blockdaemon Overview
Lachlan: So, I could probably stake myself as a consumer on a few different DeFi protocols right now. Like where does Blockdaemon come in, then you guys focus on institutions. So why would an institution want to use your over a DeFi protocol or another website, for example?
Adriana: Right. So even though we are institutional focused, pretty much anyone like you or I can stake to the public validator that we host as well. So anyone can stake it to our public validators. That’s the beauty of blockchain, right? It’s all very transparent and it’s all out there.
Adriana: Why an institution would wanna stake with us? You know, we do staking as a service. We want to provide the service, you know, it’s not really that simple to run these validators, set it up operationally. Do all the maintenance work avoid slashing, having validator uptime. It’s pretty difficult to manage. Our engineers are very involved with the communities, the different network communities as well. They’re involved in the governance. So we are very in the weeds with these different networks as well. And I would say that we focus on all the hard work. So institutions can focus on their crypto strategies on growing and scaling. And we do all the hard work for them.
Lachlan: Is this something that’s like growing a lot, like are more and more institutions even that are outside of crypto getting into it and looking for a trusted company to stake with?
Adriana: So I would say we’re seeing much more broader institutional adoption. I feel as more regulation’s gonna come in, we’re gonna see this even more. We’re right now in a period of time in the market. It’s a lot of education first and you know, like doing these types of interviews and explaining what is staking and why an institution wanna go into staking.
Adriana: We’re just seeing more and more institutions not only participate, but invest in different crypto firms. For example the majority of our investors are institutions as well that wanna get into staking in some shape of form. So I think as more regulation comes, more education and more adoption more and more institutions and retailers will get into staking.
Lachlan: Yeah. And as you and I saw a Consensus in Austin and I saw at a Futurist conference in Toronto the last couple days, there’s like a lot more institutions getting into it. I saw all the major Canadian banks at the conference, for example, like they’re all got an eye on it. So, but at the same time, I mostly work with Stablecoin and DeFi.
Lachlan: It’s interesting to learn more about how institutions are getting into staking on your side. Thanks for that. And so what other features do you guys actually have? For example, slashing is a concern. When you stake rewards, you know, what else do you guys provide that a company couldn’t get… just by doing it themselves?
Adriana: Right. So we provide insurance against slashing. So we work with an insurance company called Marsh. So we also have different mechanisms to avoid slashing. We’ve only historically gotten slashed once I believe on Cosmos. We have 99.99% uptime different you know, just playbooks with different protocols.
Adriana: As I said our engineering is very deep in the weeds with all these different networks. If you compare our validators to perhaps others, you can see it in different blockchain explorers, our stats, I would say, speak for themselves. We were the ones that had the most uptime and as I said, we have only gotten slash once.
Lachlan: And the business model would be like, if I can get 4% APR from staking Ethereum, do you guys take a small percentage of that? And it adds up in aggregate?
Adriana: We would take a small percentage in reward. But just for you know, providing the staking as a service and doing all the maintenance and routine work of running these validators.
10:24 – 13:35: Learning Resources
Lachlan: Cool. So I guess from the consumer side, there might be some viewers that are on the newer side of blockchain and all that, or interested in learning more about staking or how they can earn positive income. Do you have any advice for people interested in just learning more or like anything that you did to sort of learn more about the space that might be beneficial?
Adriana: I mean, honestly, there are a lot of resources out there. There are a ton of podcasts as well, just to keep in touch with what’s happening in the crypto space, staking space. I get a lot of information on Twitter. That’s a lot where the crypto world talks and there are a lot of resources there.
Adriana: I would say online. A bunch of conferences as well. There’s also a lot of free conferences, I would say. I think the majority of the Ethereum conferences are free. So I would just encourage people that are interested in learning. They can also reach out to me. I am happy to share more, there are definitely a lot of things online in terms of staking and in crypto in general.
Lachlan: For sure, I think the one issue, at least my friends and family have communicated is sometimes there is bit too much information online, especially like if you go to YouTube and everything’s like clickbait one thing that I would add, like a couple resources for anyone interested watching is Defillama.com is really good.
Lachlan: It shows all the top chains by how much money is locked into them. What’s called total value locked. And it also shows the top protocols within each blockchain. So for example Ethereum has different applications and Binance different applications and, and they each have different protocols that you can sort of play around with.
Lachlan: For example, the curve protocol is for swapping stablecoin. So DeFiLlama is a good learning resource. Because it can show what is going on in this space. And then just getting a little bit of money into it and sort of playing with it. Usually a centralized exchange is the easiest way to get in.
Lachlan: This is actually something that Stably does as well next month through launching like an on and off ramp widget, so that basically you can buy or sell crypto from any webpage. For lower fees, cause right now a lot of people sort have to go through Binance, Coinbase or either centralized exchanges, which adds steps, gas fees, et cetera.
Adriana: I wanted to add on. On YouTube, there is really good channel Finematics that explains a lot of DeFi concepts. And yes, there are a lot of resources online, but everyone can get in touch with me and I will share what I am reading as well.
Lachlan: Finematics with a F?
Adriana: Uh-huh, with an F.
Lachlan: Okay okay cool. Yeah so if anyone’s interested, check out Finematics and DeFiLlama, I’ll check out Finematics as well.
13:35 – 16:15: Ethereum Merge
Lachlan: And then you give a pretty good overview Blockdaemon, and what is staking, how does it compare to lending? Why would institutions go for it? One other thing that I think is interesting to cover is I actually saw Vitalik speak two days ago at Toronto Futurist, which is awesome, but the Ethereum merge, we’re pretty close to that. And for anyone who is not aware of this, Ethereum is switching from proof of work to proof of stake. With the two goals: main goals of reducing costs, significantly because gas fees are quite high right now in Ethereum and to use significantly less energy from an environmental and efficiency point of view.
Lachlan: So how will Ethereum’s switching to proof of stake benefit? How would that impact Blockdaemon and the world of stake in.
Adriana: First of all, it is probably one of the most historic and exciting events in the crypto space. That is upcoming, but the way it is going to impact the staking world, I think this is just the beginning, right? If we make Ethereum more scalable, cheaper to use, it is going to open a whole other ecosystem of decentralized finances or decentralized apps, powered by Ethereum. I would say, it is just the beginning and a huge step of building a robust ecosystem.
Adriana: Everyone at Blockdaemon, we are super excited about this event. We are following it very closely and also educating our clients about it. We are doing different initiatives internally to boost rewards to have our clients maximize on their staking rewards as well.
Adriana: It has been exciting to follow. By just seeing the different Testnet merges happen successfully, and all the development. So September’s gonna be big, that is coming up.
Lachlan: Awesome. I wonder how that’s gonna impact the Ethereum price, if it gonna.. No one knows.
Adriana: Yeah, I don’t like to give trading advice, but we will see, I am pretty bullish personally
Lachlan: Nope. Not financial advice. Yeah.
Lachlan: Awesome. Well, Adriana, thanks so much for joining us today. I hope viewers found it helpful for learning a bit more about what Blockdaemon does, how that fits into the ecosystem, and what staking is. You guys wanna check out: staking, all that, give Blockdaemon’s website a visit.
Lachlan: And if you Google stuff, especially Medium articles, et cetera. There is a lot of really good information there for learning a bit more. So thanks so much, Adriana.
Adriana: No problems, thanks for having me. Take care. Bye!
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