Here everyone and welcome to another edition of BitTrues to the Spaces EME. Today we have a very special guest, Jorosen from Stanford Blockchain Accelerator. Stanford Blockchain Accelerator is an organization that aims
to incubate top-stand-foot startups in a crypto-native way and connect standards to students with top crypto VCs from an own product cause in the industry and experience their jobs. With a wealth of
experience in the crypto industry. Joe has kindly taken the time to chat with us about all things staking related today. But before we dive in, Joe, could you give us a quick introduction to yourself and what you do?
I'm sure pleasure to meet you and to meet everyone here. So kind of that, as you mentioned, I run the Stanford Blockchain Accelerator, which is a student organization supporting Stanford students in alumni and in building blockchain projects and we try to help drive
blockchain adoption and support projects that are kind of tackling the frictions for blockchain adoption, whether it's infrastructure scalability and cross-chain challenges, whether it's a developer tooling to make it easier to actually build viable projects on a blockchain user experience.
through account abstraction and trying to simplify adoption by people being able to use decentralized applications better. So our aim is to really help founders choose the right types of projects and support them.
And they're good at market and launch. I also teach a course on blockchain entrepreneurship with a few others at Stanford and we bring in speakers to kind of talk about interesting topics and hopefully inspire fresh founders in the space. Before that, I was a
entrepreneur, built a couple of companies in the distributed compute space and have been in blockchains since 2016. Super cool thanks for sharing I think today we'll be mostly talking about staking and I guess staking has been quite a hot topic daily with the Shepela
create and everything like that. So I guess what we really want to do during these community spaces is that we really want to find out what people who have been in space for a while who are doing things in the space feel and you know what the opinions about things in general
that have happened and so on. So I guess the first question I really wanted to ask is what are the benefits of sticking on the overall blockchain ecosystem and are there any projects at Stanford blockchain accelerator that have anything to do with sticking?
So there are a few layers we can go down here. I'll try to keep it relatively high level, but ultimately blockchain is a decentralized technology and platform, right, which creates shared digital infrastructure, which means we want to have an application that anyone can come in and use, which means someone needs to run that application.
The people that run these applications are either running the infrastructure layer of chains like Ethereum, Polygon, etc. And given that we want people to be running these infrastructure layers, they need to be providing their own resources to do that.
until now that was basically kind of miners quote unquote which meant that they would provide computing resources to execute to update the Ethereum blockchain itself to to validate that
And I think that's why others were doing to check the work of other folks as well and to run smart contracts. The beauty of blockchain is that it's permissionless, which means that anyone can come in is incentivized to help run this infrastructure, but that also presents issues of potential fraud and bad
that actors because it's permissionless that anyone can come in. So all protocols have incentive structures and rewards to ensure that people want to offer up their compute resources for maintaining the blockchain and running sport contracts. But at the same time, they need to be able
punish people that are or disincentivized these actors from doing things dishonestly and potentially recording transactions that are false. The way this happened with proof of work was we would just make it really expensive for anyone to
to run any given transaction by having them basically guess a hash of a number that was very large. And this required specialized computers, ASICs, etc. or just like powerful computers.
And it would waste a lot of energy and that wasting of energy would incur a cost. And that meant that if one out of every million potential transactions that were fraudulent, you know, would potentially get through the system, it was really expensive and so expensive.
to create all of these fraudulent, to create a fraudulent transaction in the first place that you would be disincentivized from doing that. What ended up happening is that only people with large computing resources were able to kind of become miners or generally, but more importantly, it wasted a
ton of energy, which is not good for the environment. There are many issues with that overall, and it also presented decentralization issues, which is if it takes significant resources to do these things, then you have these large mining operations that were dedicated
for this and you're not as decentralized. Ideally you want a decentralized platform to allow almost anyone to be able to come in and offer their compute resources or to participate in the infrastructure layer and the more decentralized it is, the more secure the overall platform is. And that's really where
the shift the proof of state comes in, where now instead of having to guess this huge hash and waste energy resources, you stake, you basically put anyone can come in and can run a validator potentially. The requirements are not
terribly large. And you have to put down 32-Eath to stake it, basically. And one person within a group gets chosen to create the block and to process the transactions themselves to update the state.
around them validated they've done things properly and if everything is scopes that essentially there's a reward that distributed to all of the parties that validated and that proposed the new block and
One that was validated that was chosen to propose the block themselves receives the transaction fees. So that's the happy path, sad path, as if it's a bad block. Everyone gets lashed and loses their teeth that they've just staked. So they're disincentivized from being dishonest.
