Previously we discussed the difference between Proof of Work (PoW) and Proof of Stake (PoS). Read to the bottom for more information on staking QTUM and other coins at MyCointainer. If you haven’t had the chance to read my blog-post about these two consensus mechanisms, I highly recommend you do so here. This should allow you to have a better appreciation of the next topic I want to share with you today.
Now that we know more about PoS and how it works, the next natural question is: which among the hundreds if not thousands of coins out there do we consider staking? There is no simple answer to this question, it depends on what we want to achieve and the required resources needed to begin staking.
QTUM
One particular PoS cryptocurrency project that caught my attention was QTUM. What stood out about this project is its approach of leveraging some of the best attributes of the two most popular cryptocurrencies in the world— bitcoin and ethereum. Best of all there are no minimum QTUM coins required to start staking!
Before delving into staking QTUM allow me to give you a quick background about this blockchain project. QTUM is one of the most successful crowdfunded projects in any blockchain history. It was able to raise over 10,000 BTC and 72,000 ETH in less than a week from March 12, 2017, to March 17, 2017, which at the time was worth a whopping $15.6 million dollars!
Aside from a highly successful token sale, the project was backed by many prominent names in the blockchain industry, as well as in traditional venture capitalists and executives from the largest technology firms in China. This only goes to show us the level of confidence big investors have on this project.
Its current market valuation is around $171 million USD at $1.78 USD per QTUM coin. it reached its highest market valuation at $7.52 billion USD two years ago during the crypto market bull run reaching an all-time high (ATH) of $100 USD per QTUM coin. Despite losing much of its value, token sale participants netted 500% ROI in their investment at current market prices.
The company behind the project is QTUM Foundation headquartered and registered in Singapore. It features a global development team located in the Americas, Europe, Asia, and Africa. Moreover, as a testament to the project’s legitimacy, it has been listed in some of the biggest and most influential exchanges in the world such as Binance, Huobi, and OKEx.
Best of Both Worlds
What makes this project so special is its creation of a hybrid blockchain that combines the best elements of bitcoin and ethereum. Bitcoin’s secure UTXO (Unspent Transaction Output) model and Ethereum’s EVM. However, unlike bitcoin and ethereum QTUM uses what its developers call Proof of Stake 3.0 (PoS 3.0) an improved version of the PoS consensus mechanism.
UTXO Model
Bitcoin’s UTXO model which QTUM adopted helps in the high traceability of transactions. It is a secure and tested transaction model that is widely understood in the industry. This model also helps in the implementation of simple Payment Verification which allows a light node to interact with smart contracts and verify transactions.
In UTXO transaction model, outputs of previous transactions become inputs of future transactions. It sounds like an abstract concept but trust me it is quite simple once you get the logic behind the model. Let me show you a simplified example of how the UTXO model works in cryptocurrency transactions such as bitcoin and QTUM.
Example
Alice has a beginning balance of 6.25 bitcoins from her mining activities. Her wallet address is associated with one UTXO record of 6.25 bitcoins. Now she wants to give Bob 1.25 bitcoins. Once Alice triggers the transaction the whole 6.25 bitcoins are used as input to the transaction. 1.25 bitcoins are sent to Bob’s address while the remaining 5 bitcoin is sent back to Alice in the form of a new UTXO to a newly-created address owned by Alice.
Now if Bob had 3 bitcoins prior to receiving the 1.25 bitcoins of Alice, the net balance of the wallet of Bob after receiving them would be 4.25 bitcoins. In this case, the wallet would be tracking two UTXOs. One UTXO is associated with the existing balance of 3 bitcoins and the other from the transaction of Alice sending 1.25 bitcoins. If Bob wants to use the whole 4.25 bitcoins the transaction will require the two UTXO to send the whole amount.
A real-world analogy for UTXO
The UTXO transaction model is similar to using banknotes (bills and coins) in our wallets. We keep track of our wallet’s balance by adding up all the bills and coins (UTXO) we have in our wallets (account or crypto address). When we want to spend money we use all of our bills and coins (all existing UTXO) to cover the cost of the transaction and receive change or excess bills and coins as new single UTXO.
Ethereum Virtual Machine (EVM)
If bitcoin is programmable money then we can say that ethereum is a programmable blockchain. The release of ethereum has ushered in a new era for blockchain by allowing developers to create applications on top of this emerging technology. These decentralized applications (dApps) runs on EVM and is executed via code called Smart Contracts.
Smart Contracts are self-executing contracts that automatically execute whenever conditions are met. Unlike traditional contracts where intermediaries or a third-parties are involved, Smart Contracts do not need one as it is stored in a blockchain, meaning it cannot be stopped, revised, or reversed. Thes codes are protected by the same technology that secures cryptocurrency transactions like bitcoin.
Smart Contracts are coded using a proprietary programming language called Solidity built specifically for EVM. Since QTUM also runs EVM all programs built using Solidity can easily be ported over to QTUM’s blockchain and take advantage of QTUM’s advanced platform. By doing so developers gain access to QTUM’s infrastructure which is more suitable for mass adoption.
Proof of Stake (PoS 3.0)
As I have mentioned in my previous blog-post Proof of Stake (PoS) is a more power-efficient consensus mechanism compared to Proof of Work (PoW). It allows users to participate in consensus activities in a certain blockchain just by holding the native token of that particular blockchain, in our case, QTUM.
