Crypto Academy / Season 3/ Week 1 / Homework Post for Professor (@imagen) || Staking, Impermanent loss and DPoS

(1) RESEARCH AND CHOOSE 2 PLATFORMS WHERE YOU CAN DO STAKING. EXPLAIN THEM. COMPARE THEM AND INDICATE WHICH ONE IS MORE PROFITABLE ACCORDING TO YOUR OPINION

Kraken

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Kraken is an online cryptocurrency exchange that offers a wide range of investment choices for individuals and institutions around the world. It supports upto 56 cryptocoins such as, Ethereum, Litecoin, Bitcoin and Ripple.

Kraken also joined the exchange staking market in 2019 by offering a staking service for Tezos (XTZ).
Today, Some stakable Assets on Kraken platform includes:Ethereum (ETH), Tezos (XTZ), Cosmos (ATOM), and KAVA (KAVA)

Kraken rewards is about 4% to 17% compounded annually and also offer the highest fixed rate returns.
Also, you start earning rewards within minutes after you have staked your fund.
Payouts on weekly basis are being delivered.

Advantages of Staking with Kraken:

• With kraken, you start earning rewards instantly, without any lockup or waiting periods.
• It's staking reward is one of the highest in the crypto exchange industry.
• Receive payouts on a given schedule; two times every week
• it is easy to swiftly change your staking position(that is withdraw from staking pool) by transferring your token from your staking wallet to your spot wallet.

Kucoin

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KuCoin is a crypto exchange where you can easily deposit your tokens, sell, buy and even earn interest on them.
The concept of soft staking was first introduced by kucoin in July 2019. This soft staking process gives users opportunity chance to recieve staking rewards without ever locking their funds. Ever since it's Introduction, it has caught as much as the attention of 300,000 users.

This kind of staking return rewards to its users daily. This implies means that the stakers do not need to wait for days or months to receive their rewards. This helps bring about a more efficient and quicker compounding, along side an additional flexibility with portfolio management.

Some Stakable Assets on Kucoin include; Algorand (ALGO), Energi (NRG), TomoChain (TOMO), NULS (NULS), Cosmos (ATOM), Aion (AION), EOS (EOS), Neblio (NEBL), DeepOnion (ONION),

Advantages of Staking on Kucoin

• Users don't necessarily have to lock thier funds before they can stake them.
• Kucoin has one of the largest lists of supported cryptocurrencies
• Ultra low trading fees
• Good trading volumes and liquidity levels

My Preference

In my opinion, Kraken exchange is better than Kucoin exchange because of it's low withdrawal and trading fee, excellent liquidity in both USD and EUR markets and it's user friendly interface as at when compared to Kucoin exchange.

(2)

What is Impermanent Loss?

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Impermanent loss is a striking difference between staking assets and holding them in an automated-market-maker-based pool.
As one may know, for you to be able to add liquidity to a given trading pair on Pancake swap or uniswap, you will need to deposit into the pool, the same value of the both tokens in the pair.

Impermanent loss may occur when a liquidity farmer stakes two assets(pair) in a desired ratio, usually at a ratio of 50:50. Then the loss will occur when one of the staked asset is more volatile than the other asset.

If the initial exchange rate and the amount of each token in the pool changes, and then you withdraw your liquidity from the pool, then you will incure an Impermanent loss.
It is called Impermanent loss because the loss is not accrued until you withdraw you stake.

Ways of Avoiding Impermanent Loss

• Only Provide liquidity to stable coins
• Avoiding volatile and risky asset pairs
• Providing liquidity to pools with cryptocurrencies that are unevenly weighted
• Participating in liquidity mining programs and Providing liquidity to pools with incentive.
• Avoid removal of liquidity till the exchange rate returns to the initial rate

(3) What is delegated Proof Of Stake?

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Delegated Proof of Stake (DPoS) is a well known development from the PoS concept, whereby users of a given network elect and vote various delegates to validate the next block. Delegates could also be referred to as block producers or witnesses. By virtue of DPoS, you can easily vote on delegates by involving your tokens in a staking pool and linking them to your desired witness. You will take note that in this process, you do not in anyway tranfer your tokens to any wallet rather, you simply engage a provider of staking service to help stake your tokens in a staking pool.

For each new block, a limited amount of delegates are chosen. This is done to ensure that the delegates of block A might not be the delegate of block B. An Elected delegate will receive a transaction fees from the block which he has validated, and then that reward will be shared with users who who have allocated tokens into the pool of the successful delegate. The rewards recieved is distributed based on individual user stake. That to say that your share of the block reward is dependent on the amount of token which you had staked. For example, if your stake is upto 70% of the total staking balance which was delegated then, you would be receiving about 70% as your own share of the block reward.

Advantages of DPoS

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· They are much efficient and quicker in decision making than the traditional Proof of work system.

· The need for specialized and sophisticated equipment is not required to become a user, delegate, or witness. That is to say that a normal computer is sufficient enough.

· They are energy efficient when compared to the huge power sapping Proof of Work hashing algorithms.

Conclusion

• While asset staking could be an excellent avenue to earn income on the digital asset which you hold, it is still a risky venture as the staked digital asset values can fluctuate wildly. With this knowledge, a liquidity farmer should never invest more than he can afford to lose.

• DPoS is a great step in the history of consensus mechanism evolution. It builds upon the original Proof of Stake consensus mechanism and also increases scalability and speed.

Regards to professor @imagen