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Best Proof of Stake Coins for 2020 - My List

Best Proof of Stake Coins for 2020 - My List

All Cryptocurrencies

by COINS NEWS 29 Views

When I started this post about best Proof of Stake coins for 2020, I had no idea it'd end up this long, but the world of staking is really expanding it seems. If you guys have tips of other great staking coins, or thoughts on the ones brought up, feel free to chip in.

I expect this might open the door to chill fest. So readers should beware…

Staking is a strong trend in crypto in 2020 and a concept that has multiple success factors, compared to its Proof of Work predecessor.

By comparison, Proof of Staking is

  1. Environmentally friendly,
  2. Evens the field in the mining game, allowing pretty much anyone to partake, and above all
  3. Adds an actual use to keep the coins, in that keeping and staking them can build you even more value.

This said, not every staking coin is going to succeed, especially since there are already so many, and with time even more coins will become stakable. So, what should you look for, when considering a coin to stake?

Network Potential

A cryptocurrency only has true value, if it has an actual use. A currency could have the best setup for staking, ever, but if the network won’t be used for anything in particular, besides staking, then it’s not going to be likely that the coins gain value.

The likelihood of the network gaining more use in the future is therefore very important to look for. Staking generally means holding coins long term, so imminent news and current hype would be less important than the long-term potential.

Staking Model

What is the ROI staking could gain you? This is the first thing most people look at when they decide to invest in POS coins, but looking only at this would be very, very dangerous. Because unless the model is great; higher ROI will almost certainly also mean a higher loss of value as well.

It’s quite easy to have a network that prints great amounts of new coins that are handed out to stakers, but to think such coins could maintain their market value would be very naive.

A fair assumption is that increase in supply will affect the market cap neither up nor down. Look therefore in particular for systems of recycling, where heavy use of the network will yield higher rewards for the stakers, so that big rewards can be gained without increasing the total supply. Do rewards come only in one form, or in many? How does it affect the total supply of the currency?

Rewards for stakers in alternative currencies is also interesting, however, consider in these cases whether the alternative rewards ‘steal’ some of the potential value of the staked currency. Sometimes less is more.

Consider also the reasons of the staking? How important is the role of the stakers? Do they govern only the security of the network itself, or is their role even bigger than this? Perhaps they hold custody of locked-in crypto assets from other networks? Do they have a say or voting rights regarding future updates of the network? Who can partake? Networks vary a lot in the answers to these questions. Perhaps they will also shift with time.

In general, there may be some relation between the value of staking and the powers stakers are allowed. It’s good if the model is as inclusive as possible too. People don’t like being left out.

Long-Term Holder Supply Ratio

How many coins are staked and how easy is it to unstake them? This is another important thing to check, before you put any cryptocurrency on your own list of best Proof of Stake coins.

The supply ratio of staked coins vs unstaked coins vs exchange available coins is interesting. If many coins are bound in staking, this may mean that the ROI becomes low, but it also means that it’s a very stable currency, because those staked coins are ones that are less likely to be sold off soon. That factor may become completely irrelevant though if it is very simple to stake/unstake, because in this case any coin could be sold at exchanges at any time regardless of whether they are staked or unstaked.

Sometimes exchanges themselves may stake coins for their users, making the staked and exchange available supplies intertwined, severally handicapping any attempt to try to measure these things.

There is certainly a factor to consider here, but it’s much more complex than it may appear. What you should aim for is try to judge

  1. what % of the supply you believe might be actively traded and

  2. what % of the supply you believe would become actively traded if the price goes higher.

And generally, you want those to be as low as possible. Conditions of staking and amounts being staked, and amounts currently in exchanges are all clues to try to figure this out.

Decentralization

Cryptocurrency staking is generally carried out by nodes, who sign or validate the network and each node has a chance to be the next block signer/validator based on how many coins they have staked.

