Btcpop.co is one of the few exchanges that stakes users balances and distributes staking rewards back to users. There are a differing opinions on whether an exchange should or should not be able to stake user funds. Some feel it is inappropriate and exchanges should only be custodians of deposits nothing more. While others see the opportunity for a mutually beneficial opportunity. Btcpop has always seen it as an opportunity to provide value and serve its customers.
With staking user funds Btcpop creates a win-win-win proposal for users, individual pos coin ecosystems, and Btcpop itself.
Below is a table with quick debate topics against Exchanges staking coins and their rebuttals
Reason Against Exchanges Staking
Argument for Why Exchanges should stake
| Locking of funds |
In the process of staking cryptocurrency a portion of funds at stake become locked for a period of time as the node participates in reaching consensus. If exchanges stake cryptocurrency, there will be times when withdrawals could potentially be delayed due to the locking of funds.
| Locking of funds is a minor issue |
Most exchanges today use a hot and cold wallet security system. A hot wallet with a smaller amount of funds is connected to the internet and used for daily deposits and withdrawals. A cold wallet is not connected to the internet and is only used for offline transactions to refill the hot wallet. This leads to times where a large user withdrawal is delayed due to the need to refill a hot wallet.
In staking cryptocurrency not all funds are locked in staking for long. So the cases of a larger withdrawals than non-staked coins would be a similar delay to refilling a hot wallet.
| Voting + Consensus |
Many people do not see exchanges as owners of the cryptocurrency deposits, they are only custodians. So an exchange moving, voting, or staking those coins are acts of ownership and break their inferred agreement with depositors as custodians.
| Exchanges are participants as well |
Exchanges in many cases are the largest holders of cryptocurrencies and the most active wallets in an ecosystem. As such they are also the biggest stakeholders and the most interested in securing that network. When exchanges participate in honest staking they act to protect the network. This not only protects their interest but the interest of their depositors as well.
| Loss of Stake |
Part of the proof of stake consensus mechanism is also the disincentive of losing ones stake if they try and attack the network. If a rogue employee working for the exchange unsuccessfully tries to attack the network, they could lose coins at stake. Once lost these coins are gone, and so the exchange incurs a risk of losing depositor funds.
|Incentive for good business |
Exchanges will not risk their stake while staking for the same reason exchanges don’t just steal user deposits. It is more profitable long term to provide a legitimate service and profit honestly on fees. The same is true for staking.
So it’s easy to see the drawbacks of exchanges staking coins are pretty minimal. But the benefits create a win-win-win situation.
- Users win by getting their coins staked for them with no effort and the benefits of more frequent payments and the compounding effect that comes with staking in a pool.
- The POS coin ecosystem wins for each coin with the addition of a reliable high value staking node securing the network.
- And Btcpop benefits by charging a 2% staking fee on all staking rewards enabling lower withdrawal fees and better service.
How Users Win:
Staking wallet run for them
The simplest way users win is by their funds automatically staking. Runing a staking wallet is not extremely difficult, but it does require some technical skill which not everyone has. If you have ran a staking wallet yourself, you know their are a lot of pains such as syncing, bogging down computer, fan noise, going offline, and more. It’s by no means “free money”. If you have a lot of staking coins it can take up all of your computing power and drive a person mad for minimal reward. With Btcpop you can run hundreds of POS coins extremely easily with no work.
Btcpop even keeps track of stats and publishes them in a nice easy to read organized table for users.
Compounding effect of pooled staking
Pooled staking has significant advantages over solo staking just like pooled cryptocurrency mining. The main advantage is many small payments, instead of significantly fewer larger payments. With staking, this leads to a getting stakingrewards on your staking rewards (comparable to compound interest). This process of earning interest on interest is called the compounding effect and for staking it will usually earn more rewards over time than the 2% staking fee taken out by Btcpop.
Alternative Income, Faucet + Withdrawal fees
The customer always pays for costs. So for example if a exchange spends a ton of money on advertising, they will have to charge higher fees and make more money per customer. This is why name brand products cost more than generic even if they are produced for nearly the same material cost.
Btcpop distributes all of its staking rewards through its altcoin faucet. This acts as a great marketing tool. This helps keep exchange fees down. Also Staking fees are used help keep withdrawal fees low for all coins and is why Btcpop is able to offer some the industries lowest withdrawal fees.
How Individual POS coin ecosystems win:
As mentioned earlier exchanges in many cases are the largest holders of cryptocurrencies and the most active wallets in an altcoin ecosystem. As such, they are also the biggest stakeholders and the most interested in securing that network. When exchanges participate in honest staking they act to protect the network. This not only protects their interest but the interest of their depositors protecting the network.
How Btcpop Wins:
Btcpop wins directly by collecting the 2% of rewards staking fee which is uses to fund its faucet and keep withdrawal cost low. But Btcpop also wins indirectly by increasing the exchange liquidity of all POS coins at Btcpop. All POS coins stake automatically even if they are in a sell order. So users have every incentive to deposit their POS coin, place their high sell order and forget about it. They still get their staking rewards and they might snag a good selling opportunity.
A company wins by helping its customers
It’s no secret that companies become successful by helping their customers solve problems. Btcpop greatly values its existing customers and plans to continue growing and helping more users with its secure easy to use features such as pooled staking. Btcpop continues to develop each day and improve its P2P lending website, exchange, cloud mining contracts, pooled staking, and savings account.