Inflation and Staking - the details


Why would exchanges not stake once they hold millions and millions of the people’s Tezos in there exchange wallets?


im not quite sure that you will be able to spend anything out of whatever amount you actively stake. kind of like inverse frac reserve action you put on yourself.

everyone dedicating a stake out to the network in advance is how the network determines block writing rights for each cycle. if people were to do whatever they want, it would wreck havok on overall block generation stability.



Think about all those tezzies “locked-up”, what are they going to do with them, why stake of course.
All those XTZs are off the table because they want to rise with the tide, not fight it.

And when the lock-up ends and they see increased value by actual work being performed, what will they do, sell and invest in what?

Keep what works, toss the rest.

How about all the early adapters?
From the emails, I’m getting it seems that they are thinking very-very long term.
I have been asked if they could just stake for a year or two and not think about it!

To me, this means the past will not equal the future.

Just today a 12-year-old kid from Pakistan deployed a node, just like I was running over the weekend. I asked why? “To be a future that gives Pakistan’s opportunity.”

Something mighty is going on here.

Wouldn’t you agree?


Exchanges are derivative bets, they benefit the most by not having to record ownership. By playing this way they have a float of tokens that they move back-and-forth but never have to assign until a customer withdrawal them.

If you stake, your XTZs are at work with a little sign that reads:

Do not Disturb, Tezzies Hard at Work for Their Owner

Rise with the tide, don’t fight it.


i guess you’ve lost me. first you seemed to be concerned about exchanges gaining too much power. then you say they are going to lose and you arent worried about them, but are worried about supply.

there will be nearly 800 MILLION XTZ in supply, more than likely there will be plenty to go around. but thats just me.


I think you are confusing my response with another.

As I stated earlier:
Exchanges are derivative bets, they benefit the most by not having to record ownership. By playing this way they have a float of tokens that they move back-and-forth but never have to assign until a customer withdrawal them.

The worst thing that can happen to an exchange is an exchange run.

That is not a supply number, it is a total number created, not the same thing.


What counter point is ultimately being debated on this thread? I’m not following the logic. My personal concern is that exchanges will hold a massive stake (from customer Tezos deposits) and therefor a massive vote block. I can’t say for sure exchanges will vote in the best interest of the people and not themselves.



So what if they do? One can only vote if they are staking!

Staking means no transfer of ownership!

The derivative market controls only as much as is needed to fulfill their obligations, people taking their holding off the exchange.

Exchanges do not want to be exposed, take on any more risk than is necessary.

Your job is to make this abundantly clear to your customers.

  • Shout about the 5% they gain
  • Shout about strengthing their blockchain.
  • Shout about the virtues of a true digital commonwealth.

Exchanges have enough to worry about.


Exchanges will stake. Of course, they will. They will make millions from it and exchanges are in the business of making money. Why would they not? Once people deposit their Tezos into an exchange the blockchain sees it as a transfer of ownership. The blockchain does not recognize that the tokens are still technically owned by the account holder. Blockchains see the transfer to the exchange as a full transfer of ownership and therefore stake. The instant any exchange sees that they can earn 5% on their customer deposits they will stake right away. They will keep a float amount unstaked in reserve for customer withdrawls. They will do the exact same thing banks do. Do you think banks keep all of your deposit cash on hand? No, they keep deposit reserve and invest the rest. Exchanges will do the same thing.


“Blockchains see the transfer to the exchange as a full transfer of ownership and therefore stake.”

NO ownership is NOT staking, you are merging the concepts again.

“The instant any exchange sees that they can earn 5% on their customer deposits they will stake right away.”

If, and it is an if, they do, the customers lose.

This should be telling you something!
Your job as a delegate is to set those tezzies free form the derivative exchanges.

Get to work on doing that, be the delegate that Tezos holders want to delegate to.

Make this scenario of yours irrelevant.

Definition of an exchange:
A marketplace in which cryptocurrencies are traded. The core function of an exchange is to ensure fair and orderly trading, as well as efficient dissemination of price information.

Take away:
A centralized marketplace, for a decentralized economy.

I would laugh but I can find no humor in this.


There are two ways to stake, either you are assigned as a delegate or you hold the Tezos in your wallet and hoste a node yourself. I am saying that once the exchanges “own” the customer’s Tezos in their exchange wallets, then they will have the opportunity to “stake” by hosting their own node. They will not give up this opportunity.

You are proving my point about being concerned about exchanges. Why do you think I have been warning about exchanges this whole time? Hence the need for honest delegates.


I have been asked politely to pass along this information so I am doing just that.

Kraken (an exchange):

  1. A “bank run” is an impossibility.
  2. Customer assets cannot be borrowed against.
  3. No margin trading.
  4. All deposits are air-gap and thus isolated.
  5. 85% of all crypto assets are held in cold wallets.
  6. Compliance measures dictate that customer assets cannot be used outside of the scope of service.

No Staking.
No Voting.

Not speaking for all exchanges, but it is a good example of what an exchange must go through to be in business.

I stated “If, and it is an if, they do, the customers lose.”

The reputable exchanges will not have that option available to them.


Let’s hope your exchange contacts are feeding you correct information. I hope you are right.


I’m ending this thread now.

Link to the Kraken Practices
All the points given, are expanded there.


Hello Jonas!

Thank you for My walllet is #34 and i would like to begin staking and baking! however, it does not appear to be functional. Where can I move my holdings in order to begin staking on the network?


Wow - #34. Thats an early contributor!

There are no options for you yet except to sit tight. Sometime later this year (hopefully) Tezos will launch it’s Mainnet and your tokens will become tradable. We expect here will be significant communication to token holders about how to manage their tokens around that time.


I understand. I am concerned about the security of my holdings. I loved the static receipt of the wallet. I believe in this platform and what we are doing.
I just want to be assured my wallet is secure, my front end seems to be secure.

Hitbtc exchange is trading XTZ…are these true tezzies that have been released by the foundation?


no - these are just "IOU"s of XTZ that HitBTC has promised that they are entitled to, that they say they will be able to trade now, just on their platform. if you trade with them it stays in IOU status and you have to keep the IOU on their exchange and cannot move anything off the exchange untile XTZ does go live, and then HitBTC honors those IOUs


Exchanged must stake. If they don’t, customers will lose out viz inflation or take thieir tez elsewhere to trade. Honest exchanges will give customers option to trade staked coins.

In fact, I anticipate smart contracts and derivative tokens that will allow a person to sell the right to reclaim a staked tokens at the end of the hold period. I agree a fixed 5% inflation of the money supply causes concern and hope that a market based mechanism is implemented.


I am wondering if the inflation rate is going to be static 5% for all coins or only 5% for the coins being staked?

For instance, if there were 1000 coins and only 500 were being staked, would the 500 coins get 5% inflation based off of the 1000 (50 coins of inflation bringing the actual rate per stakeholder to 10%) or would the inflation be based solely on the coins that were being staked meaning 25 new coins were issued?