Generally, most networks will have some way for holders without nodes to offer the power of their tokens to holders with nodes. Such systems are generally called delegated Proof of Stake.

These systems are great in that they more easily include all who desire it (even those who have no desire to run a node) to be part of the staking process. However, the system also presents an issue of decentralization as popular nodes who offer good terms or extra rewards for those trusting their stake with them may also become so popular that they completely dominate the network. Generally, such nodes will be known as pools. These large pools may attain several advantages over small independent nodes as cost of operation, for example, maybe a much smaller part of the total yield.

Another common practice is that the number of validator nodes are limited to anything between 10 and 100 nodes and that holders generally stake their coins by voting on their favorite node as to choose which 10, 100, or whatever nodes get to be a signer/validator. Generally, such things are done to sacrifice decentralization for performance.

Decentralization is important because it offers greater security, and the more value network guards, the more important it becomes. Overall look for a system that is as open as possible to anyone (with enough stake) being a validator, and that preferably favors smaller nodes in terms of yield/staked coins.

Ease of Staking

This comes both with advantages and disadvantages. The big advantage here is that the easier it is to stake, the easier it will be to get a larger part of the tokens involved in the staking process and it might also be easier to engage new people to try it out, yielding an increase in demand.

On the other hand, making it easy, also makes it less of a commitment and if it’s possible to choose to unstake and sell on the same day then 100% of the supply must really be considered liquid, even if it is all staked. Good score for “Ease of Staking” and “Long-term holder supply ratio” therefore becomes an impossible combination.

In my opinion “Ease of Staking” is the more important factor out of the two, because if the network is to build value, it really needs to try and get as many people involved as possible.

Network Use

Perhaps the most important statistic to consider when judging the current health of the network is now used it actually is.

This can be seen at https://coinstats.network/, a site that tries to keep track of all the top networks in terms of actual use. Often staking rewards will be tied to spent gas in transactions, and thus rewards become higher as more gas is spent.

These are also in a sense “real rewards”, since they give the reward without increasing the circulating supply of the network and thus cause no inflation.

Current Market Evaluation

As when considering any type of coin, you need to consider if the coin is overvalued, undervalued, or neither - all things considered. Undervalued will yield a high score here - but always look for the reasons behind the low value before proceeding. Overvalued would likewise yield a low score – but if the high price is the only bad thing about it, it should still definitely be worth watching.

So, what are the Best Proof of Stake coins for 2020, in my subjective opinion?

Using these 7 factors I looked at over 40 coins and I’ve made an attempt to score 6 coins that I, myself, would consider staking and for each factor give them points on a scale (1-5)

FSN - Fusion

Network potential – 5

Fusion aims to revolutionize Finance through the interoperability of all types of currencies and assets and enabling easy time-based contracts for anything. Large goals, so, the potential is indeed quite high.

Staking model – 5

Open to anyone to run a node if they have enough FSN. Those not wishing to run a node can trust node-runners with time-slices of their FSN in exchange for the yielded interest.

Long-term holder supply ratio – 4

Quite a large chunk of the supply is staked and unavailable for quick exchange.

Decentralization – 3

Larger pools currently hold an advantage over small nodes on the network. Still, many stakers choose to run their own node anyway, which is the only way to guarantee rewards 100%.

Ease of Use – 4

Running your own node requires some level of effort and insight, but using a pool is quite simple. Especially the new app WeDeFi that has daily interest payouts on FSN committed to staking. This has really made FSN staking much easier, but at the same time somewhat hurts decentralization.

Network Use – 4

In terms of actual network use, Fusion seems to be booming competing with many top coins.

Current market evaluation – 4

Many of you might be surprised to see FSN on the top of the list, but easily it could be one of the most underrated cryptos. Fusion has suffered from a large theft in Q3 last year, has had a complete lack of marketing for a while, has a record of getting ignored by peers, and has had trouble getting exchanges to adopt the main net resulting in it being severely undervalued. And as these issues are getting resolved it is seeing steady recovery.

