Baker Difficulties & Why Tezos Is Special
By: Phil Champagne
Tags: Blockchain, Tezos

I recently received an interesting question via the contact form on our website (https://HayekLab.com) from an investor. I realized afterwards that I should share the answers with you.

Tezos adoption catalyst

One of the questions was about what might be the trigger or catalyst that will bring Tezos into the upper ranks of coin & token market caps (aka coinmarketcap.com) and in adoption rate. It’s not an easy question, and one can only speculate. But let me share with you my thoughts on this.

Smart Contracts allowing for formal verification

At some point, we might see a trend emerge where more and more organizations requiring a smart contract platform with at high level of security choose Tezos over Ethereum. Industrial sectors such as medical or aviation that must run critical systems prefers to invest heavily in costly formal verification rather than face billions in liability later. As the Tezos platform gets chosen for this ability, it will become associated more and more with high value processing which might create additional focus and interest. Social proof applies to system as well, as more serious organizations approve of Tezos, the more it will accelerate its adoption.

Liquid Proof Of Stake

The ease of which people can earn extra tez by participating in proof of stake will definitely be of increasing interest the more this feature gets recognized. As I have said before, if one could easily mine Bitcoin with a specialized machine that would be more efficient the more BTC you would store in it, everyone would want this machine. The established status of Bitcoin does help label Bitcoin mining as a solid form of revenue, the drawback is its requirement in investing in specialized hardware for mining BTC with a large electric bill rather than invest in the currency itself. Hence we will see a shift in the social mindset that will value the income from Proof-Of-Stake, that rather than coming from “hard work” will be from “demonstrated stake” in the system.

But there is another angle to this. This might sound strange but look at the stock market this week (chart below), the jump in value of Bitcoin and the drop in the US dollar index. We might be on the verge of a currency crises. It’s coming for sure, the question is more about the when, and it feels like 2019 will be an “interesting” year. Imagine an event like the Turkish Lira devaluation but on the US dollar or the Euro or pound.

If you own gold, silver or BTC in such an event, although your wealth is protected, you still have to sell some of it to pay for other things. In such an environment, even if you own real estate, the income will not catch up with such inflation as rent couldn’t increase much faster than the renters could afford it. The last 8 years saw inflation of the currency supply fueled by debt go in all asset classes except into gold and silver. The next wave will be a combination of commodity inflation as central banksters need to refuel the base of the fractional reserve inverse pyramid at the same time as the stock, the real estate and bond market are crashing, perhaps in waves or suddenly. We might see something similar to the stagflation of the 1970s, just quite more extreme and violent.

As a cryptocurrency, Tezos will allow investors to earn additional XTZ from the liquid (delegated) proof-of-stake, hence being able to retain their initial capital while the rewards can be used for supplementing the household income. A reminder that some Venezuelans did bitcoin mining to afford products the devalued Bolivar could not provide them. So the requirement for additional income without liquidating assets and the realization that Tezos could provide this might be another catalyst.

Governance

On a more positive note, we have not yet seen Tezos governance in action yet, but once it is used for the first time to introduce a new feature or to alter, improve or update the Tezos protocol, this might bring additional attention. After all, because right now Tezos governance is more theory than anything, it needs real world experience to prove itself. But once it does, imagine the realization by the general public of the facilitation it will bring. It will not solve all problems, and forks will likely still happen for critical bugs or changes, but it will nevertheless show how some contentious past issues for other cryptocurrencies would be less likely to happen for Tezos.

What are the biggest difficulties for a baker right now?

This was the second question. I think the answer varies per baker and depends on their bond to staking ratio. Those that have plenty of space for new delegators would be obviously about getting new delegators while those near or in over-delegation will be about lack of tez in their baking node’s tz1 address (aka “bond pool”).



This might sound surprising to you but right now, in our case (Hayek Lab), I would say it is the lack of time! :-) We have multiple amazing projects in the pipeline, the next one to go public is an update of our amazing dashboard. We also intend to offer self-bonding to our delegators as well so that they can get lower fees by servicing themselves the imposing bond requirement. And we have 2 other projects in the pipeline that will be made public probably in late January or sometime in February. Of course finding delegators, or funding the bond pool are issues for us as well, but that will take care of itself with our next dashboard update and our other projects, so that’s why it comes back to the need for time. (Anyone who has a time machine, please contact me). But I think for bakers in general, it will be one of those 2 — either bond or delegators or both.



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