Protocol Embedded Staking –
A new way of stabilizing crypto tokens

Staking and Proof of Stake (PoS)

The main idea behind the Proof-Of-Stake concept is that participants can lock coins (their “stake”), and at particular intervals, the protocol randomly assigns the right to one of them to validate the next block. Typically, the probability of being chosen is proportional to the amount of coins — the more coins locked up, the higher the chances.

Market effects of Staking within Proof of Stake

Typically there are certain requirement on amount and locking duration within Proof-Of-Stake networks. Only certain minimum amounts of tokens can be staked for at least a minimum amount of time. Although this is very reasonable from a security perspective, these conditions lead to market effects which aren’t always welcome by token holders: At the end of locking periods users feel an incentive to claim the rewards they had been waiting for while their tokens had been locked away and thus had not been usable by them. The end of a staking period leads to a higher probability of tokens being sold on the market, which in turns can lead to some selling pressure and dropping market prices.

Protocol Embedded Staking (PES)

Protocol embedded staking was invented in reaction to the disadvantages described above. Although the mechanism of protocol embedded staking is not suitable for the basic infrastructure currencies themselves, it can be an interesting alternative for tokens setup on top of these currencies, for instance for ERC20-tokens within the Ethereum blockchain.

Advantages for Currency Holders

The technical attributes described above facilitate some special advantages holders of crypto currencies constructed in this way can expect:

Examples for Protocol Embedded Staking

For the time being Savix.org is the only cryptocurrency token implementing protocol based staking.

The Savix project aims at making decentralized finance products available to non-tech-savvy users. The Savix token enables gas-free automatic staking rewards.