Staking is no longer a stranger to those who are active in the mining field this year, which has set off a new trend of “everyone mining” and has also brought PoS back to the spotlight.
The rise of Staking is largely due to the fact that drawbacks of PoW mining are becoming ever more apparent with the current market not doing very well. Those early participants had been lucratively rewarded, while latecomers could only feed themselves on beautiful fancies. What is more, today's currency price is by no means the same as that of 2017. To increase computing power, the cost and the energy consumption are both climbing. The Golden Age of those mining machines that used to be held fantastic has silently begun to fade away. If the situation continues, with the number of the miners reduced and the head mining pools still occupying a large proportion of computing power, 51% attack is no longer something far away.
Against such a backdrop, the Staking came into birth, following the PoS mechanism. By strength of a few star projects, such as Tezos and Cosmos, Staking has been one of the hottest stars for a long period of time. In PoS or any PoS-resembling mechanism, anyone can use encrypted assets to obtain token rewards through the “lock-up” by Staking. Also, the rate of return is calculated in terms of the currency standard, and it depends entirely on the expansion model of the corresponding cryptocurrency.
Staking consists of two modes: MasterNode and Dividends. MasterNode means that a node could only be able to provide network services and obtain interest rewards after itself having stored a certain number of tokens. In other words, a node can gain corresponding returns if there are users receiving network services provided by it.
The other mode, Dividends, as the name suggests, is a dividend-like way referring to obtaining interest by holding tokens, which is commonly adopted by the market today. Also, there are modes of dual tokens, such as those getting token reward from B while holding A tokens.
In the Staking model, it is not the case that the more tokes you pledge, the more tokens you will accordingly obtain. Rather, the fact is that the more tokens you pledge, the bigger your possibility of mining will tend to be. However, with the market being so excited about Staking, coupled by the recent market rise, many exchanges and mining pools have also launched their Staking service lines, attempting to lobby for a slice of this pie.
From the perspective of maintaining decentralization, Staking can guarantee the normal running of the blockchain and ensure the activity of the public chain, thus improving the security. This may be the biggest value of Staking. Despite this, Staking is not without problems. Staking's so-called “interest” and “dividend” have long been questioned, that is, the value of the token after additional issuance.
The current Staking projects all have an additional issuance mechanism, with the rate generally between 3% and 6%. While inflations caused by the additional issuance of projects have long been noted by the industry. According to the data where rates of inflation are ranked from high to low, we can find that - the top 10 inflation rates are close to 80% with the lowest stay at 16%, indicating that bubbles inside it may come into a break any time.
In addition, Staking is inseparable from the “lock-up”. Building on this, many Capital projects will require investors to do the lock-up for half a year or more, but it will take more than half a month to unlock. What's worse, the investors have no control over the return gained from the lock-up, and the rate may be 6% or simply 1%, totally in the hands of Staking providers.
As a leader of PoC, Lava proposed the concept of “Firestone Mechanism” and completely mitigated the above problems. So, what is the “Firestone Mechanism”? Actually, it is a Lava's unique proof with the consensus building as a previous goal, supporting the pledge of LAVA token LV to obtain double mining output, which however is not mandatory. Also, the value of the Firestone is regulated by the market. Therefore, the project has no final say over how many LVs can be pledged to generate the Firestone.
We all know that prices fluctuate around value. In addition to the supply and demand of the market, the supply of Firestone also depends on the value of projects in some way. Moreover, Lava does not carry out ICO (Initial Coin Offering) or any token pre-sale, so the concept of valuation is not fit for Lava, whose price is completely determined by the market.
The freeze ratio of Firestone is dynamically adjusted at the beginning of each slot (every 2048 block height). When the number of Firestone in the previous Slot exceeds the target value 2048, the freeze rate of the Slot will increase by 5%; And when the number of Firestone in the previous Slot is less than the target value 2048, the freeze rate of the Slot will decrease by 5%.
At present, rules for the Firestone also vary according to different mining pools. For example, in B3pool there is an 2-8 split of the income between miners and users who buy Firestones, while the split becomes 6-4 in onepool, where users who discover a new block can be awarded an additional 50 Lavas. Besides, 168pool features a combination of the exclusive mode of Firestone income and the sharing mode of Firestone income.
The above-mentioned exclusive mode of Firestone income can be understood as a miner holding the Firestone and generating block, will enjoy the full income (double mining reward). While the sharing mode refers to that all miners holding the Firestone will share the block reward. When generating blocks, mining pools will automatically detect the proportion of each miner's Firestone share and their valid capacity ratio so that block reward can be calculated based on the corresponding weights assigned to each miner.
The joining of Lava Firestone Mechanism has made Staking no longer just a way of obtaining “interest” by the pledge, greatly enriching the modes of Staking. In addition, Lava is also capable of a power binding mechanism, which allows users to bind their own computing power to another user, so that the income of both parties can be transferred to the bound address. The binding of computing power means that the organization of mining pools will be more diverse, and the ways it can be shaped in the future are also more varied.
Simply put, the Firestone Mechanism is like an upgraded version of Staking, which inherits all the merits of Staking and mitigates the inflation rate that has long been criticized.
The reason why the Firestone Mechanism was designed by Lava is to enable the natural adjustment of the Firestone price by the market. In this way, the enthusiasm of the miners can be incentivized in the first place, ensuring the activity of the chain. Moreover, it will prompt the market to generate increased vitality and hence have more possibilities to make the miners and the mining pools to work more closely together. Also, the price can be a signal to reflect the gap between supply and demand, and the economic model of projects can be timely adjusted. All these will be more conducive to the development of the Lava ecosystem. Also, it aims to make itself inclusive enough to accommodate more blockchain co-builders and face the market with more freedom, rather than perusing a steeply changing economic model.
Lava has always focused on improving the problems of existing consensus mechanisms by focusing on the PoC consensus mechanism. As indicated by its vision, it has been working to build an underlying framework for global PoC participants, to create a “root of trust”, and to establish a global “top-level index” based on this.