The paradigm shift from Proof-of-Work (PoW) to Proof-of-Stake (PoS) is both a technical and behavioral innovation when it comes to distributed ledger technology (DLT). It built upon the cryptographic proof of Bitcoin to enable more decentralized, scalable, and sustainable participation in network security.
As you probably know by now, native staking went live on the Hedera mainnet on July 21, 2022. The network is currently in phase 1 of the staking program rollout, as explained in this great post, and we’re excited to announce our support for native staking.
The Importance of Staking
Like the transition from PoW to PoS, native staking will have a similarly important impact on the Hedera network and ecosystem. Staking complements the network’s existing aBFT security mechanism by incentivizing stakers to reward good node contribution and behavior. You can read more about how staking further secures the network in the whitepaper.
Native staking will clear the path towards community nodes. In the future, we expect that HBAR holders will be able to choose from a growing group of permissioned and permissionless consensus nodes, and ultimately reward those they deem most worthy of stake with the ability to influence consensus via weighted vote. In addition, native staking is an additional feature that builders can incorporate into their product suites and business models. Consider some of the user stories outlined in HIP 406.
The Foundation’s Role in Staking
The Foundation’s purpose is to support the growth and maturation of the ecosystem. We believe continued development towards a permissionless network is foundational to achieving our vision of individuals and institutions forming digitally-native communities controlling their own assets, identities, data, marketplaces, economies, and more.
As such, we are focusing on standing up two key pillars of success for native staking. First, while the technical ability to point accounts to validator nodes is the core of staking, the incentive structure is what sustains it. In fact, we have already completed a grant distribution to the staking rewards account (0.0.800). For the foreseeable future as we work to make our vision a reality, we expect to continue allocating grants to account 0.0.800 as needed. As the staking program matures, we also welcome diversification of funding mechanisms for account 0.0.800, whether through other participants or the Hedera Governing Council voting to route network and services fees there.
At this time, we will not be staking our own treasury to nodes as it is an unnecessary detractor from our specific value to the ecosystem. As outlined by Hedera, there are sufficient non-rewarded staking accounts that will ensure enough stake for network security.
Instead, we will continue to deploy our HBARs to support and accelerate development and adoption of the network, the second pillar of success. We’ve already begun doing that, by working with ecosystem participants like Hashpack, Wallawallet, Acoer, and others to enable community staking participation. We’re also working with defi protocols, exchanges, custodians, hardware wallets, and staking providers to ensure more diverse options for individuals and institutions alike.
Beyond the four phases of staking, what goals should we be focusing on?
Continue to debate the future of the network. We’ve already seen the incredible success of the discussion on HIP 406. That it was the most discussed HIP is indicative of the community’s interest and participation in important network advancements.
Continue to build the future of the network. In addition to those ecosystem participants already supporting native staking, we’re buoyed by the ongoing collaboration among projects and teams looking to innovate on top of native staking.
Continue to push the future of the network. The legacy of native staking will be how it promotes the continued decentralization of the network and ecosystem and its role in enabling the growth of communities that control their own incentives.
We’re excited to support our ecosystem as it grows and matures and look forward to continuing our work to support the Hedera community.
For more discussion, please join our upcoming HBAR Foundation Twitter Spaces Leadership AMA on August 12, 2022.