Tezos Jumps 25% on Coinbase Staking, Ethereum Next?

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Tezos on Coinbase

Tezos has spiked to a recent high of $1.90 from about $1 to currently settle at around $1.23.

That’s after Coinbase announced its US customers can now stake Tezos with them to receive a yearly reward of 5%. They say:

“The current estimated annual return for Tezos staking on Coinbase is ~5%. You’ll see your pending rewards increase in real-time in the app, and once your initial holding period completes (35–40 days), you’ll receive rewards in your account every 3 days.”

Tezos spike, Nov 2019
Tezos spike, Nov 2019

The news led to one of those classic charts of up and down as markets price-in the new offering. Coinbase says:

“Staking lets you earn income with your crypto by participating in the network of a particular asset. When you stake your crypto, you make the underlying blockchain of that asset more secure and more efficient. And in exchange, you get rewarded with more assets from the network.”

This is one of the first staking service offered by Coinbase, with the crypto exchange-broker keeping some commission in return.

To do it on your own, you need 10,000 XTZ ($12,000). Coinbase on the other hand doesn’t mention a minimum presumably because they pool all stakers together so the amount wouldn’t matter.

That makes it as easy as just giving consent to Coinbase with a click, so letting you earn interest on your Tezos holdings.

Coinbase says how much you earn depends on how many are staking. Last time we did the calculations it was 5.5%, but on Coinbase it’s at around 5%.

In ethereum too the rate of reward depends on how many stakers there are. Here the minimum amount to do it solo is 32 eth ($6,000) with returns ranging from 8% to 5%.

Just how many eth Coinbase holds in custody is not too clear because they chop their cold wallet into many small ones. We’d estimate about 3 million eth.

If all of Coinbase eth holders staked, and no one else, they’d receive 13% a year of their eth holdings in eth. At 4.5 million eth staked in total, it’s 9%. While at 10 million eth, they get 5.6% according to some estimates by Vitalik Buterin, ethereum’s founder.

Coinbase has not made any announcement they will facilitate ethereum staking, but if they’re doing Tezos, then it can be assumed.

The two networks technically have some differences, but for end-users it’s the same concept where you lock your eth or tez and can’t access it for some period of time because it is basically doing what Proof of Work miners do, proving identity in a non-sybilable way to verify the code rules are being followed.

After that period of time you’re given the reward in eth or tez depending on what you’re staking. With this all currently live for tez, while for ethereum it might hopefully launch this winter.

At a technical level the differences are more conceptual in that Tezos uses what is kind of like delegated Proof of Stake (PoS), but you don’t have to delegate it.

Ethereum’s design is arguably a bit more decentralized as there is no delegation, with Coinbase’s job in addition more difficult for eth as it sort of has to split the 32 eth slots into different systems. A bit like it splits its cold wallets presumably.

Otherwise the two networks are roughly the same currently, with tez having a 5MB limit, while ethereum is at around 1MB per ten minutes.

Ethereum is of course working towards sharding, which increases scalability considerably, while we’re not aware of likewise plans for tez.

Tezos does have smart contracts like ethereum, but it’s in a language called Michelson, which is like OCaml. Meaning you need quite a bit more skill to code on Tez than on eth’s javascript-like Solidity or Python-ish Vyper.

The one difference is that tez claims to have on-chain governance, but we’re not very sure just how much of that is really on-chain because very unpopular “features” – like identity requirements to access the ICO tez – were not removed through this governance mechanism.

That illustrates it’s probably not really that much on-chain, with such mechanisms usually having some sort of committee which can say yey or ney. So making it arguably a bit more centralized.

Copyrights Trustnodes.com

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