Total score 29/35

ETH - Ethereum

Network potential – 5

Ethereum is a clear market leader in network use and the number of projects that have their roots in Ethereum is staggering. It is also a network that continues to evolve to keep up with the competition. As such, I’d be surprised if they don’t hold their spot as a major blockchain for a long time to come.

Staking model – (3)?

Staking on Ethereum has yet to go live, so I feel attempting to rate it may be unfair, so the score is put as average. All that can be said is that it has been much anticipated for a very long time, but that it suffers the disadvantage of being an afterthought and will have to co-exist with a PoW consensus for some time. It may not be ideal, but I still have hopes that it will be something very great as it no doubt will have consumed more thought and debate than any other model.

Long-term holder supply ratio – 5

ETH is one of the most actively traded tokens and they’ve more than enough time to find their way into the right hands who intend to keep them for a long time to come. No major party holds too much. So, even though staking hasn’t even begun it’s fair to give a high score here. ETH even kind of already has its own way to measure these things through its DeFi lock-ins, which is a pretty similar metric.

Decentralization – 5

In terms of decentralization, ETH is certainly leading the way with the largest number of active nodes of any blockchain.

Network Use – 5

There is absolutely no comparison here at the moment, for any other public blockchain.

Ease of Use – (3)?

As with the staking model, it’s unfair to rate this at this point in time. Thus a neutral rating.

Current market evaluation – 2

Though I’d consider ETH to be one of the safest investments out of all cryptocurrencies, it’s also very unlikely that it will see the biggest growth. So, though market evaluation is definitely not high, the room for growth in other networks is even higher.

Total score 28/35

ATOM – Cosmos

Network potential – 4

Cosmos sets out primarily to solve the issue of interoperability between blockchains. Efforts so far, are highly respected by peers, which is important. Since so many set out to solve this as well, useful interoperability requires a high level of trust, and Cosmos are on the right path here.

Staking model – 4

The staking model seems to have found a good sweet spot between ease of use and commitment. But the limit of 100 validators would be a negative for anyone seeking to run their own node.

Long-term holder supply ratio – 5

A great majority of ATOM are locked into staking. This must definitely be seen as a great success for the network.

Decentralization – 4

The limit of validators is somewhat of an issue here for a growing network, though there seem to incentives to keep them balanced and in check, which is great.

Ease of Use – 3

There are various possibilities for punishment and time requirements and lock-ups, making it perhaps not the option of choice for more casual staking looking for good ROI.

Network Use – 4

Cosmos sees a decent amount of traffic on its network as evidence that it’s actually being used.

Current market evaluation – 2

ATOM has had a solid performance in the market, which is no surprise given that it looks like a promising network with a successful staking model. However, this also means that the market evaluation can’t really be called undervalued.

Total score 26/35

DCR - Decred

Network Potential – 2

It doesn’t appear to me that Decred has any specific goal or purpose, so maybe you'll be surprised why it is on my list of best POS coins for 2020. This crypto project aims to be an ideal all-purpose Blockchain. Not a bad goal, however, can it really engage people’s imagination enough to really grow?

Staking model – 5

Decred may have been the first system using a model of ticketed staking that’s open to anyone, also used by Fusion, for example. There’s really not much to complain about. It’s been running for years and is still very much relevant.

Long-term holder supply ratio – 4

A lot of DCR is bound in staking.

Decentralization – 5

Decred is a community-oriented project and has been for a long time. Focus on decentralization comes naturally as a result.

Ease of Use – 3

Despite having been around for a long time staking DCR, doesn’t seem to have hit the super simple stage yet, even if there are good guides that can quickly teach someone how to do it.

Network Use – 3

The network is used and I’d wager the use is mostly real/meaningful as it’s a community-oriented project. But it’s far from leader inactivity.

