How Asia stakes: a look at the region's interest in proof-of-stake projects and approaches

Asian investors have shown significant interest in proof of stake (PoS) projects – but the tokens they're keen on and the different approaches they take may make it difficult for staking service providers outside the region to capture that market demand. 

Recently, Shanghai-based Fenbushi Capital – one of the most active cryptocurrency funds – partnered with New York-based staking infrastructure provider Staked to build its own staking platform, aiming to bridge the gap between rising interest in PoS projects from Asian investors and a lack of staking services providers that can sufficiently address their needs. 

Meanwhile, other Asia-based cryptocurrency funds, such as NGC Ventures and Hashkey Group, are all offering staking services to Asian investors.

According to The Block’s research, three out of four of the most popular staking projects are dominated by validators based in Asia and North America. However, beyond these most popular projects, Chinese investors are interested in different PoS projects than U.S. investors and tend to opt for different staking providers compared to those sought by parties in the U.S.

Particularly, 62% of the top 21 validators for the EOS blockchain are based in Asia, with 33% from North America.

For Cosmos, Asian validators account for 33% of the total number that, together, contribute 90% of the total staking volume. Twenty-nine percent of such accounts are based in North America. 

Different interest

Despite sharing the same interest in widely popular projects, investors from Asia and the U.S. seem to have diverging tastes on other PoS tokens. 

“There is a bit of a disconnect between the Asia side and the U.S. side - a lot of new coins that are launching the U.S. companies are either not that interested in or up to date with. They don’t want to touch those blockchains.” Peter Yang, the investment director of Fenbushi Capital, told The Block. 

Case in point: Polkadot, a blockchain project led by the nonprofit Web 3.0 Foundation, is significantly more trendy in China than in the U.S., as noted by Molly Mo, the head of marketing at Hashkey Group's asset management and staking arm Hashkey Hub. 

“I heard that Polkadot is not that popular in the U.S., but in China, especially in the past two years, it is one of the hit projects and attracts the most attention. This has something to do with the community building the project has done [in China],” said Mo.  

The disparity in staking interest between East and West means that some of the U.S. staking services providers may not be able to address the need of Asian investors.

For example, New York-based Staked currently supports over 15 PoS projects, ranging from the most popular ones such as Tezos and Algorand to smaller ones like Horizen and Synthetix. By comparison, InfStone, a staking provider that caters to Chinese users, supports very different projects such as Wanchain, Ontology, and IRISNet, which tends to draw more interest from Chinese investors. 

Staking as relationship building

As Yang pointed out, staking platforms that appeal to Chinese investors usually let investor demand drive their decisions on which projects to stake. If an investor requests a certain project to be staked, these platforms are inclined to support the project as a gesture of goodwill. To a certain extent, building good relationships with these investors is as important, if not more so, to these staking platforms as it is to generate a profit. 

“When we want to launch a new coin for staking, most of the time they will be more focused on the profitability side, versus in China where when we go discuss with other staking platforms they are more curious about the relationship behind that,” said Yang. 

In a similar vein, Asia-based funds and exchanges tend to stake with platforms they know or trust, rather than those that generate the highest yield. Therefore, without an established network within the PoS community, it is very difficult for oversea staking companies to break into the Asian market. 

“Choosing a staking partner is largely about trust. I think that naturally leads to a business that's relationship-driven and that tends to be regional in nature. That's one of the reasons we saw a partnership with Fenbushi as a big opportunity,” Staked CEO Tim Ogilvie told The Block. 

"Without some sort of Asian reputation or credibility behind it, it would be very hard to get into the Asia market,” said Yang. 

Ecosystem over profit

As such, staking service providers in China, backed by funds like Hashkey and Fenbushi, may care less about the profit than fostering the ecosystems around the blockchain projects that these funds also invest in. 

“Many of the tokens that we do staking for are tokens that our venture arm invests in. Doing this is not profitable, but we still do it for the sake of these projects’ healthy ecosystems,” said Mo.  

Fenbushi Capital has similar goals in mind as well. One of the staking projects that the fund works with, Enigma, is also a portfolio company of Fenbushi. In anticipation of the blockchain’s mainnet launch this year, the fund is prepared to run Engima nodes in Asia, integrate Enigma’s tokens with one of the crypto wallets it invests in, and help to host a series of meetups and Ask-Me-Anything events. 

"Our main focus is bridging the gap between the U.S. and China. A lot of tokens we see have a demand in Asia but not in the US would be the ones we focus on to bring those projects over,” said Yang.