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It didn’t take long after the invention of Bitcoin for people to envision use-cases for blockchain technology that go beyond the “digital money” vision pioneered by BTC. Others wanted to keep it simple and focus on P2P value transfers, but sought to improve upon the original Bitcoin design and make it more suitable for widespread usage. This either came through entirely new consensus models, or layer 2 solutions that function on top of Bitcoin.
Stakenet review
In this article, we’ll be taking a look at Stakenet (XSN), a cryptocurrency that combines many of the technological advancements that have happened in blockchain and packages them into one platform. Stakenet is a Proof-of-Stake blockchain platform that supports decentralized applications and the Lightning Network, a layer 2 scalability solution for blockchains that’s also very popular among Bitcoin and Litecoin users.
While Stakenet can handle about 240 transactions per second on-chain, Lightning Network support provides massive scaling potential. By supporting Lightning Network, Stakenet also remains more connected to the rest of the cryptocurrency ecosystem, making the adoption process easier – anyone who supports Lightning Network is able to accept XSN payments.
The basics
Stakenet is a Proof-of-Stake blockchain platform that features XSN as its native asset. XSN plays a similar role to BTC on Bitcoin or ETH on Ethereum – it’s required to perform operations on Stakenet, and also provides an incentive for stakers and masternode operators to keep the network secure. Of course, XSN can also be used in peer-to-peer transactions as a digital form of money, and Stakenet’s support for the Lightning Network enables transactions to be performed at high speed and negligible costs.
Stakenet’s block time is approximately 60 seconds, and the block reward is distributed in the following way:
- 45% to masternodes
- 45% to stakers
- 10% to the treasury
XSN is technically an inflationary cryptocurrency, as it doesn’t have a hard cap on its supply. However, the issuance does follow a predictable schedule and the block reward has stabilized at 20 XSN, where it will remain in perpetuity. This is designed so that the economic model of Stakenet is viable for the long-term, as there will always be rewards for stakers and masternode operators. In order to offset potentially negative effects of inflationary pressure, transaction fees on Stakenet are permanently burned.
The most prominent cryptocurrency exchange that lists XSN is Bitfinex, but it can also be bought on other trading ventures like Coinall and Whitebit.
The XSN DEX
One of the main aspects of the Stakenet ecosystem is the XSN DEX, a decentralized exchange that currently features the XSN/BTC, USDT/BTC and LTC/BTC trading pairs. The XSN DEX leverages the Lightning Network, and can be accessed through the XSN Wallet.
The team is currently working on adding additional functionality to the XSN DEX and essentially connect it to the Ethereum ecosystem – users of the exchange will be able to trade Ethereum-based tokens in addition to the assets supported by the Lightning Network. This will be made possible through the Connext layer 2 solution. Per an update published on January 7, ETH and USDT trading is currently being tested on XSN DEX thanks to the Connext integration.
In addition to connecting its decentralized exchange to Ethereum and the DeFi ecosystem, Stakenet is also working to further decentralize XSN DEX through an upgrade dubbed “Hydra”. With Hydra, masternode owners will get the opportunity to earn additional rewards by earning a share of the trading fees generated by XSN DEX. The Stakenet team has prepared an article where you can read more about the proposed changes for the Hydra update.
With the XSN DEX, the Stakenet project is tapping into demand that’s clearly being displayed by cryptocurrency users. We saw a massive surge in the popularity of decentralized exchanges in 2020, and Uniswap even managed to surpass the likes of Coinbase Pro for a brief period of time. This trend is likely to continue in 2021 as traders realize the benefits of freely trading cryptocurrencies without having to give up ownership of their private keys to a third party.
Trustless Proof-of-Stake (TPOS)
The Stakenet team has developed Trustless Proof-of-Stake (TPOS), a way for XSN holders to stake their coins and enjoy staking rewards even while keeping them secure in a hardware wallet or any other type of cryptocurrency storage. The advantage of TPOS is that users can participate in XSN staking while not having to run a potentially vulnerable hot wallet.
This is achieved through “Merchantnodes”, which can perform staking on behalf of the user while not having access to the user’s private keys. Users who want to use TPOS can either set up their own Merchantnode or use other Merchantnodes, typically for a commission where the Merchant is paid x% from each block reward that this TPoS wins.. TPOS is facilitated through a smart contract between the Owner (XSN holder who wants to stake their coins), a Merchant and their Merchantnode.
XSN can be held on Ledger’s hardware wallets. If users want to earn staking rewards at the same time, they can use the aforementioned TPOS process.
Masternodes
One of the key aspects of Stakenet are masternodes, which perform a number of key operations on the Stakenet network. Examples of the roles performed by masternodes on are the hosting of decentralized applications and the XSN decentralized exchange, as well as facilitating Lightning Network functionality for Stakenet users.
In order to run a Stakenet masternode, users need to put up 15,000 XSN in collateral. At current XSN prices, this translates to about $6,250. While this is not a negligible amount of capital, it is much more accessible compared to setting up a profitable Bitcoin or Ethereum mining operation.
If you want to learn how to set up a Stakenet masternode, you can check out the following article.
Treasury for long-term development
Decentralized cryptocurrency projects always face issues when it comes to funding long-term development. If there is no well-funded entity behind the project, developers will often work on cryptocurrency projects for no compensation – hardly a sustainable solution. In the case of Bitcoin, the community is large enough that there’s enough individuals and companies prepared to sponsor developers out of their own pockets, but that’s not a viable option for most cryptocurrency projects.
Stakenet has approached this issue by creating a treasury, which receives 10% of the block reward. Funds from the treasury are used to support the development of the Stakenet protocol or fund new projects that are building on top of Stakenet.
The XSN Cloud
The XSN Cloud is a centralized platform that provides services tailored towards XSN holders. These are primarily “quality of life” services for users that perhaps want to participate in the ecosystem a bit more passively. Users can have XSN Cloud run a masternode for them, or stake on their behalf. The fees collected by XSN Cloud go to the Stakenet treasury to fund development.
Compared to using TPOS or running a masternode, staking through XSN Cloud is more expensive (due to fees) and comes with more risks, as XSN Cloud is a centralized platform. However, it can be a viable option for users who hold smaller amounts of XSN and don’t want to commit too much time and resources.
The bottom line
Proof-of-Stake cryptocurrencies and masternodes have proven to be popular designs among cryptocurrency enthusiasts, which could help Stakenet gain some traction. By combining a masternode cryptocurrency with the Lightning Network, the Stakenet team has delivered a unique proposition. At the end of the day, however, developers will need to create decentralized applications on Stakenet that leverage the platform’s unique design and that are actually in demand by users.
Those that are following the Stakenet project closely have plenty to look forward to. Some of the upcoming milestones on the Stakenet roadmap include the launch of a mobile Stakenet wallet, an upgrade of the Stakenet block explorer, and the integration of ETH and Ethereum-based tokens to the XSN decentralized exchange.
