Competitions of Staking and Other Mechanisms in Bifrost Financial
PROBLEM
In a platform there will be many mechanisms of action of different elements. Sometimes they can also bring conflict. So does Staking conflict or not?
Bifrost always wants to be able to bring the best benefits to the participants. So in the ecosystem it creates, there will be diverse elements with different roles so that when combined, they will bring the best to the platform. However, besides the relevance, there will also appear some conflict or competition. Staking’s mechanism also has quite a lot of conflicts with other elements. To understand how those conflicts are, let’s go to the following research.
Staking conflicts with PoS
PoS’s mechanism determines that the security of the network is maintained by the Staking mechanism, which means that liquidity and security are mutually exclusive. Typically, increasing Staking’s liquidity requires consideration of network security, while PoS Staking’s token liquidity solution seeks to break through this barrier, helping to reduce opportunity costs for users to participate.
Staking while improving the overall Staking ratio of the public PoS chain. If the Staking ratio is too low creates a PoS consensus security issue, and the nodes may be at a higher risk of centralization, which will cause users to lose due to their safety concerns. While high deposit rates lead to a lack of liquidity in the market. The price discovery can only be done through a few tokens, which means there are lots of bubbles leading to higher price volatility. For users who Are Holding their Assets, they cannot take hedging because there is no liquidity in a locked position and the opportunity cost of a Deposit will increase.
Staking and DeFi
With the current arrival of new DeFi products, such as Yield Farming, DeFi products could give users a staggering annual rate of return, but will this prosperity be built on ETH PoW consensus and can be maintained according to ETH 2.0 consensus or Polkadot PoS?
Users can only choose between DeFi or Staking as a matter of rewards. If the DeFi reward cannot offset the cost of the Staking link, users will transfer their assets from DeFi to Staking by choosing a higher reward. On the contrary, users will transfer their assets from a Staking product to a DeFi, but inadequate staking rates could cause security issues of PoS network consensus. Either way, there will be a gain-lose situation.
Meanwhile, Staking still has many problems such as high threshold participation, lack of liquidity, conflicts between governance and interests. PoS and PoW also have Byzantine fault tolerance issues. More users need to participate in Staking to ensure that the entire network is decentralized and more secure. Some projects apply centrally managed programs to address the above problems of Staking. We believe this activity can increase participation in Staking in the short term, but it will gradually undermine the PoS decentralized system that is at risk in the long term.
Bifrost’s current design goal is to provide investors with a unified business and service interlayer across many well-known PoS public chains, multiple Polkadot parachains and Polkadot transition chains, while providing Secure, standardized, configurable decentralized financial instrument to form a rich and flexible marketplace for collateralized income notes. Strengthen the building of the PoS ecosystem of the entire blockchain industry and help promote the widespread popularity and development of DeFi technology and applications.
Although there is still some competition and conflict that is not worth mentioning. The Bifrost is still definitely the trustworthy foundation for you. Certainly in the future, the publisher of this platform will try to fix and upgrade the improvements to make Bifrost even more perfect.
Website: https://bifrost.finance/
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