Current market evaluation – 3

I’d say Decred is neither undervalued nor overvalued.

Total score 25/35

BNT - Bancor

Network potential – 4

Bancor is a DEX which has set out to decentralize the provision of liquidity. A good idea and steady progress towards the goal seem to constantly be shaping up. At the same time, it seems as though they fail deeply with market awareness. To my knowledge, they were the first DEX to go cross-chain offering trading of tokens running both on Ethereum and EOS. I’m expecting them to continue to lead the way and eventually become a full-blown crypto DEX across any network.

Staking model – 5

Staking is usually about the safety of the network through decentralization. But BNT doesn’t have its own network, so staking here is about something else entirely. It’s about providing liquidity for exchange pairings. Liquidity is the big issue that DEX has in trying to compete with a CEX. Therefore, allowing BNT stakers to help out in this task is absolutely genius. It’s a difficult model to compare to other staking models, and even ROI will depend on which pairing you support with your stake. Since I prefer originality over more of the same, it gets a top score.

Long-term holder supply ratio – 2

Only about 30% of BNT seem to be locked in staking and the way to watch this figure is also a bit unclear. In future upgrades, this may improve and may also make staking both easier and more popular.

Decentralization – 3

It’s tough to give a score here for BNT as it does not compare to other staking networks. As a DEX it seems to have different layers. A noteworthy event was that bancor.network was closed to US users, but the DEX could supposedly be interacted with anyway through alternative user interfaces. To me, that is promising.

Ease of Use – 2

Though BNT tokens have a very clear use as liquidity providers in BNT staking, it’s clear that many holders still haven’t figured out how to do this or felt enough reason to get involved. So, something might be missing in terms of making it user-friendly.

Network Use – 4

A good DEX is expected to be busy, and it’s clear that Bancor has a decent amount of network activity and I’d expect it to go up as development expands and more and more activity starts to mover from CEXs to DEXs.

Current market evaluation – 4

BNT has seen a recent increase in price after very little action for a long time. I feel it’s still very much undervalued and that it has yet to be truly discovered as a token that can be used for staking.

Total score 24/35

IOST - IOS

Network potential – 4

IOST aims to be perhaps the top blockchain in areas such as speed and tx-throughput, while still having as many parties involved in their decentralization. They have many impressive partners and describe themselves as a network with the combined benefits of Ethereum, EOS, and IOTA. The goal is, it seems, to be the best of the best. At the same time, I don’t see anything new and unique here, which is usually needed to really succeed.

Staking model – 3

The network is closed for anonymous nodes. To run a node, you need to be an IOST-partner. What is good is that partners need to split their rewards with the stakers who vote on them. In a sense, it’s an improved POA system and quite a good model. But it certainly cannot claim complete openness to all.

Long-term holder supply ratio – 2

Though the amount of bound IOST seems to be really high, it’s also supported by all kinds of partners/exchanges/applications. It seems built to be easy and smooth and not bound away from exchange possibilities.

Decentralization – 3

Since you need to apply to be part of the validation process this immediately hurts decentralization a lot. The methods/abilities to keep each node in check by holders/stakers are quite good though. So for, what it is, I think a decent score here is appropriate.

Ease of Use – 5

IOST staking has great support from what I can tell and might even be tough avoiding completely.

Network Use – 1

Despite its high throughput plans and many partners, next to nothing seems to be happening on the network today.

Current market evaluation – 2

The ‘best blockchain’ niche is a tough one with many players competing. To succeed you really need to stand out and be able to show actual network usage. IOST may well do this, but there’s definitely also a chance that it’s overvalued at the moment. This could quickly change of course as a really high throughput blockchain may have areas of use not seen by other blockchains, as of yet.

Total score 20/35

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As I said at the beginning, If you guys have tips of other great staking coins, or thoughts on the ones brought up, feel free to chip in, to share your own list of POS coins for 2020 and whatever you feel like sharing.

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