Well, thanks for the in-depth explanation. I think there was probably one of the most in-depth explanations of what's taking is that I've had so far. And I think for a lot of our community here that really want to know more about sticking, you know, I think definitely you really
for a great break down it. So I think the next question I really want to ask is the difference between staking in crypto as compared to traditional finance or track fight. I think recently there has been a lot of discussion about how crypto, whether crypto is a security, these and so on.
So I think the question I really have here is how does staking differ in crypto, so staking exchanges, DeFi, and so on, as compared to traditional finance, so stuff like retail, bond, structured investments, or even fixed income securities. Yeah, so, a great question.
I mean, on the surface of it, it's very easy to think that staking is just a security. I mean, the how we test is, are you expecting a return? Right? You put some in, you wait, and then it comes out, which seems like, okay, that looks like
a lot like, you know, many of these structured investment instruments or like alone that you get an interest on. I think the primary difference here and the nuance is that you're not just like giving an investment and hoping someone else does all of this
stuff and it provides a return you're actually running a platform in a protocol. So you're actually doing work that is critical to maintaining whichever blockchain platform or protocols, Ethereum, Polygon
et cetera. So in running these validators, in taking your e if you're not just like putting money down, you're actually supporting and involved in running these validators themselves and these validators are doing things. They're running smart contracts. They're updating the state of the blockchain.
So I think that there's a nuance there that needs to be understood now when we get into more, you know, some of the other alternatives of staking as a service or a liquid staking, it starts to look a lot more like maybe that there is more overlap there from a security standpoint because at that point you are kind of
of delegating everything to someone else and you're just giving money for someone else to do a whole bunch of work. But you know, there's more of a gray area there, but certainly it's not all this blanket just staking is a security because you're not just putting money down and expecting return, you're actually providing a service.
Yeah, that's super cool. Thanks for explaining. Thanks for sharing. I think the follow-up question I have to that is what are some of the risks that are associated with sticking in how can people who want to do so safely? Great question. I mean, there's a lot of
different way to stick, right? So I guess just to go back to the other example of comparison with mining. And mining to be able to be a good miner, you needed tremendous compute resources, you needed access to energy and low cost energy. And those
Those were basically the primary things that limited who could mine and who couldn't mine. In staking, really there's two things. One, you want to be able to stake honestly. And two is you need uptime. So if you're not seeing every single block that comes in as
being proposed and then validating, then you can easily get slashed. So you still need compute resources, but not nearly what you need beforehand. The compute resources are relatively modest, but really it's like network uptime to make sure that you're able to not get slashed.
And there are a number of different ways that you can stick, right? So you can either literally just run a solo validator. You can download the application that needs to run to run that validator. It's like, you know, I7 until machine with like, uh, uh, however many gigs of RAM.
So it's fairly reasonable and you can run it and if If you you have really good network and you can ensure that your machine is never going to be down and you have like 99.9 whatever percent of time then you've got a pretty good chance of not having tremendous risks on the
on the staking front. However, if you can't, then the other options are you can delegate at the someone else to do it for you and then you're trusting them and doing it and they take a bit of a cut. One other note is you need 32 E to be able to stake, right? That's the minimum amount of any running evaluator.
So if you don't have 32-week, then that's a problem as well. Then you can join a pool. There are also ways where someone else that is running a validator, you and a few others can pull together. And now you're trusting this person that's running your validator for you. There are validator services out there that kind of de-read.
risk that a little bit no more trusted. And then there's these things called like liquid staking pools where basically a third party is running these validators for you and they just you get you but basically buy a token and that token represents your stake with the VM. But ultimately from a risk perspective, it's like are the validate if you're not if you're doing it
yourself, are you going to have that uptempt and I could slash? And if you're doing it through someone else, are they A, can you be sure that they're honest and B, which usually all of these large providers, they're huge. Like, there isn't really concern about dishonesty there, but B is like, will they be able to maintain
the uptime and you can kind of see the history of that and you can go and see what the average rewards are. I guess one other thing to note on like risks in staking is that there's two mechanisms that work here. One is your staking rewards which is giving you basically like a percentage return and that you could be three percent
It could be 8% I think with Ethereum is like 4 or 5% ish, but there's also deflation in the value of the currency itself. So if you're seeking to earn a return, you have to be aware that the value of whatever you're getting might also appreciate or depreciate, and there may be inflationary pressures
as more of these get created, as more tokens get created overall, or there might be upward or downward pressure depending on if we're in a bull or bear market and the regular swings of investing. Thanks for sharing that. Yeah, thank you so much. I think you shared a lot about them.
