Comparison and Analysis of PoS Public Chain Projects: ETH2.0, Tezos, and Cosmos

In 2020, PoS issuance of public chains became one of the hot topics in the market. This article will analyze and compare the three major star PoS projects ETH2.0, Tezos, and Cosmos, based on on-chain data, to analyze the wallet addresses and the number of tokens held in these three networks according to current data.

ETH2.0 is a major update for ETH that began this year, divided into four phases. In the upcoming Phase 0, ETH will transition from the PoW mining model to the PoS mining model, which will reduce ETH's new issuance rate from nearly 10% to less than 2%, below the inflation rate of traditional currencies, proving ETH's scarcity.

Tezos is a high-performance underlying public chain that benchmarks Ethereum, with the highlight being its self-amendment feature. XTZ token holders can stake their tokens to become nodes or delegate their tokens to "bakers" to indirectly participate in governance, as well as in technical upgrades and iterations, minimizing the risk of forks. The community also has layouts in DeFi and compliant finance.

Cosmos is a decentralized network that provides scalability and interoperability, built on the BFT consensus algorithm of Tendermint consensus. The combination of Tendermint Core and the inter-blockchain communication (IBC) protocol forms a universal architecture, enabling interoperability among various cryptocurrency main chains.

With the emergence of several prominent public chains, adopting the PoS consensus mechanism has become an unstoppable trend for the new generation of public chains. Staking involves participating in network security management by pledging tokens, preventing the tokens held by holders from being diluted due to inflation. In contrast, in the mining field of the PoW algorithm, the business logic behind mining is divorced from the logic of manufacturing, which is more related to the fields of computers and hardware as well as offline operations. Major companies such as Fish Pool and Bitmain have already established a substantial scale effect in the mining industry, making it difficult to start from scratch and surpass existing giants.

Of course, PoS is not perfect either. Some projects lock the existing tokens in users' hands while offering a portion of newly minted tokens as rewards to loyal users. At first glance, this model seems good, but unfortunately, due to the overall poor market conditions later on, the intrinsic value of some PoS tokens cannot support the actual coin price, leading to situations where users holding such projects often end up making gains in tokens but losing money.

Later, the market preference shifted towards a deflationary economic model, and for a period of time, PoS was rarely mentioned. However, in the first half of this year, the emergence of ETH2.0 has revitalized this sector, with the expectation that phase 0, which is set to launch in the third quarter, will officially require a stake of 32 ETH for PoS mining. This means that the expected issuance of ETH and the threshold for node rewards have been lowered, bringing the Staking model back into the spotlight. This analysis is based on data from the Amberdata API.

## How many tokens are there among the top 10, 100, 1000 addresses?

In the world of public chains, there is no clear identity information; we usually use addresses as carriers of identity. Whether there is a person or a group of people behind this address, they act consistently on the chain as a community of interest.

ETH, Tezos, and ATOM all use an account model, meaning each address is an account. As of June 17, 2020, ETH had a total of 101,539,249 accounts, increasing by at least tens of thousands daily since January 2018. Unfortunately, most of these accounts do not hold any tokens.

Among these ETH addresses, we see that the top ten addresses hold 15.93% of the tokens, while the top one hundred addresses hold 35.32% of the tokens, and the top one thousand addresses hold 64.87% of the tokens. There are a total of 31,358 ATOM addresses, with 125 validators, where the top ten addresses hold 88.82% of the tokens, the top one hundred addresses hold 98.62% of the tokens, and the top one thousand addresses hold 99.94% of the tokens. Tezos has a total of 546,382 addresses and 494 bakers, which are equivalent to validators (. The top ten addresses hold 20.71% of the tokens, the top one hundred addresses hold 53.24% of the tokens, and the top one thousand addresses hold 81.23% of the tokens.

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Comparing the total number of accounts and the holdings of three types of addresses, it is clear that ETH performs the best in terms of decentralization, which is expected for the second-ranked public chain by market capitalization. Tezos presents a pleasant surprise in all three data points; as a relatively new blockchain, its top ten and top one hundred addresses do not perform much worse than ETH in terms of token holdings.

Due to the limitation of the total number of addresses, the number of tokens on the top one thousand addresses is slightly inferior. The Tezos system employs "bakers", which are similar to miners ) but do not require expensive hardware and a large amount of electricity (. Bakers maintain the security of the Tezos network and validate transactions. Among the top one thousand addresses, there are bakers who attract external staking with a large number of their own tokens, so we can say that non-bakers ) on the Tezos public chain, which are ordinary users (, still hold a considerable proportion of tokens. This proves that the Tezos public chain has a certain advantage in decentralization compared to many PoS public chains. The degree of decentralization is a key indicator of a project's potential. The higher the degree of decentralization, the greater the community and developer potential, as well as more democratic governance.

These three public chains, which focus on smart contracts, have a higher total account number indicating a larger potential user base, and a more distributed holding address means it's easier to achieve decentralization.

In terms of user numbers and decentralization, there are very few public chains that can challenge Ethereum in the short term. However, there are also many people who are bearish on Ethereum, and emerging public chains are all claiming to take down Ethereum. It is worth noting that Ethereum is not yet a true PoS network; it will switch to PoS only after the ETH2.0 upgrade is launched. Therefore, based on on-chain data performance, Tezos is currently the most likely and most confident competitor to Ethereum.

