This seems obvious and not remotely over reaching.
The SEC press release[0] makes a clear distinction between decentralized staking and centralized promising to stake on behalf of a customer. Promising to use funds in a specific way to generate a specific return sounds like the most obvious security. Nobody should be surprised.
Maybe - ETH staking was specifically setup with incentives to encourage self hosting as much as possible (downtime penalties are tiny, especially if they only comprise a small portion of the network). There are some "decentralized" staking options that don't give over custody of your funds (the node operator only has enough control to run the node, doesn't actually have the ability to take your funds).
And even with centralized exchanges, at least this system gives people a choice. I can choose to run my own Ethereum staking node. I can't choose to operate a bank / participate in the fed's central banking system.
Well yes and no: those staking coins do indeed get more coins but there's still lots of speculation going on. I mean: it's not a given that if, today, with x coins you can buy, say, a laptop tomorrow with x * 2 coins you'll still be able to buy that same laptop.
Stakers do definitely take the volatility risk. They're rewarded by getting more coins.
A common approach is staking pools, which incentivize decentralization for the greater good of the network.
One of the largest ones for eth and several other chains ($7B TVL) is LIDO, of which I’m an eth mainnet and testnet validator node operator. They distribute stake over many high quality validators and have very rigorous operational guidelines to ensure high quality operators only are allowed. I’m not shilling for LIDO but they are a very professional and well ran DAO that truly cares about what’s they’re doing.
One of the cool things they do is liquid staking. In most PoS networks, your funds are locked during a given time boundary, generally referred to as an Epoch. You start staking at an epoch beginning and can not access funds until the beginning of the next epoch. Validators are rewarded for reliably and securely (no double signing!) performing their task via staking rewards. Staking rewards are quite akin to inflation in more traditional monetary systems.
> 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.
> 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.
In a chain like Tezos, the validator software is relatively easy to run if you have a Raspberry Pi and some terminal chops, and a lot of hobbyists do stake this way.
But it’s easier for most people to delegate to another party. This is where decentralized staking pools for ETH2[1] built around smart contract interactions could be a good alternative for many users, and may compete with centralized staking platforms.
The mere fact that these peer-to-peer and decentralized alternatives exist, and that some portion of users will prefer to use them, is what makes this technology distinct.
there will be decentralized & trustless staking pools such as RocketPool, where even if a loss of funds occurs the loss is subsidized through the entire protocol.
You don't have to buy them, you can borrow them. This opens up a certain type of attack where you promise to pay interest to get control of the stake. If you're running a stake pool, you can pay interest on top of the stake reward. It's possible to run a staking yield farm, where you pay interest in a different cryptocurrency that you can mint yourself.
These kinds of off-network incentives can disrupt the reward system. It's even possible to incentivize a lot of people to collude in a double spend attack if the rewards can be distributed to the participants.
You earn interest (varying) while you delegate the coins to a stake pool.
This is basically the same (details matter, ADA for example keeps the coins in the wallet all the time - AMP coins are transferred elsewhere) for all PoS (Proof of Stake) coins.
Bitcoin, on the other hand, is a PoW (Proof of Work) coin.
Edit since i can't reply downthread:
You're of course free to cash out your staking rewards however you want, but mind 2 things:
Except the barrier for entry on building a stake pooling operation is relatively low, so there will be a substantial amount of competition in the space over time. Coinbase for instance is taking a 25% commission on the staking earnings, so anyone who can come in under that, or offer options in terms of liquidity on the staked funds that can be reinvested, will attract a good amount of the share of stakes. There is even a fully decentralized pooling system that is nearing release.
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