these different staking mechanisms work but another question I have to add on to that is that for people who are new to staking and of course we do encourage our community members to do your own research and so on but just from your perspective do you feel that there is
a way to kind of determine what kind of tokens and what kind of cryptocurrencies are best for staking and as well as I'll talk about that how much of an investor's portfolio should they be staking. So a great question. I mean there's like
sites you can go to like stakingrowards.com that will tell you basically what returns you can expect from staking different types of tokens. The easiest way to stake and I forgot this is actually just through exchanges, right? Centralized
in general, it changes generally like offer staking options. I think Bittrue also connects, can easily connect you and provides staking options there. If you're going to be holding a token, by and large, it makes sense to stake it as well.
because the risks of getting slashed are pretty low. Usually if you're going through your exchange and you're going to hold on your exchange anyway and I'm not advising you to do that or to take that that's a separate discussion. You may as well stake in or in the rewards on that because you're actually providing a service and it's like a pass through service here.
Yeah, thanks for thanks for sharing and yes, you're definitely right. We do offer many staking options from us dt to your Bitcoin XRP I think most of the people that state with bit true XRP Holdings because we are one of the
exchanges who have been supporting XRP since quite a long time ago. So thanks for sharing that with Dr. Muthy as well. Yeah, I think the next question I have would be about regulation because I think that's something that's increasingly talked about in this
And I think when it comes to sticking regulation is also something that maybe a challenge or maybe an advantage in the future depending on how things go. It definitely talks about coinbase, wanting to leave
the US and not being sure about where regulation is going and so on. There's all kinds of things that people are talking about now when it comes to regulation. So I really want to ask, what do you think are some of the regulatory challenges that are associated with sticking? Is it compliance, is it taxation?
which ones do you think are the biggest challenges when it comes to Staking? I mean the biggest ones are I think less the taxation because those are things that can be solved than people and their services that either exist or will exist to solve them for the different types of staking.
that are out there. I think really it's a compliance and security is more than anything and if something needs to be registered as a security then it significantly changes who's allowed to kind of offer these instruments in the first place and
who's a lot to hire them and everything around that. We're seeing different takes. The US currently is being quite harsh. And it's not harsh from a legislative perspective. It's from the regulators themselves that we have
two different regulators that are each trying to assert their authority. And we're seeing a number of companies, well, you know, Kraken wasn't great because it was kind of doing staking as a service, but handling a lot of things internally on its own. So in some ways, it was
offering securities versus in the US specifically and kind of the regulars went after them and gave them a $30 million fine and then they shut their US operations and that caused a whole bunch of selling of ETH within the US specifically for those that were kind of
getting out of other positions, but you know, Coinbase is still up there and they're basically saying that, you know, we're just connecting people with other providers and services, but ultimately the regulation isn't going to come from the regulators, it's going to come from things to on a court. And that's what's happening now as well, within the US
specifically is more sophisticated people will be arguing both sides in court and hopefully will come up with reasonable regulations. But on the flip side, we're seeing like Europe and Hong Kong are being kind of more open and crypto-friendly
in their regulatory approach and understanding that there's value here and that blockchain overall has value to add to society in terms of decentralized applications and in terms of the future of technology. So I think
know, for now, it's a little harder in the US, but these are decentralized technologies and you can access them anywhere. And again, I'm not giving advice one way or the other. And in Asia and Europe, things are looking a little better.
Hey, thanks for sharing your opinion and regulation. I think as the centralized exchange, we also look very closely to how regulation is changing in order to be ready to take on the challenges when the new policies are put in place.
