80% of Tezos (XTZ) in Baking Despite Fat Fees, Making it Susceptible to Manipulation?
- Tezos price performance leaves other Ethereum killers in the dust
- Tezos delegation increases exchanges' voting power that results in low participation in voting making it susceptible to manipulation
The star altcoin of the crypto market, Tezos (XTZ) is up 485% in the past year. Even in the past month, XTZ has been up 32% against BTC. Against Ethereum as well, XTZ has been experiencing much growth.
Baking your Tezos
These gains recorded by XTZ have been for the most part propelled by the staking craze. And despite the ongoing bear market, it keeps on growing.
As per Messari, currently, 79.7% of XTZ’s circulating supply has been baked. The Liquid Proof of Stake network allows investors to participate via baking or delegating.
To earn staking rewards and passive income on Tezos investment, there are two options. If you bake XTZ yourself, you get to earn an annual reward of 6.30% with adj. reward of 1.33% for a lockup period of 14 days, as per Staking Rewards. Doing it independently requires 8,000 XTZ in collateral.
Also, for this, you need to run a Tezos Node as well as the endorser and baker client which must be constantly connected to the power and internet.
Delegating your Tezos has relatively low risk and the recommended minimum is just 1 XTZ. However, it offers an annual reward of 5.67% and adj. reward of 0.70% with a 10% default provider fee.
Leading cryptocurrency exchange Binance offers a yield of about 7% with zero fees unlike other exchanges like Coinbase that charges 25% fee or any other platform Kraken (7%), Coinone (10%), OKEx (18%), and Gate.io (28%), as per the data provided by MyTezosBaker.
The staking yield meanwhile on these exchanges is 4.78% on Coinbase, 4.58% on Gate.io, 5.51% on Coinone, and KuCoin offers 3.06% yield while charging a hefty 50% fee.
Exchanges Controlling Voting Power
Delegating your Tezos to exchanges for baking means, they now control a significant share of Tezos voting power.
Last week, XTZ holders voted in favor of implementing the Carthage upgrade that will increase the gas limit by 30% allowing developers to run more complex applications. The update further aims to improve the accuracy and security of calculating baking rewards.
However, the poll saw a considerable decrease in participation, which has been on a decline over the last 3 voting periods. One possible explanation for this is the rise in staking-as-a-service.
Low participation in voting makes it susceptible to manipulation by those with heavy bags.
Both the big players Coinbase and Binance did not participate in the Carthage vote on behalf of its users. With delegated XTZ baking on exchanges increasing, PoS participation could continue to decrease until a viable voting solution is developed by these exchanges.