Learning the Web3 Staking Process With an Arcade

@0xxxxxin

writing palatable DeFi content & web3 marketing or something

Credibility

Preface: I recently shared my restaking piece with non-crypto native friends, and although the target audience wasn’t meant to be non-crypto native readers, I decided it’d be cool to explain staking, liquid staking, and restaking with the help of an extended metaphor — a narrative! A caveat: of course, I omit a lot of technicalities involved while explaining, but this should establish a fundamental understanding about Web3 staking amongst non-crypto native readers. :) This is part 1.

a community arcade

Welcome to the Arcade! We are a community arcade run by you, and for you. What does this mean?

A good arcade is efficient, effective, and secure, and a big factor is capital. At the Arcade, our operations are built on an Automated System that thrives as more people contribute to the Arcade community.

When you enter, exchange cash for Arcade Tokens both at the counter or the Token machines. All Arcade activity runs on Tokens, and there are 2 ways Players like you can earn rewards:

1. Players: Pay Tokens to join Arcade games and get rewarded with Tokens if you win.
2. Contributors: Deposit Tokens with the Arcade Automated System to improve and maintain operations. In return, you will receive a deposit reward according to the amount deposited and deposit period.

what does a Contributor do?

Contributors can also concurrently be Players, earning rewards both through regular Arcade games and through their deposit.

The Arcade Automated System is configured in a way such that it runs on Contributor Tokens. The more deposited Tokens, the better the Automated System can run like a well-oiled machine, ensuring efficiency, effectiveness, and security across all games. This is why we call ourselves a community Arcade — without you, we won’t survive.

how does depositing work?

fig 1: Player and Contributor paths

Good question! Of course, it would be silly to assume that every regular Contributor would have the technical knowledge to deposit Tokens into the Automated System. Hence, we have a group of Depositors that help with the “code-y stuff”.

If you’re a Contributor, all you have to do is deposit your Tokens through the Token machines. Our Depositors will be the middleman. Upon receiving your Tokens, they will do their magic and your Tokens will fuel the Automated System. The next thing you really have to do is see the deposit rewards accumulate in your account! As easy as that.

what’s the catch?

Ah yes, opportunity costs. Well, the catch is an obvious one and not something we’ll try to hide from you. While your Tokens are deposited into the Automated System, they are locked-in until and unless you decide to retrieve them. This means that you won’t be able to use these “locked” Tokens to play Arcade games which could potentially bring you more profit. On the flipside, Contributors get a source of stable and passive income.

a parallel to Web3 staking

Now that you have an idea of how this community Arcade works, let’s compare it to how staking works in the crypto world. Here’s a comparison table of parallels:

fig 2: comparison between the Arcade and Ethereum

*Smart contracts are collections of codes that act as the backbone of blockchains, serving various functions beyond just staking on a PoS chain.

Contributor // Staker

The Arcade represents a proof-of-stake (PoS) network like Ethereum, where users can choose to be stakers. When you stake your ETH with the network, you’ll play a part in securing the network because of the way the system is configured. In return for “locking up” your crypto with the network, you’ll receive staking rewards in the same cryptocurrency, ETH in this case.

All the Arcade games depend on the Automated System. Similarly, all the projects and platforms on Ethereum depend on its security and functionality. As such, being a staker allows you to, as the word suggests, have a stake in the network. In the Arcade, the more Contributors, the better the system works. Similarly, the more stakers, the more secure Ethereum will be, and security is fundamental to the operations of the network.

Depositors // Validators

In Ethereum, validators facilitate the process of staking for the average staker (like you and me). In layman terms, they do the more technical work and “stake on your behalf”. This is compared to how Depositors in the Arcade “do their magic” to help Contributors deposit Tokens into the Automated System.

drawbacks of staking

Similarly, Ethereum users can earn from both using their ETH in different projects or through staking. However, the drawback of staking is that ETH is locked up with Ethereum and there’s the opportunity cost of possibly earning more if that same amount of ETH is used to trade or invest on other platforms. This is similar to how Arcade Contributors sacrifice the chance to earn rewards from games when they deposit their Tokens with the Automated System instead.

(very) TL;DR

Staking is the process in which users lock up their crypto with a PoS blockchain network, such as Ethereum. This helps to secure the network, while stakers receive staking rewards in return.

If only this locked amount of crypto can be used productively while still securing the network and generating staking rewards…right? Stay tuned to the next piece!

This non-sponsored article is for informational purposes and definitely should not be taken as a form of financial advice. Reach out to me to discuss about this article or any other Web3 topics! Say hi on X (twitter): https://twitter.com/0xxxxxin