The Chinese interpretation of "Staking Economy": From the new mining era to the decentralized dilemma

The concept of staking economy has garnered widespread attention in the cryptocurrency field in recent years, and its Chinese meaning “权益经济” (rights-based economy) is increasingly being mentioned. The Chinese definition of staking refers to the investment behavior under PoS or DPoS consensus mechanisms, where token holders stake tokens to nodes to earn newly issued tokens from the project—this mechanism marks a new era in cryptocurrency mining.

What is Staking? A Three-Minute Explanation of Its Chinese Meaning

To understand the true meaning of staking in Chinese, we should start with the analogy of the Bitcoin “Gold Rush.”

In the early days of Bitcoin mining, the most profitable entities were not the miners themselves, but the businesses manufacturing “pickaxes and cowboy jeans”—corresponding to the crypto world, these are companies producing mining hardware and operating mining pools. Once everyone realized this, giants like Bitmain and Canaan dominated the market, and large mining pools like ANTPOOL and F2POOL completed early deployments. Participants without capital to enter mining hardware and pools could only trade on the secondary market, bearing high risks but earning low returns.

The “权益经济” (rights-based economy) of staking breaks this situation. The main difference between PoS consensus and PoW is that PoS no longer requires energy-intensive, 24/7 running mining hardware or high-cost large-scale mining farms. Instead, anyone holding tokens can participate in this new reward system. This is what makes the staking economy exciting—the barrier to entry for mining is greatly lowered.

The Arrival of the PoS Era: A Historical Shift in Mining Rules

The concept of PoS (Proof of Stake) is not new. As early as August 2012, Sunny King proposed this consensus mechanism, which was later applied to Peercoin. This pioneering project attracted attention for significantly reducing energy consumption—compared to PoW mining competition, PoS is more like a modern corporate dividend system, where those holding more rights earn more rewards. In early 2014, Peercoin ranked among the top four in global market cap, reaching $150 million.

In the Chinese context of staking economy, this is seen as the beginning of a “new mining era.” Nodes no longer compete for computing power but earn token rewards by maintaining the network, packaging transactions, and participating in community governance. This process is called “Stake,” directly analogous to mining behavior in PoW.

However, the real chain reaction began when mainstream projects like Ethereum announced their transition from PoW to PoS. As the second-largest cryptocurrency by market cap, Ethereum’s shift not only broke the old mining era but also redefined the rules of the game—everything is just beginning.

Hidden Risks of Centralization in Decentralization: The Centralization Trap Behind the Staking Economy

The staking economy sounds perfect, but it hides an unavoidable problem: the re-concentration of centralization.

Although staking lowers the participation threshold, in practice, phenomena similar to PoW re-emerge. Large staking pools gradually appear, and token holders, for convenience, delegate their tokens to these pools, ultimately leading to a concentration of power.

Data illustrates the severity: behind Bitcoin and Ethereum, fewer than 20 major mining teams dominate each network, with over 50% of Bitcoin’s hash power controlled by the top four miners, and Ethereum’s situation is similar. This means that even with PoS, the risk of centralization persists—if the top three participants collude, they can control over 51% of the system’s hash power, threatening the entire ecosystem.

Deeper economic issues include that in many DPoS systems, token supply is not fixed but inflationary. This means current reward structures directly influence future reward distribution, which over time can further exacerbate power concentration and weaken the original goal of decentralization.

Redesigned Solutions: From Institutional Innovation to Balance

In response to the centralization risks brought by staking economy, project teams are exploring various solutions.

Popular PoS projects like Cosmos suggest that future mechanisms may introduce balanced reward schemes for major nodes to promote decentralization; more projects are choosing to lower the operational costs of nodes, enabling more users to participate independently rather than delegating to pools.

One innovative attempt is the UPoS (Unified Proof of Stake) dual-stability consensus mechanism. This mechanism combines the advantages of PoW and DPoS, designed from the outset to address the challenge of achieving both efficiency and decentralization—known as the “impossible triangle,” balancing security, efficiency, and decentralization.

UPoS employs clever mathematical design to prevent monopolization during dual consensus operation. First, it introduces convex functions to regulate the voting influence of large stakeholders; second, it uses game theory algorithms to make malicious attacks like “wolf attacks” economically unprofitable, thereby discouraging misconduct through economic incentives. The entire mechanism ensures a dynamic balance between miners and stakeholders.

From Vision to Reality: The Future of the Staking Economy

From the era of PoW mining to the era of PoS staking, the consensus mechanisms of cryptocurrencies are continuously evolving. The deeper significance of the Chinese term “权益经济” (rights-based economy) lies in the fact that—while participation barriers are lowered—the responsibilities and considerations are increased.

The rationality of system design will determine everything. Good systems can resist the emergence of oligarchs and effectively prevent monopolies. The true value of the staking economy is not just in creating new profit models but in providing a real opportunity for the masses to participate in decentralized autonomous communities.

However, none of this will happen automatically. Considering decentralization from the outset and designing systems to resist the trend of power concentration are key to whether the staking economy can fulfill its original intention. In this new “Gold Rush,” the real winners are no longer those who build monopolistic fortresses, but those who design elegant systems and promote genuine community self-governance.