so I think it's really a space that has to be watched especially with the things that you've mentioned earlier. So I think I want to move on to how staking fits into the bottom market, most specifically how the staking fit into the
broader cryptocurrency market. So what kind of impact do you think Sticking has on crypto and what is the importance of Sticking in the growth of the crypto space? I mean I think it's critical. There's
There's two ways to look at crypto. One is you look at it as tokens with prices that go up and down, which is basically how we look at it as investors. But that's not really what it's providing here. The purpose of cryptocurrencies are to be
tokens that are part of a decentralized platform that is doing something. So whether these are compute layers, like Ethereum, Polygon, whether these are applications themselves, each of these tokens represents something within an ecosystem that is generally providing utility
of some sort. Not exclusively, obviously we have currencies, we have stablecoins, we have non-s stablecoins. But in that context for the entire decentralized application and decentralized ecosystem to run, and as I said in the beginning, you need to have people that
are allocating their own computing resources to run these applications and to basically support the overall ecosystem because the infrastructure layer of these applications have to run an infrastructure layer that's decentralized and staking really provides the ability for more
people to join in being part of this infrastructure and in providing resources, both compute resources as well as their own token resources because providing a token and lending that token so that it can help disincentivize fraud is part
part of how all of this works. So staking ultimately and moving to proof of stake helps create greater decentralization and greater adoption and growth of these infrastructures overall, both by incentivizing more people to participate and more diverse people to participate, which
ultimately makes the blockchain ecosystem more viable to begin with and kind of grows the pie and grows the value. You'll have more applications being built and run on this. They'll have more users that come in and use the applications and it's highly supportive and critical to the overall blockchain ecosystem.
How do you see staking evolve in the future with new developments? What do you think we can expect in the future? We've actually seen a lot of this evolution fairly quickly.
from solo stakers where you could run your validator on your own machine or on a server farm to exchanges themselves that were offering staking services to pooled staking to liquid staking where kind of
You have this third party, a set of people that are running validators, a set of people that are able to purchase this token. So I think the idea behind this is that it gets more people involved. One of the necessities of staking, especially for new protocols,
and your platforms is that when you have low liquidity and something is brand new, you still need enough people to actually validate and stake and to be part of running that specific protocol itself. So how do you incentivize people to do that and how do you get people who
who are perhaps only familiar with Ethereum or Polygon or Solana to stake on these kind of newer platforms that the main entrepreneur does. And here we're starting to see also a lot of innovation and folks like Eigenlayer are allowing kind of redirecting
And we're seeing ways of, I think it's oboe, is working on projects to have like even more decentralized validator where you can have like multi, you can split up validator keys across multiple parties that have a lot of different
multi-party validators. And again, what that does basically is increase the decentralization. And that ensures that these platforms and protocols continue to have low amounts of fraud, high amounts of trust, and continue to grow.
No, thanks for sharing that. I think that really made sense and definitely I really feel that with everything that has happened in all the developments that have been made in the space, there definitely is a lot of room for such growth that you've talked about.
Welcome, you. Great question. Yeah, I mean, we've got a ton of projects that are coming out and we're going to have a demo day in a couple of weeks.
I'll share more information on my Twitter about that. We'd love you guys to kind of come to the demo days of virtual demo. They see the projects that our teams are working on. If you're looking to support them, if you're looking to work in this space,
Awesome, without the have you also learn about them because as they launch and they at some point have staking You know that they'll need and want your support So would love for you to get involved anyway you can and I'll share more info sorry more information on my Twitter
Thanks. So for you, those of you guys who are interested in what Joe and Stanford Boxer are doing, do give Joe a follow on their Twitter and check out what they're doing because I think it's really interesting and definitely spend some time to check out their demo date.
I guess you're coming to the close of today's year me and really thank you so much for joining us today and you know taking taking your time. I know it's quite early where you're at and it's also quite early around the minute so I'm really happy that we managed to make this work.
I think just one thing before you log off, I think it's there anything in particular that you want to just share with our community, with regards to crypto or any kind of what's very encouragement that you would have for someone who wants to build or develop
projects and so on into space. Yeah, I mean, this is the best time to be building in space. The bull market was a wonderful market where many people made a lot of money and that's always a nice thing. It attracted a lot of interest and attracted a lot of people to build projects
projects, but a lot of it was around speculation, and that's not necessarily lasting. And I think now we're starting to see real projects that are tackling all of the, like, why is it that we're not all using blockchain based and decentralized applications in most of our day to day lives? It may not be relevant.
But for others, these technologies are still expensive to run applications on their challenging to use, their challenging to develop on. So there's a lot of room for opportunity and for growth within this space. And it's a really exciting time now to see people working on projects.
that are helping drive the entire ecosystem forward and what it can do forward. So I'd urge, like, if you're interested in this space now as a time to actually start something to work on a project and to see it grow such that when we do get back into the bull market, you can reap
Well, great advice. Thanks so much for sharing. I think that like a lot of what you said makes so much sense and I hope our community today took away something from this age.
Thank you very much for joining us, Joe, and have a great day ahead. Thank you. Appreciate the time and it's great to speak with all of you. Thank you.