Research Summary
The report discusses the concept of staking in the context of ApeCoin, a cryptocurrency associated with the Bored Ape Yacht Club (BAYC) NFT community. The author criticizes the modern interpretation of staking, which he believes has deviated from its original purpose of rewarding users for contributing to the security and operation of a network. He also critiques a proposal for a staking program for ApeCoin, arguing that it does not provide real value or utility to the ecosystem.
Key Takeaways
The Evolution of Staking
- Original Purpose of Staking: Staking was initially introduced as a way for users to offer their coins as collateral to validate blocks in a network, thereby contributing to its security and operation. Users were rewarded for taking this risk and doing this work.
- Modern Interpretation of Staking: The author argues that the term ‘staking’ has been repurposed and now often refers to a system where users are rewarded with more coins simply for not selling their current ones. He criticizes this modern interpretation, stating that it does not contribute to the ecosystem in any practical or technical sense.
- Implications of Modern Staking: The author believes that modern staking mechanisms are essentially a shell game, designed to encourage less selling by offering more coins as a reward. He argues that this does not make an ecosystem more robust and is essentially giving away equity for nothing.
ApeCoin and Staking
- ApeCoin Staking Proposal: The author critiques a proposal for a staking program for ApeCoin, which suggests paying 17.5% of the total supply of ApeCoin to people who stake their ApeCoin over the next three years. He argues that this does not incentivize early NFT adopters or benefit the APE Ecosystem, but is simply paying people in ApeCoin to hold ApeCoin.
- Implications of the Proposal: The author suggests that the proposal is essentially a bribe to prevent existing holders from selling their ApeCoin. He argues that this is a poor use of the DAO’s equity, which could be better spent on creating value for ApeCoin and building a sustainable ecosystem.
- Recommendations for ApeCoin DAO: The author suggests that ApeCoin DAO should spend its remaining equity on solving real problems for users and building incremental value for APE ecosystem users and potential users. He also recommends designing a staking program that incentivizes the introduction of new people to the Ape ecosystem over the next decade.
Actionable Insights
- Reconsider the Purpose of Staking: Cryptocurrency communities should reconsider the purpose of staking, ensuring that it provides real value and utility to the ecosystem rather than simply serving as a mechanism to prevent selling.
- Use Equity Wisely: DAOs should use their equity to incentivize people to take risks, do work, and grow the community, rather than giving it away to existing holders as a bribe for not selling.
- Design Effective Staking Programs: Staking programs should be designed to support the goals of the ecosystem and incentivize the parts of a product, community, or network that require people to do work or take risk.
