On April 29, 2020, Bitfinex Exchange announced that it had distributed 35,000 EOS tokens in staking rewards, for a total value of approximately $100,000.
Bitfinex’s staking rewards program is designed to provide users with an alternative way to increase their funds and allows their clients to earn up to 10% of the theoretical amount deposited per year. This is achieved thanks to the so-called Stake Delegate Proof (DPoS).
DPoS allows users to delegate the staking of their tokens to 3rd parties who will use them to validate blocks, in exchange for rewards that are then redistributed among the users who have delegated the staking of their tokens.
EOS uses this same system to validate the blocks and therefore allows EOS token owners the ability to receive these rewards, which are in EOS tokens.
In addition to EOS, Bitfinex allows you also to stake out Cosmos (ATOM) and v.systems (VSYS), while Tezos (XTZ) will be introduced in May 2020.
Bitfinex Heats Up the Staking Wars
Coinbase exchange kicked off the staking trend by offering XTZ staking to institutional clients in March 2019, before rolling the service out to retail investors in November of that year.
Binance exchange then followed suit by launching a fee-free staking platform for more than half a dozen crypto assets running on proof-of-stake networks. Shortly after, U.S exchange Kraken joined the staking game, allowing clients to tap into the rewards offered by Tezos.
Leading the pack with the highest value of staked crypto assets is EOS, which represents almost a quarter of the total amount at $1.8B. This is closely followed by Tezos and Cosmos. Current estimates put the total amount of staked cryptocurrency at around $8 billion.
Staking has emerged as a preferred method through which crypto exchanges can reward loyal customers while growing their active user base.
Staking Could Lead To Increased Centralization
Surprisingly, not everyone in the crypto community is keen on the development of staking programs. Some analysts are concerned that aggregated staking will lead to concentrated governance power and increased centralization.
For instance, Blockchain analyst investor, Arianna Simpson, suggests the trend of centralized players offering to stake will result in a “staking war” where the winner, who has the most brand recognition and gives clients the most competitive rates, will get the bulk of staking rewards.
The winners of the staking war will also have more sway in network governance processes like voting, and an outsized ability to determine the direction of the network.
This could defeat the point of decentralization, especially for smaller, more vulnerable cryptocurrency networks.