In today’s edition of Cryptocurrency Nerds Learn about Capital Markets, we take on “staking as a service” businesses. At the face of it, the business model is quite straight-forward: I have coins that I can stake (helping secure a Proof of Stake-based network) and can earn a certain yield in return for it. This staking process is rather complex to a non-technical user and certain optimizations that can be made, i.e., economies of scale in certain PoS designs, so the service is outsourced to a trusted third party.
These businesses pool up funds of many different people: long-term holders, active traders, etc. and maximize the yield that they can earn. While the marginal return generated by the staking pool is minimal, they make the process extremely convenient. The Block’s Francis Chapparo explains: