In white-label staking, the crypto holders get their validator node explicitly created for them. This is then managed entirely on their behalf by a third-party operator.
What Is White Label Staking?
In Proof-of-Stake (PoS) blockchains, as more coins are added to the circulation, the staked assets grow the holdings of the validator simultaneously.
As shown by the diagram below, staking itself can be primarily segmented into two forms, namely white label staking and public delegation or staking pools.
If the white label staking provider has high-security standards and robust infrastructure where high-quality nodes are used, the maximum amount of rewards can be earned. This is because the flow of funds across PoS blockchains relies on high-quality validator nodes.
Lastly, the white label staking provider can also tailor the node to the customer’s specific needs while being maintained with 100% slashing insurance, constant uptime and 24/7 engineering support.
On the other hand, public delegation is when a token or crypto holder delegates their PoS tokens to an existing public validator. This tends to be more beneficial for token holders who don’t have as much capital to meet the minimum requirements to set up their own validator nodes. The lower overheads thus make it a more attractive option for such token holders, as this is a simpler ‘off-the-shelf’ solution for generating staking rewards with minimal requirements for getting started. As token holders can also delegate and earn rewards as soon as possible, allowing them to get started staking rapidly, the speed to market is also much faster than white label staking. However, the quality and reliability of the public validator nodes are still essential factors, as they affect the consistency and amount of rewards.
While the validators do earn staking rewards for the token stakers, they have no ability to customize the validator to their specific requirements. All staking nodes are branded under the validator node provider, rather than the individual stakers.
Staking pools allow token stakers to earn rewards in proportion to their holdings and share of the pool, even if the quantity staked is a fraction of what is needed to achieve validator status on the blockchain.
While the lower minimum overheads make this an attractive option, especially for retail investors, the staking pool should be chosen cautiously, as the staked tokens act as a guarantee for the blockchain. It is thus important that the pool operator, which is acting as a validator on the blockchain, performs their role properly and without malicious intent. If the validator facilitates invalid or fraudulent transactions, slashing will still occur, which results in the penalty and loss of the staked token.
A staking pool will also give smaller rewards than if the tokens were directly staked with the blockchain since every staking reward is split among the participants of the staking pool. After deducting platform fees and commission rates, the final payout reduces further.
It is critical to research and evaluates which methods of staking are most suitable for each token holder, as they all have respective pros and cons.
Andrew Vranjes, is the VP of Sales and GM (APAC), Blockdaemon, the leading institutional-grade blockchain infrastructure building a full suite of staking, node, API and custodial products connecting institutions and developers to leading networks.
With extensive experience from holding leadership roles in established technology and data companies such as Amazon Web Services (AWS), Cisco Systems and Singtel/Optus, sales and business development for several acquisitions, and internally built software solutions – Andrew is also an expert in building partnership with startups, digital natives, Crypto/Fintech with venture capital and private equity communities.
Based in Singapore for over a decade, Andrew is passionate about bridging the gap between institutions and digital assets through blockchain technology for the APAC region, through a foundation of sound infrastructure and developing innovative, accessible, secure solutions that scale seamlessly.