## Staking Rates and Expected Returns of Tezos and Cosmos, Comparison of Ethereum's Predicted PoS Situation

For PoS public chains, users stake tokens to earn additional rewards, thereby sharing in the benefits of the network's expansion. This mechanism is more user-friendly for underlying users compared to the PoW mining approach. Similarly, this method locks the liquidity of the entire network. Through on-chain data, investors can clearly see the circulating market value of these PoS public chain projects and the circulating supply that is set to be unlocked in the short term, which also creates the potential for speculative trading.

However, it is unfortunate that compared to PoW public chains, the newly issued tokens are controlled by upstream miner holders, making it easier for top players to reach a consensus on holding and jointly lock the issued tokens while waiting for the price to rise. In PoS public chain projects that lower the threshold for staking, the newly produced coins have become the retail investors' fleece, leaning more towards selling rather than holding. In the absence of actual value support for public chains, this portion of selling pressure becomes the last straw that breaks the camel's back.

According to the data, as of June 18, 2020, the current dynamic staking rate of ATOM is 93.88%, with an annualized yield of 9.26%. Unlike the staking rate displayed by the browser, which uses the total supply of tokens to calculate the staking rate, the dynamic staking rate uses the circulating token quantity, making it more accurate compared to the total supply of tokens. Therefore, we use the dynamic staking rate for calculations.

As of June 18, 2020, the total market capitalization of ATOM is $511,415,238, which means the non-staked circulating market value is only $31,298,612, a figure close to Dragoncoin, which ranks 137th. Currently, the total number of circulating tokens is 190,688,439, and based on the current staking rate and annual yield, the number of tokens issued each year is calculated to be 16,577,095.185. In other words, the annually issued ATOM tokens are 1.42 times the existing non-staked circulating tokens.

The dynamic staking rate of XTZ is 79.93%, the annual yield is 6.94%, and the total market value is $1,936,917,919. The total circulating supply of tokens is 733,364,642, with an annual issuance of 40,680,778.1 tokens based on the current staking rate and annual yield, which is valued at $107,397,254. In other words, the tokens issued annually for XTZ are 27% of the non-staked circulating tokens.

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The annual inflation rate of ATOM is 1.42 times that of the circulating tokens, which raises concerns among investors that the increase in the number of tokens from nodes will impact the market price. In other words, such a high inflation rate would greatly reduce the cost for token holders, making it unfair for users who participate later. In comparison, the inflation rate of XTZ is much lower, which is clearly more reasonable.

## Active Status of Coin Holding Addresses

According to the monitored data, 38% of addresses in ETH have been active in the past year, meaning they have had transactions or transfers. From the perspective of the number of tokens, the number of active tokens within a year accounts for 76.01% of the total circulating tokens. The Tezos mainnet successfully launched on September 18, 2018. Among Tezos token XTZ holders, 56.2% of addresses have had active records in the past year, while the proportion of active XTZ tokens in circulation over the past year reached 95.17%. From the activity time of the addresses, it can be seen that the top 1000 addresses have a high proportion of transactions in the past 30 days, showing high activity in both trading and staking.

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Cosmos Hub went live on the mainnet on March 13, 2019. In Cosmos, 44.25% of addresses are currently active, meaning they have conducted transactions in the past month. The proportion of these addresses that had transactions in 2020, specifically from January to May, reached 95.5%. From the comparison, it can be seen that the overall activity level of wallet addresses for both Tezos and Cosmos is relatively high, with a higher proportion of Tezos addresses being active in May 2020, where over 60% of addresses remained active in the past month.

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Tezos and Cosmos, two public chains, have a relatively shorter launch time compared to the established public chain ETH. This makes early supporters more willing to participate in consensus to maintain network security, either directly or indirectly, in order to avoid their tokens being diluted by inflation. Although the market potential in the Staking economy has not yet been fully realized, in the PoS token economy, there are not only returns, but participants also have obligations and risks to bear. However, as the supporting infrastructure of the industry gradually improves, many exchanges and wallets have now incorporated Staking services into their business landscape.

For example, regarding the Staking support for XTZ, users can easily participate in trading and delegation in wallets and exchanges that integrate Staking features. These supporting facilities meet the Staking operational needs and security requirements of many ordinary token holders, and also provide early investment institutions with professional technical solutions to participate in delegation and governance, indirectly promoting the activity of XTZ tokens.

In the future, the decentralized governance of public chains and the improvement of their ecosystems will be key to whether public chains can maintain vitality in the long term. During the development process, many designs have created liquidity demand at the underlying level of public chains. For example, Tezos and Cosmos are both committed to providing interoperability to some extent. The asset onboarding on Tezos and the development of tzBTC have brought Bitcoin and other assets into the Ethereum ecosystem. In the stage of ecosystem expansion, these measures are also attempts to explore different possibilities for public chain applications, and at this stage, they have played a positive role in enhancing the project's visibility and user participation.

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From the data above, we can see that as the second-ranked public chain by market capitalization, the proportion of ETH concentrated among large holders is the lowest, indicating the highest degree of decentralization. The token XTZ of Tezos also performs well in terms of decentralization, at least better than the same rising star Cosmos; Tezos is more decentralized. Currently, both Tezos and Cosmos maintain a relatively high dynamic staking rate, but if the newly minted tokens do not have better consensus value support, they will face significant selling pressure. The higher the ratio of newly issued tokens to the existing non-staked circulating tokens, the more likely it is to impact the circulating tokens in the market.

From the perspective of token activity, both Tezos and Cosmos have had relatively high address activity ratios over the past six months. In this regard, the supporting services are...