Coinbase Custody’s Maker, Tezos and Cosmos Proof of Stake Blockchain Support: Friend or Foe?
Coinbase recently announced on its blog that it launched staking support for Tezos, which includes proof-of-stake. As the platform announced on its blog, such assets “incentivize participants help secure the blockchain by ‘staking’ or ‘delegating’ their assets to someone running the blockchain software.” Delegating enables users to share the rewards received by the validator for mining. Further, anyone who builds blocks can also be a part of this process.
Coinbase CEO Sam McIngvate shared with Coindesk,
“We’re hoping to bring online, frankly, the majority of institutional investors. We’re growing these three assets under custody and hoping to see an increased turnout of these votes.”
The next question that arises is how such a process can incentivize votes.
DAO CEO Dave Becker explained the process to Coinbase. He shared that about 20 percent of Maker tokens were involved in a vote to increase fees for ethereum-pegged stablecoin loans and he added that the turnout was high in regard to institutional investors who have the ability to vote. One prominent issue that can arise, though, is compliance. Such requirements can make it difficult for institutional investors to vote. Becker stated,
“If you’re using an institution and you represent third-party investors, you do not need third-party custody as extra protection, to make sure those assets are looked after in a safe manner.”
Coinbase’s recent move may be in response to this.
Coinbase’s voting structure may promote voter turnout and it may also be more convenient for some of the largest players. On the other hand, there are those who see it as something that could become a
“wallet-driven proxy voting platform that influences, gathers, aggregates, and reports on users behavior.”
Coinbase pointed out that because this system is for businesses, and not individuals, there is little to no use behavior to track. McIngvate also stated,
“We are here to provide support, pure infrastructure and services to enable our clients to participate in these networks however they want to. What they’re doing is not really our business. In fact, our business is to protect their anonymity as best we can, and the security of their funds.”
Moreover, politics may have an influence on the process as well. Zaki Manian of Cosmos Ecosystem shared with Coindesk in the initial article that the three PoS assets Coinbase Custody will support need a unique governance option, which depends on whether the system automates changes or shows sentiment. He stated,
“If a big validator votes for something early, it gives that proposal a lot more legitimacy. I have a thesis that they [Coinbase Custody] are going to have a hard time keeping them [stakers] because . . . custody is designed not to be a nimble businesses and staking has to be a nimble business.”