by Brett Sun
Proof of Stake (PoS) is a novel consensus mechanism for coordinating a global shared state across a distributed set of machines. Unlike the original Proof of Work (PoW or “Nakamoto”) consensus model used by Bitcoin and Ethereum’s initial network that utilizes energy-intensive computational power for security, PoS relies solely on using users’ economic stakes to secure a network.
Although first implemented in 2012’s Peercoin and envisioned in Ethereum’s roadmap since 2014, PoS has taken a long time to mature. From 2019, however, the mechanism has taken the blockchain base layer (L1s) by storm with all notable networks launched since—including Cosmos, Polkadot, Solana, and Avalanche—relying on PoS for network security. As of this writing, PoS networks’ combined market caps contribute to $290B of the $1T total crypto market cap (with Bitcoin itself contributing $350B).
In that time, a robust ecosystem has blossomed to service these networks, most importantly the companies running the essential staking and validation software that keeps the networks operational. To participate, these actors first put up an economic stake to then later be rewarded for doing good work or punished for acting badly. Each network encodes their own rulesets as to what constitutes good or bad work and what amount of rewards to provide.
Today it is still difficult to objectively compare their performance and quality. This is due in part to each network emphasizing different trade-offs in their ruleset, which are often multi-variate and multi-role, but also because there is no established standard on how to interpret the enormous machine-readable data being output.
Enter Rated. Living up to its tagline of “Reputation for Machines”, Rated’s initial product is a single effectiveness score for each validator participating in Ethereum’s Beacon Chain (PoS), calculated from their public work on the network. This score aims to be robust and credibly neutral as governed by their core design goals.
We view the establishment of such a score as a true zero to one moment for PoS networks. Being able to objectively understand the degree to which one validator is better performing than another unlocks a myriad of potential uses and products downstream, such as for consumer marketing, enforcement of quality standards, or the creation of financial derivatives. In many ways, it is analogous what was unlocked with the establishment of personal and business credit scores.
For example, Lido, a portfolio company, is integrating with Rated to aid their decision intelligence when considering which new staking operators to onboard onto their backend. Separately, Rated could power insurance products, such as with Nexus Mutual, or lending products that help capitalize and derisk staking operations and thereby contribute towards the long-term health of the entire ecosystem.
Further down the line, co-founders Elias and Aris ambitiously see Rated not only expanding to support all PoS ecosystems, but becoming a platform that is able to attract the best minds to establish a diverse set of industry-leading scoring methodologies for any machine-generated data, and which powers an increasing set of downstream integrations. We’re excited to be partnering with them from this early stage to materialize their dream of establishing the reputation layer for machines.