Persistence makes Staking easier for asset managers

A significant number of institutional investors are still getting to grips with investing in bitcoin, in crypto-friendly Switzerland, asset managers are already looking at staking in new generation blockchain networks.

Last week, Tavis Digital, a firm based in Zurich, announced its partnership with Singapore-based Persistance to provide an opportunity for traditional firms to explore token staking and DeFi. Tavis Digital is a spin-off of Tavis Capital, an asset manager regulated by the Swiss Financial Market Supervisory Authority (FINMA), which has some $1.07 billion in managed assets. Once again, agile countries, such as Switzerland and Singapore, are ahead of the pack in offering investors opportunities in cryptocurrencies and related apps.

Using white label

To assist clients, they are being offered white label products. Tushar Aggarwal, CEO and co-founder of Persistence explained why they are doing this: “We white-label our services to institutional clients and stakeholders who do not know how to run a validator node both on the software side as well as on the hardware side. It’s not a trivial thing to run a validator node, you need almost close to 100% uptime otherwise you get slashed.”

Interest with Proof-of-Stake (PoS) networks

Staking rewards are a new thing for institutional investors, and are much like interest on other investments. By using Persistence, investors can access proof-of-stake (PoS) networks such as Cosmos, Polygon (formerly Matic), NEAR, SKALE, Terra and others. The partnership with Tavis, indicates that traditional funds are now looking beyond bitcoin (BTC) as the ‘only’ crypto asset class.

What is PoS?

A PoS system “proposes to solve the “nothing at stake” problem by apportioning some skin in the game,” as Coindesk says. It resolves the intense energy use of bitcoin transactions and the ‘nothing at stake’ problem. Essentially, when you stake, you purchase and hold onto a blockchain network’s tokens, that then gain you rewards for validating the network’s transactions. However, if a validating node goes offline or is unresponsive, then those who have staked may experience losses. This is known as ‘slashing’.

Participating in staking networks is complex, which is why support is needed. Persistence provides a complete handholding service for firms that don’t want to set up dedicated blockchain teams. Presently, the staking hosting service has some $260 million in assets under delegation, mostly on Cosmos. 

Aggarwal commented, “With a backdrop of most parts of western Europe now at 0% interest rates, or negative interest rates in certain jurisdictions, there is an increased demand from institutional folks to generate fixed income yields,” and staking is looking like the way to achieve better rewards.

A look at the Money-verse in 2028

Today money is going through an evolutionary process as I write. The choices the finance sector, and the consumer, make today will shape the future of money, and we can already see that the world’s sovereign currencies are under siege from cryptocurrencies and stablecoins.

Bitcoin has not yet brought about the massive revolution that some expected on the one hand, but on the other, if “governments and central banks can’t offer a sound version of the sovereign money for the digital age, their downfall could be tragic,” Marcelo M Prates writes at Coindesk.

Prates envisages a ‘ future fantasy’ scenario in 2028 that may become reality. Amongst other things he sees, “ see drones dropping bags of money in the neighborhoods most affected by the latest cyber-attack on the e-Gov platform.” Regardless of whether the attack is foreign or domestic, “nobody can transfer digital dollars or even check their FedAccount balance.”

In his view, this kind of disaster could happen if the government decided not to offer an offline account option. Why not? The government might believe “people would finance domestic terrorism with an offline FedCoin that could be transferred from person to person without identification.”

As a result, every time the e-Gov platform is attacked, the government has to send out bags of old dollar bills so that people can make payments.

There may also be a global Big Tech Alliance offering its own digital asset that launches before a government-backed one, and it could potentially result in a fall in demand for dollars, especially if inflation is rising at a record pace.

Governments will have to deal with the fallout from the huge expansion in spending during 2020. Nations’ debts will be soaring, and it’s foreseeable that printing more money might well become a response.

Banks will also be affected if an organisation, such as Prates’ Big Tech Alliance offers customers a compelling reason to empty deposits in traditional banks, and use it for the consolidation of other debts, thanks to favourable loans. The result would possibly be multiple bank closures.

This entire scenario is likely to happen due to central banks’ ambivalence about digital currencies. In Prates’ world, “Many believe that the breaking point came when the government insisted on having exclusive control over the digital ID scheme created to provide every American citizen and corporation with a single digital identity. The goal was to keep track of the vaccination progress amid different coronavirus variants and better target the relief money sent monthly.” However, centralization is rejected, as it “was seen as a further step toward the growing surveillance state.”

What is clear, even now, is that the technology available makes a multi-faceted Money-verse entirely possible, because as Prates says, “Money does not need to be controlled by a government or limited to a sovereign territory anymore.”

Central banks need to get their digital strategy right, or face the consequences in the not too distant future.

Private finance is taking crypto mainstream

Last year was a turning point for cryptocurrencies. It turned blockchain from being a space for geeks into one where governments, institutions and retail traders now had a seat at the table. The 2021 GameStop story also played a major role in a change of perception.

Most interestingly, as Alex Shipp explains in an article for Cointelegraph, “cryptography and its primary feature, privacy, have been relegated from the front-and-center role they once played as cryptocurrency’s main attractions.” This has been replaced by the enticements of DeFi apps that offer “enhanced liquidity, yield farming and unprecedented economic models.”

Will 2021 be DeFi’s big year?

DeFI has become the Shangri-La of cryptocurrency it seems. Its allure is pervasive across the cryptocurrency landscape, with investors enchanted by its “double-digit APRs and seamless user experience,” which holds better long-term prospects for them than the “subtle, systemic benefits conferred by a privacy-centric exchange.”

Privacy is no longer the primary reason for entering the crypto space. Moreover, as the perceived benefits of DeFi grow, consumers are more than happy to make trade-offs to keep it growing. They really don’t want to forfeit these for the sake of privacy.

DeFi is the current Disruptor-in-chief within an already disruptive community. Now we can expect another to emerge – PriFi, or Private Finance. This, says Shipp, “brings privacy back on-stage by bringing it back on-chain — that is, into the Ethereum and Polkadot ecosystems — to integrate privacy into a robust network of rapidly evolving applications of decentralized finance.”

It’s significant because until now, “privacy solutions have remained siloed on standalone, privacy-oriented blockchains, isolated from the ever-expanding features of the DeFi landscape.” This ‘movement’ wants users to be able to have access to privacy without any trade-offs. Shipp says it could not have come at a more critical moment. Why?

The answer is GameStop. I won’t reprise the story, because I’m sure you know it. However, one critical factor is that after the hedge funds got caught over-leveraged in short positions, centralized companies, such as Robinhood, Charles Schwab, TD Ameritrade and others, restricted trading “thereby protecting the remaining capital of the exposed funds.”

This caused outrage amongst the retail investors, because these companies had essential hung them out to dry. What they learnt was, as Shipp says, “For retailers in 2021, that has meant awakening to a pair of sobering realizations: that centralized markets only remain free as long as they serve centralized powers and that surveillance is a primary supporting feature employed by such power structures.”

The trading restrictions placed on the retail traders highlighted the need for “a new line of emergent derivatives: fully private, on-chain synthetic assets whose values are securely pegged to traditional financial instruments — stocks, commodities, bonds, insurance products and more.”

The crypto space is opening up in ways the first enthusiasts probably never dreamt of, and while it may not suit purists, it is driven by the demands of the market. You could say everything has changed, and nothing has changed – depending on your perception.