Ledger & Figment: how to stake freely and safely ? - with L. Gabel, CEO @ Figment

One of the most fascinating things about Web3 is that it’s turning users into owners, granting them the ability to participate freely in network operations and benefit from it. 

This includes participating in Proof of Stake (PoS) mechanisms, which use tokens as the main resource to run blockchain operations. While this process is often considered complex, Figment simplifies participation for token holders and enterprises. The good news is that Ledger users can now access figment services directly from within the security of the Ledger ecosystem.

Ledger host Mo El Sayed welcomes Lorien Gabel, Figment’s CEO and co-founder, and Charles Hamel, Ledger’s VP of Product, to discuss this crucial partnership.

Key Highlights:

Proof of Work vs. Proof of Stake: A Fundamental Shift

Lorien Gabel, a bitcoin OG who began mining in 2012 before transitioning to PoS in 2018, provided an overview of consensus mechanisms:

• Proof of Work (PoW): Requires miners to run big data centers and consume a lot of electricity to produce the next block and provide security. In Bitcoin, the token holders and the miners are two separate audiences, and their interests are not necessarily always aligned.
• Proof of Stake (PoS): Emerged as a way to run a blockchain that is theoretically more scalable, use less resources, while maintaining a secure, decentralized, trustworthy ledger.
  

The fundamental difference lies in governance and value sharing. 

Lorien Gabel explained that PoS brings the miners and the token holders together. He views PoS as the ultimate realization of Satoshi’s vision because users that transfer value also have the ability to run and govern and share the benefits of that network. 

He provided an analogy:

“It’s as if you’re a credit card holder you hold your Visa (card) and if you want you can actually process some of the Visa transactions as a user and as and then have a say in governance”.

Ledger’s Role: Giving Access to Secure PoS Participation

Charles Hamel explained that Ledger’s interest in PoS stems from its role as a horizontal company that supports every blockchain, recognizing that every user of these blockchains needs security to keep control of their assets.

Staking capability is one of the top kinds of feature requests Ledger receives.

Charles emphasized that by integrating PoS within Ledger, they prevent users from having to move their assets to a centralized exchange and losing some of that self-custody and kind of independence that they had with their Ledger. 

Watch the full video below or read into the key topics discussed in the Podcast ahead:

How Delegation Works: Dispelling the Custody Misconception

Figment prefers to operate in the background through partners like Ledger, stating, you shouldn’t necessarily be familiar with figment. Lorien Gabel clarified the most common misconception about staking—that you are giving up custody.

When a user decides to stake, they are performing an onchain contract that is essentially a transaction that essentially points to us as running those nodes on your behalf. 

Crucially, the user maintains total control within the Ledger signer. Lorien guaranteed that “if pigment were if meteors were based in canada meters were to hit canada we were to disappear — we have no control of your funds. 

Furthermore, rewards go directly to your onchain address, meaning Figment cannot control those rewards either. The transaction itself is simple, involving transactions within Ledger Live via a drop-down menu.

Technical Complexity, Partnership, and Rapid Scaling

The partnership with Figment is vital because it means Ledger now has a partner with the expertise to “scale up the protocol support fast and bring a uniform product for staking and earning rewards across multiple protocols within the same app. 

Accessibility, Minimums, and the Future of ETH Staking

Lorien Gabel addressed misconceptions about minimum token requirements. 

In general, you don’t need any minimum to participate in most protocols (like Solana or Cosmos).

Ethereum is an exception, requiring 32ETH per node. However, the industry is developing solutions like liquid staking that allow users with less than 32 ETH to pool their holdings onto a node, which will likely be available post-merge.

Security Risks: Downtime and Slashing

The Proof of Stake mechanism, as explained by Charles Hamel, requires participants to put an economic stake at risk if they violate the protocol’s rules. Lorien Gabel outlined two primary risks for users who delegate their stake:

1. Missed Rewards: This can happen due to downtime if a validator’s nodes go offline.
2. Slashing: This mechanism is designed to prevent forks of the network or double spending and can result in a loss of some percent of the staked assets.

Figment prioritizes safety over liveness in its infrastructure, preferring temporary downtime to the risk of slashing, which they have successfully avoided to date. While staking is a passive experience from a user’s daily point of view, their delegated assets are active in securing the network. 

Staking also grants users the power to engage in governance and on-chain voting.

Protocol Staking vs. DeFi, and Institutional Interest

Lorien Gabel divided income generation in crypto into two buckets:

1. DeFi Activities: (Yield farming, lending) Involve high risk (smart contract, counterparty risk) but potentially higher rewards.
2. Protocol Staking: (Running the protocol consensus) Involves no smart contract or counterparty risk and is considered more passive/lower risk.

This lower-risk profile makes staking the ideal starting point for institutions and large investors.

Decentralization and the Rich Get Richer Conundrum

Addressing the philosophical concern that PoS allows the people with the most money are the ones that are going to be making the calls, Lorien Gabel argued that decentralization is a scale not a binary. He noted that contrary to the rich get richer theory, most successful new protocols tend to decentralize ownership over time and not the other way around.

Charles Hamel reiterated Ledger’s stance:

“As long as that self-custody option is there, the user can own their keys then there’s no (question about) why should we judge it differently”.

Future Moves: ZK, Mobile dApps, and Developer Adoption

Looking to 2022, Charles Hamel anticipated scaling and the ZKrollups and mobile friendly dapps with good UX. Lorien Gabel is focused on interchange communication between major ecosystems (Cosmos, Avalanche, Polkadot).

Figment is driving developer adoption by moving up the stack. Lorien wants more people using these blockchains and offers Data Hub and Builder DAO to simplify smart contract build and deploy tools for developers, urging them to build smart contracts instead of building in web2. 

Figment also aims to support builders creating NFT financial primitives (e.g., lending, collateral).

Reading List

Learn more about these topics mentioned in the episode, or explore our library of articles on Crypto, Security, and Regulation on Ledger Academy

• Figment x Ledger
• Solana
• Staking
• ZK (Zero-Knowledge) Roll-ups