It means there are no complicated and expensive mining equipment to setup. This breaks down a significant barrier to entry to would-be consensus participants who do not have the technical know-how and expertise to set up their own mining devices. Moreover, there are no additional tasks required after setting up your coins for staking.
QTUM developers call their PoS version 3.0 since it improves upon the previous PoS version. Previous version PoS version (version 1.0) relies heavily on “coin age.” This is simply the amount of time a UTXO has not been spent. The problem of this approach is the incentivization of people to not use their coin.
Those who are lucky enough to have their coins staked early will most certainly be guaranteed to always get rewarded. New participants would be less interested to join consensus activity because of this parameter. Fortunately, coin age was removed as a stake modifier in version 2.0. Instead, PoS version 2 used block times and transaction times to determine the age of UTXO.
PoS version 3.0 further improves the determination of UTXO as a stake modifier mechanism by judging its depth in the blockchain such as the number of confirmations. They did this to increase the security of PoS version 2.0 which as become vulnerable to “short-range” attacks, which is just a fancy word for being able to “change something” by exploiting Block Time, remember blockchains should be immutable truths.
There are a host of other improvements that were introduced in PoS version 3.0. If you are looking into digging deeper I suggest you read this interesting article explaining PoS version 3.0. The Most of the essential improvement has to do with the security of PoS and in making block rewards distribution fairer and more inclusive to increase consensus participation which in turn increases the decentralization of the blockchain.
How to Stake QTUM
There is no minimum requirement to stake QTUM, one can stake with very small amounts. However, stakers will need more coins for a realistic probability of winning a block reward. Block rewards are awarded in a random lottery process. The odds of winning depend on the number of coins in your wallet vs. the total number of coins being staked on the network.
The more coins a wallet is staking, the more often it will win a block reward of 4 QTUM. Staking will give block rewards of about 6 percent return per year. To see the expected time to a block reward use the stake calculator. The “Expected Time” to a block reward is an estimate of the average time to a block reward. There is significant variation in the block rewards which could come earlier or much later than the Expected Time.
There is a variety of ways how to start taking on QTUM but before you begin you need some of these basic requirements:
(1) a device where you can install a QTUM wallet
(2) Any Amount of QTUM in that Wallet.
You can download QTUM wallets in QTUM wallet download site here. I particularly like to use the QTUM QT wallet since it has a graphical user interface (GUI). You can find a wonderful tutorial on how to set up your wallet here. Staking is quite straight forward it entails just setting up your wallet and moving your QTUM into that wallet.
Challenges on staking with your own wallet
However, as trivial as it may seem to some users who are used to dealing with blockchain-based applications, setting up your wallet for staking might be a bit complicated especially when problems occur. Like when staking does not initiate. This can happen due to the staking wallet being encrypted, QTUM coins have not yet reached maturity (500 blocks), or staking feature is not enabled.
Furthermore, the wallet should be online 24/7 to participate in PoS consensus, be a block publisher and win block rewards. This means even if you are staking QTUM in your wallet you will not be rewarded if your wallet is offline and have not synchronized with the blockchain. This poses an additional cost of time and money for would-be participants.
QTUM Offline Staking
Qtum is developing “offline staking” for later the year where you could delegate an address (and their UTXOs) to another online node providing “Super Staker” service. In that case, that wallet would not have to be online (while the Super Staker is online and handles the staking). This is a much-anticipated feature which is set to be released later this year. However, why wait when you can have a similar feature with better rewards.
Using MyCointainer
MyCointainer offers automated online staking and masternode services. All you have to do is to deposit your QTUM tokens into their platform and let them do the rest. You don’t need to wait for staking maturity, configure your wallet to ensure that staking will initiate and worry about uptime of your wallet. Best of all you will be a part of a pool of stakers with higher Staked QTUM which means you are part of a pool with higher chances of getting rewarded compared to staking alone.
This platform not only makes staking easier without learning the technical intricacies of blockchains and cryptocurrencies it also allows users to earn even more crypto earnings through their referral program. Every successful referral will earn the referee 20% of their referral’s rewards. To learn more about this amazing staking platform you can visit their website.
References:
https://www.mycointainer.com/assets/qtum/
https://docs.qtum.site/en/Qtum-Wallet-Tutorial/
https://qtum.info/misc/toolbox/stake-calculator
http://earlz.net/view/2017/07/27/1904/the-missing-explanation-of-proof-of-stake-version
https://www.investopedia.com/terms/b/block-time-cryptocurrency.asp
https://de.wikipedia.org/wiki/Masternodes
https://en.wikipedia.org/wiki/Solidity
https://en.wikipedia.org/wiki/Decentralized_application
https://en.bitcoin.it/wiki/Lightweight_node
https://www.coingecko.com/en/coins/qtum
https://en.wikipedia.org/wiki/Uptime
DISCLAIMER: Some of these programs are affiliate programs or benefit myself. All of these programs listed above are legitimate. I use these all myself as does our team. Realize that some cryptocurrencies will profit greatly in the next five years and many will simply fail and disappear. Never invest more than you can afford to lose in any investment, crypto or traditional investments. Opinions expressed here on my website are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. This is of course just my own opinion based off of my research and experience. Always do your own research before investing. You can also store your Crypto currencies on a secure exchange, a good method is to stores no more than 1/3 of your overall holding is on any one exchange, 1/3 in a cold wallet and the rest on a different exchange then you should be ok.