Hello readers. Has this ever crossed your mind? The thought of staking tokens and receiving a different one in return which now happens to be available for trading, while still earning staking rewards? Yes, it probably has but have you been enjoying such luxury? No you haven’t and that’s because there hasn’t been any system to make such a thing possible. Well, until the birth of StaFi protocol.
StaFi Protocol is the first-ever decentralized finance (DeFi) protocol focused on unlocking liquidity of staked assets. StaFi is an abbreviation for Staking Finance and the primary aim is to solve the contradiction between Mainnet security and token liquidity in Proof-of-Stake consensus. Token holders like you and I stake through staking contracts built within the StaFi protocol to be given alternative tokens called reward token, rTokens so to say. These rTokens are tradable, and it is possible to earn staking rewards from original chains or initial staking actions simultaneously. Good things come in twos uhn?
StaFi consists of three layers, the bottom, contract, and application layers. The bottom layer is based mostly on a blockchain system established by substrate which is a Blockchain architecture developed by parity and the whole architecture is built to integrate development modules, including the consensus module, P2P module, and staking module.
The contract layer functions as it’s name implies, is to create a layer of various staking contracts for different assets such as XTZ, ATOM, and DOT. Asset holders like you and I can therefore stake through one of these staking contracts that consists of the inflation incentives obtained by the ordinary or usual stake. However, the difference is that the holder can also receive rTokens, reward tokens, thanks to StaFi protocol.
rTokens are the alternative tradable tokens you get from the staking contract, having the same ratio as the initially staked token. Holding rTokens means you can get incentives from tokens staked. As earlier on said, rTokens can be traded on the market. After the transaction, the staking contract will adjust the reward and redemption rights. You don’t need to be burdened with that chore.
Finally, the third layer which is the application layer, supports third-party StaFi-based APIs (Application programming interface) or customized APIs to create a decentralized bonded asset trading market for rTokens to circulate, transfer, and trade on the StaFi Protocol.
The protocol runs in a purely decentralized manner. Stafi, which is built on Substrate, will be connected to Polkadot as a parallel chain, sharing the underlying consensus of Polkadot. The main security and performance are also guaranteed by Polkadot.
The core layer is the contract level, and the ownership of the Staked token is fully guaranteed by the contract code. Stafi uses a distributed key storage protocol to ensure the security of the Stake address through multi-signatures. The holder can initiate Stake or redeem the Stake anytime and anywhere without the need for third party intervention. When the holder of the coin initiates the Stake token to the Stake contract, the system’s inflation incentives can be obtained regularly. Meanwhile, any holder of rTokens can initiate a redemption to the corresponding Stake contract anytime, anywhere. The redemption operation interacts with the original chain of the token staking through the Stafi protocol. After the redeeming transaction is written to the chain, Stake coins will be sent to the submitted coin account after unlocked.
The Stafi protocol guarantees that each and every alternative rToken is exclusively corresponding to the token on the original chain. That is to say, only the holder of the rTokens can initiate the redemption of the original token to the Stake contract. When A trades rTokens to B, A no longer has the redemption right to those tokens, and B now can initiate redemption to the Staking contract. The whole process does not require third party intervention. So basically the reward token is both a substitute and the key for redemption to the initially staked token. If you intend on getting the yield of the Staked token made with the staking contract of StaFi, then it would be wise to not sell off the corresponding rToken for the staked token.
Any third party can establish a decentralized bonded assets exchange using the Stafi protocol at the application layer. All rToken exchanges share the depth of the transaction. With the increasing number of public chains adopting PoS launching their mainnets, the number and variety of Stake’s tokens will rocket. And rTokens will be traded more frequently. As a result, developers will be hugely rewarded, in the form of transaction fee from rToken transactions they initiated.
Over the last three months StaFi protocol has had a string of successful milestones. The list includes rDOT, rKSM and rATOM being made publicly accessible, as well as the evolution of rETH from V1.0 to V2.0. StaFi developers have designed a general solution base layer for three of the newly-born rTokens, which has made it possible for StaFi to deploy rToken Solution to various projects based on Cosmos SDK and Substrate.
Undoubtedly still, StaFi has faced problems and challenges. From limited manpower to below expectations use of the rToken app and lack of technical support for some marketing campaigns. Nevertheless StaFi has identified these challenges with some possibilities and future scope of work. They’ve come down with a number of solutions.
For one, they propose to create new rTokens. For every new quarter in the future, the development of new rTokens will be significant development work. It is essential for StaFi Protocol to become a staking network. New Integrations. StaFi will continue to create new user scenarios for rToken. Liquidity will keep increasing to support new integrations in the future.
A New rToken App has been created. The App is a tool that facilitates the rToken asset management both for stakers and Validators. At the current stage, the UI/UX is not as per expectations. As the number of rToken holders is increasing, the App faces new challenges. StaFi claims to be working to optimize the App experience based on user feedback. At the same time optimizing the UI/UX for the Validators, and one important work ahead of the protocol is to optimize the election strategy for original validators. They design the strategy to follow the principle of maximizing rewards and minimizing losses. According to them, a mature product will be released in Q3 and almost all users will benefit from that exciting product.
Conclusively, we look forward to new explorations and better securities and decentralisation from StaFi protocol.
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