Staking, while it essentially involves locking one’s crypto assets in a proof-of-stake (PoS) blockchain for a specified length of time, is largely used to secure a network for developers and reward-making. To assure the authenticity of every new transaction published to the blockchain, a consensus is necessary, which these locked assets are used to achieve. Aside from protecting a network, every stakeholder’s primary goal is to maximize profit.
Every Proof-of-Stake blockchain has its own set of rules for validators. The technical and financial prerequisites to become a validator (for example, a minimum stake size), the methods for selecting validators to complete an actual validating task, and the principles of reward distribution among validators are all defined by rules. The stake size, actual involvement in the consensus procedures, and the total quantity of coins at stake are commonly used to determine the payouts.
StaFi’s long-term goal is to provide liquidity solutions for all PoS projects, making staking more convenient and adaptable. The StaFi contract layer allows for the creation of various staking contracts on PoS chains. The token holder can stake via a Staking Contract, which provides the same inflation incentives as a regular Stake. However, the holder can also get rToken, a reward token that can be traded while yielding a specific percentage of annual reward on their initial stake. StaFi has published eight rToken solutions to accomplish this, including rETH, rBNB, rFIS, rDOT, rKSM, rATOM, rMATIC, and rSOL.
The StaFi protocol not only solves liquidity difficulties and makes the staking procedure more flexible; it also integrates a method for maximizing staking rewards, which automatically selects a group of Original Validators with the highest reward on the chain for staking. This method is known as the delegation technique, and it is usually dependent on the original chain’s consensus mechanism.
Staking Finance (StaFi) is the first Decentralized Finance (DeFi) system for unlocking the liquidity of staked assets. Cryptocurrency owners can use StaFi to stake their PoS tokens and receive rToken. This is similar to staking one’s certificate of share ownership with an entity in exchange for a token that allows one to trade one’s locked assets. Users can acquire the staking reward and trade the locked staking token at the same time with rToken.
The protocol is completely decentralized and promotes liquidity. StaFi, which is based on Substrate, is linked to Polkadot as a parallel chain that shares Polkadot’s underlying consensus. Polkadot additionally ensures the highest levels of security and performance. The contract level is the most fundamental layer, and the contract code guarantees full ownership of the Stake token.
StaFi delegation strategy is established on the consensus mechanism of the PoS chain and the influencing elements of staking rewards. Hence, the rToken App uses the following staking rewards maximization approach:
- Diversified Delegation: The original tokens contributed by users in the StaFi rToken pool will be distributed to numerous (the total number of rToken issued — M) mini staking accounts, which will be governed using a multi-signature system. The profit maximization technique will then delegate multiple (the total number of burnt rToken — N) validators to each staking account.
M will be determined by the original token deposit’s scale, and N will be determined by the project’s delegation regulations.
Diversified delegations will aid in reducing the likelihood of a single node crashing, as well as increasing the decentralization of project validators’ staking power.
- Pick Original Validators candidates strictly: The on-chain performance data of original validator candidates will be evaluated by the rToken App using parameters such as online time, slashing record, self-bond ratio, node identity, commission ratio, and others to ensure that great validators with low commission are chosen. According to the evaluation results, StaFi will rank all of the project’s validators and choose the top validators as Original Validator candidates.
- An automatic delegation mechanism that strikes the right mix between increased decentralization of project validators and increased staking rewards: The top Original Validator (OV) candidates’ staking power will always be monitored by StaFi rToken contracts, which will re-rank the OVs according to staking power from low to high in each epoch, then choose the lowest M validators as the official OVs to delegate.
- A plan for minimizing the risk of loss: The rToken staking contract will immediately initiate the redelegate process and re-select additional qualified validators in the OV candidates for delegation when the system detects that the node is cut or the online rate is lower than the standard.
To unbind assets, the staked token and associated prizes might be redeemed at any time using the rToken App. rToken contracts will automatically unstake and remove Tokens from the project chain after receiving a redemption request, then send the original tokens to the user’s address, which may take a few days depending on the project. When utilizing the rToken App, users do not need to collect staking rewards; the on-chain staking contract will automatically re-stake the rewards to create the greater APR.
As the PoS network expands, validators will need assistance in unlocking the liquidity of staking assets while maintaining the original chain’s security. StaFi’s rToken is a solution to the difficulty of unlocking liquidity. Billions of dollars in staked assets can circulate with rTokens without the need to unstake. It overcomes the staking liquidity problem and makes crypto enthusiasts and blockchain developers more inclined to participate in PoS consensus. The delegation strategy, also initiated by StaFi ensures users maximize their profits when staking.
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