How do outlandish crypto staking rewards work?

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Hello reader,

Today, I can safely say that my crypto portfolio has seen a phenomenal financial loss for the first half of 2022.

I can point to several moments that could’ve led to the downturn. Maybe it was when the author of the influential book Black Swan said Bitcoin was worth “exactly zero.” Or it could’ve been the assessment from a billionaire hedge-fund manager that cryptocurrencies are a “limited supply of nothing.”

Whatever the turning point, I wish I knew the difference between using high annual percentage rates (APRs) as a marketing gimmick and those that have a more sinister motive. In today’s hot story, my colleague Scott decodes the wild staking rewards seen around the crypto market.

Today we look at:

• The mechanics behind companies offering high staking rewards
• A new Shariah-compliant fund that will focus on startups in the ASEAN and Middle East and North Africa regions
• Other newsy highlights such as a new supercomputer that is fast enough to match the human brain and Gojek’s potential entry into Malaysia.

As a safer bet, you might consider filling out this CDP x Tech in Asia questionnaire survey and being part of our campaign to help the startup ecosystem go green.

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Decoding high staking rewards

Image credit: Timmy Loen

Pre-Terrapocalyse, a tweet by Renz Chong, the CEO of NFT factory BreederDAO, attracted a significant amount of investor interest for offering returns of 373,186%. But companies offering crazy APRs – up to five figures – on staking pools aren’t uncommon.

• A heads up: “First of all, we have to look at why the APR is abnormally high, especially from a starting basis,” says Danny Chong, co-founder of Tranchess, a Singapore-based company that focuses on tokenized asset management. APRs as high as 10,000% on the first day or the first few hours is often not a very true reflection of actual returns, he adds.

• All that glitters is not gold: Offering extremely high yields for staking can have a hyperinflationary effect on the token economy, says Lucas Outumuro, head of research at IntotheBlock, a US-based data science company that provides crypto intelligence services. In those cases, staking may become necessary to prevent tokens from being diluted.

• What next?: It’s clear that it will take more than just a high APR to stay with firms like BreederDAO for the long term. Crypto projects that wish to seek more longevity should consider issuing tokens that have some utility other than staking.

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