There were three waves of exponential growth in the digital asset space. The first was Bitcoin, the second was Ethereum (smart contract platforms), the third was tokens and the fourth will be DPoS-Assets.
DPoS stands for Delegated Proof-of-Stake, it is a consensus mechanism which uses voting with a reputation system to reach consensus. Every holder of the asset can delegate his/her voting power to a staking pool which now validates blocks and votes on protocol upgrades. For doing this, the staking pools are rewarded with additional coins which then are distributed across every holder who chooses the staking pool as his representative.
It works like Proof-of-Stake, with the difference that not anybody can stake. Instead, only entities with a required minimum of coins are able to stake, and every holder of coins can delegate his/her staking rights to a trusted entity who will do the staking for them and in return distribute some of the rewards back to the holders. This delegation can be done while your assets are still in your wallet, they don't need to be sent to the staking pool operator.
This ushers in a new era, the first cryptocurrencies which generate cash flow. They produce yield. And this is why I think that DPoS-smart contract platforms and ecosystems will be the next catalysator for exponential growth. But there was a big problem with this type of investments that prevented institutional investors to enter this space. This problem was custody. It is difficult to participate in on-chain governance and run staking nodes, and additionally keep the assets in secure cold storage.
There were no providers for this service, but a huge demand.
This has changed now. Coinbase custody, a subsidiary of Coinbase Inc. is now offering staking and automated distribution of rewards for their clients. Coinbase custody is a qualified custodian and fiduciary under NY State Banking Law. It is known as the world's most trusted cold storage, battle-tested and fully insured. This removes the entry barrier for institutional investors to enter this space. The first digital asset which is available for staking at Coinbase custody is Tezos (XTZ). Under current network conditions, one can expect 8% yield annually for staking Tezos coins. If someone is using Coinbase custody staking service he/she gets 6.6% ROI annually. With the most secure cold storage in the world and without the need of doing anything.
We should have a close eye on the assets that get available for staking at Coinbase custody in the future. The next assets which will be available are Cosmos (ATOM), Polkadot (DOT) and Algorand. None of these assets are available to buy for the public at the moment (only IOUs in the case of Cosmos). We will inform you when they are available and determine the best time to buy. Our goal is to build a small portfolio out of these assets. This could score a big win in the future.