At the beginning of July, JPMorgan Chase releases report Among them, two analysts at the bank predict that by 2025, the value of the staking industry will reach 40 billion U.S. dollars. The report predicts that once the Ethereum 2.0 network completes the transition from Proof of Work (PoW) to Proof of Stake (PoS), the expenditure will more than double, from the current US$9 million to US$20 million. In the next four years, it will double again.
With the rapid increase in staking in the past few years, it is not surprising that traditional financial analysts have begun to notice this. Although JPMorgan Chase analysts are correct that the market will continue to grow, even $40 billion may be a conservative estimate.
If this seems ambitious, consider how fast the current mortgage market has accelerated in the past few years. Among the top six staking platforms, only Cosmos and Algorand have launched staking before 2020. The other four — Cardano, Ethereum 2.0, Solana, and Polkadot — have only launched their PoS variants in the past 15 months or so.In addition, these platforms are now account It accounts for about half of the total mortgage value.
After this rapid growth, venture capital (VC) investment is Pour into the encrypted space. As one of the mature growth areas of encryption technology, decentralized finance (DeFi) is currently attracting investments that have become mainstream headlines.Financial Times Report Private investors have already supported 72 DeFi companies this year, even surpassing 2020 before halfway through this year.
The vast majority of these DeFi applications are based on PoS platforms, which shows that we can see the level of traffic on these networks increase exponentially in the coming months and years. More traffic means more fees, which means that validators and pledgers can get more generous rewards, which makes it easy to generate passive income from pledges.
PoW proved vulnerable to mining bans
The reasons for the project’s transition to PoS hardly need to be re-examined. Ethereum’s scalability issues under PoW are well documented and discussed. PoS provides an opportunity to increase throughput and reduce costs. However, recent events explain more than ever why PoW is no longer applicable.
As the Chinese authorities took severe measures to ban cryptocurrencies, Miners go out in a big way So as not to violate the law.Some people migrate across national borders, and some people dump their mining equipment on the market, leading to Bitmain Stop shipping its latest model.
This is Bitcoin (Bitcoin) The reputation of keeping prices unchanged indicates the flexibility and maturity of the cryptocurrency market.
However, events in China have highlighted PoW’s vulnerability to the kind of censorship that blockchain aims to resist. In recent weeks, Bitcoin’s electricity consumption has proven to be its biggest weakness, and this situation may repeat itself in any other country where PoW miners choose to use low-cost electricity.
Bitcoin Energy consumption also has another Achilles’ heel, And a hotly discussed issue this year-its impact on climate change. Although renewable energy provides a solution, PoS provides a more attractive solution-completely eliminating dependence on energy consumption.
Many environmental advocates cited the metaphor of coal-consuming power plants to illustrate the dangers of PoW. Furthermore, PoW can be regarded as the engine that drives cryptocurrency through the “industrial revolution” stage. However, for the digital age, we need a more sustainable and flexible engine that can maintain cruising speed for a long time in the future without losing power or causing unknown collateral damage on the way.
PoS-the model of the future
None of this is a criticism of Bitcoin or PoW, both of which prove their durability. The resilience of Bitcoin means that it will exist for a long time. However, new platforms and projects self-evidently avoid PoW and support PoS instead. Therefore, over time, many PoW platforms will gradually disappear due to lack of use, which seems inevitable.
Ultimately, this is a good thing for the blockchain field. In addition to endless accusations of environmental damage, the shift to PoS will ensure that the ecosystem is more resilient to external forces. In addition, by eliminating the need for expensive mining equipment, PoS makes joining the blockchain network as a validator more democratic and removes barriers to entry. Making staking more attractive can increase the likelihood of validators joining the network, thereby improving security.
As the available returns in the traditional financial market gradually decrease in the next few years, and when the government seeks to recover debts generated in the past year or two, staking will become an increasingly attractive prospect for investors. For those of us who have witnessed an unstoppable rise in staking in the past year or two, the only question is: Are JP Morgan’s predictions sufficient?
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The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Tushar AgarwalAn early member of LuneX Ventures, he is the founder and CEO of Persistence, a cutting-edge financial application ecosystem focusing on institutions and crypto native users. Tushar is listed in Forbes Asia’s top 30 under 30.