One Way For You To Show Skin In The Crypto Game – Run A Branded Validator

August 1, 2022

By Harry Alford, Coinbase Cloud

There are two sides of crypto: the tech and the hype. Global interest in and adoption of crypto has increased significantly, spurred on by the bull market of the past 18 months. But this attention also comes with significant criticism due to greed, foul play, bad actors, and poorly designed protocols. Deciphering the signal from the noise is increasingly difficult. How are consumers to know what, and who, to believe? 

It will be those companies, individuals, and brands that show their belief in the tech by having genuine skin in the game. They take on the downside risk of participation in blockchain while also owning the upside. How? By running branded validators to secure a blockchain network, with their name and logo publicly displayed.

What is a validator? 

In Proof of Stake (PoS) networks, transactions are verified and added to the blockchain by a distributed set of validator nodes. Validators are required to secure the decentralized network at the heart of any protocol. Security is created by validator owners, plus other token holders, staking (also called delegating) their tokens to the validator, which puts them at risk of slashing caused from misbehavior on the network such as double-signing or downtime. In exchange for securing the network, all staked tokens earn rewards.

Running a validator has a lot of upsides – it allows you to earn rewards through third-party delegations and commissions, participate in governance decisions for the protocol, and contribute to the security of the decentralized network. The downside is the risk of slashing, with the possible result being missed rewards, tokens lost, and a hit to your reputation. Rewards and slashing punishments differ drastically between different PoS protocols but the bottom line is validators have skin in the game.

Companies are publicly showing their commitment to blockchain

Sports betting company, DraftKings, joined the Polygon network as one of the first major publicly-traded firms to run a validator. According to its Chain Explorer, Polygon’s market cap is north of $4 billion, and one of the most popular PoS chains. “Gaining exposure to staking technology supports DraftKings’ broader strategy of building out a robust, sustainable, and decentralized infrastructure to help futureproof aspects of our business in the Web3 era,” stated Paul Liberman, co-founder and president of global product and technology at DraftKings, in a Polygon blog post

Spinning up validators also unlocks new ways to engage with your audience through innovative technology. For instance, Turner Sports is running validators for its first installment of the Blocklete Games franchise, Blocklete Golf, on the Flow blockchain and offers its fans a seamless, secure way to buy, sell, and trade collectible NFTs. "Turner Sports believes that the future of sports engagement will be interactive, social, and built on the blockchain,” said Yang Adija, Senior Vice President, Digital League Operations, Growth and Innovation, Turner Sports said in an announcement earlier this year.

For a validator to earn rewards, it must meet the protocol mandated minimum number of tokens to be in the “active set.” The active set minimum is dynamic and can also be competitive. If you don’t have the brand equity, you risk not receiving enough delegation to remain in the active set. This is more reason why someone like a popular professional athlete would be a perfect candidate for running a branded validator. Their name recognition, crypto engagement, and following could draw a considerable amount of delegation to a validator allowing them to earn significant rewards all while showing commitment to the security of a given protocol’s network. Actually, prominent professional athletes are already pursuing backend infrastructure support by running nodes to drive participation. 

Running a validator shows a vested interest in a network's success AND failure. As Cryptoslate’s Laszlo Dobos said about DraftKings, “While large corporations have shown increasing interest in the nascent Web3 economy, most participation until now has been limited to investments and promotional campaigns. The decision by DraftKings to take an active role in the day-to-day operations of a major crypto network is an important adoption milestone for the blockchain industry.” 

Enterprises, leading brands, or influencers with star power will need to grapple with their legitimacy as crypto becomes part of their business processes. The ones with skin in the game define value for themselves while allowing the intended audiences to experience their authenticity through action. The showing will be as important as telling, and branded validators are one way to take an active role.