Cold staking offers a simplified lending process, with shorter staking periods (Callisto’s starts at one month) and no minimum deposit amounts. Cold staking’s ease of use to the non-technical user provides anyone the opportunity to collect dividends on their holdings, simply by holding their Callisto and without the requisite hardware to run a master node. This encourages Callisto holders to hold their funds and invest in the Callisto network by locking up their CLO for short periods of time on the network, and rewards them for their participation with an adequate return where they may otherwise not be able to participate in a crypto lending facility. Now that the main differences between cold staking and master nodes are broadly understood, consider the theoretical similarities between cold staking and financial instruments, such as a certificate of deposit:
Let’s assume User1 acquires 10,000 CLO as a speculative position in November, 2018.
User1 has no immediate plans to liquidate their CLO and can commit to a minimum holding period of 4 months. Based on some initial projections, they can stake their entire balance for 4 months, and without purchasing a single CLO throughout the holding period, could claim their initial stake and reward in March, 2019 for 12,862* CLO. That amounts to a 29% return over a period of 4 months. This is quite attractive from an investment perspective, even assuming CLO price in a vacuum for the entire staking period. Now compare this to a traditional fiat currency investment of comparable terms and structure. User1 could invest $10,000 USD in a certificate of deposit and at current rates, be “guaranteed” an approximate annualized yield of 0.58%, which is the national average on a 1 year certificate of deposit. Since 4 month terms aren’t typically available, you would need to either accept a 30 day yield at approximately 0.08%, or lock up your funds for a period of 6 or 12 months. At the end of 12 months, User1 would earn a paltry $58 for lending their $10,000 to a financial institution. When taking into consideration inflation and income taxes, User1 is essentially guaranteed to LOSE money in real terms. If evaluated in parallel to cold staking, the opportunity cost is substantial. Thus, when evaluating investment alternatives in simplified terms, User1 is faced with an opportunity to enter into a cold staking protocol with more flexibility, lower risk, and a high probability of a superior return.
a very interesting example, and most importantly very detailed painted. This is not just a thought, but a whole analytical article that positions Callisto only on the positive side. If you do not mind, I want to take your thoughts as a basis and write a short article in this direction.
Show Posts
That our guessing would be close to the truth it is necessary to know more information. First and foremost: How many CLO is created / mined all and how much CLO is actually used?
