In just one year, the deployment has grown from an academic exercise to a dominant force in crypto.
The biggest story of 2020 is of course the launch of Ethereum 2.0. In addition, there was an enormous flowering of PoS networks (proof-of-stake) in the past year. Four of the nine leading crypto assets by market capitalization are on the way to proof of use. The number was zero in January – and more will follow.
This post is part of CoinDesk’s 2020 Year in Review – a collection of posts, essays, and interviews about the year in Crypto and beyond. Tim Ogilvie is the CEO of Staked, which operates staking infrastructure for institutional investors, exchanges, custodians and wallets.
Proof-of-stake now makes up around 15% of total crypto market capitalization. Much of the acceleration in crypto development we’ve seen this year is due to proof-of-stake blockchains, including Ethereum as well as Polkadot, Cardano, NEAR, Solana, and others.
As the dominance of proof-of-stake in developer engagement continues to grow in the coming year, we’ll see an explosion of projects and apps for users.
One lingering criticism of the evidence of the stake is that it is only theoretical. Many assumed that a PoS blockchain would fall down in practice, like an academic building a bridge out of books. Previously successful launches of PoS blockchains like Tezos and Cosmos did little to silence critics.
The frequent delays and apparent setbacks of Ethereum 2.0 undoubtedly contributed to this skepticism, and the project became a punch line in the crypto world until its successful launch last month. And with that, the proof-of-stake moved onto the main stage.
Ethereum ranks second after Bitcoin in terms of total market capitalization and has the largest developer community of any blockchain. The fact that this is finally a proof-of-stake is a clear signal that the concept is here to stay. Ethereum 2.0 is now becoming the top betting chain – although exactly when someone can guess.
While Ethereum 2.0 is a coming-out party for proof of stake, just focusing on successfully upgrading Ethereum means overlooking a much bigger picture. Many PoS networks find success and acceptance this year.
Polkadot, currently the largest PoS chain, has now deployed over $ 3 billion. Chainlink, the fifth largest crypto asset by market capitalization, has announced that it will also switch to PoS. More will follow. By the end of 2021, most of the top chains will be converted to various degrees of stakeout systems.
Of course, Bitcoin will keep its crown as the largest crypto asset. It was the first, it’s the most famous, and it has a clear and easy-to-understand use case. However, this is less of a counter-argument than the exception that proves an emerging rule. Bitcoin makes an excellent foundation as a store of value, but those looking to build applications and institutions for a decentralized economy will continue to switch to proof-of-stake.
Adoption will continue to grow due to the traction and developer activity we see with proof-of-stake blockchains, which sets them apart from bitcoin, stablecoins and “meme coins”. The numerous Bitcoin bridges that are currently hitting the market reflect this: The vast wealth of Bitcoin is hungry for new ways to generate returns … on PoS blockchains.
Proof-of-stake has always been the goal of Ethereum and many other crypto projects. A certain cynicism was inevitable on this path – and the progress of the PoS networks has certainly not been without setbacks. But in 2020 the theory became a reality.