StaFi is one of the few crypto projects that provide an easy and fruitful experience for the average crypto enthusiast.
It is a DeFi protocol built on Substrate that is aimed at solving the problem between liquidity and Mainnet security. It solves this problem by unlocking the liquidity of staked assets through issuing Asset-backed-Tokens(ABT), specifically rTokens. These alternative tokens can be traded at any time while still enabling earnings from the original staked tokens.
StaFi is part of a new wave of staking services that assist in alleviating many of the liquidity problems that surround Proof of Stake networks. Its protocol opens up a world of immense possibilities for stakers and in this article, we will be discussing “Yield Farming”; one of the means of earning staking rewards on StaFi.
Before we delve into “Yield Farming” and what it entails, we would first have a brief look into the protocol that gave birth to it and one which it operates on/with; “Decentralized Finance (DeFi)”.
Decentralized Finance (DeFi)
DeFi has been at the forefront of blockchain innovation. It has been a key contributor to the cryptocurrency’s widespread adoption in 2020 and remains one of the industry’s most essential innovations.
DeFi is a financial service with no centralized authority. It removes the middleman from the traditional financial system and replaces it with a smart contract. Unlike commercial institutions or brokerage accounts, DeFi does not require a government-issued ID, proof of address, or Social Security number. It operates in such a way software developed on blockchains allows buyers, sellers, lenders, and borrowers to engage in peer-to-peer transactions or with a completely internet-based intermediary rather than a corporation or organization handling the transaction.
One of the innovative ideas to have emerged in the DeFi space is Yield Farming; a unique way to earn rewards for your cryptocurrency holdings through the use of permissionless liquidity platforms.
Yield Farming is the act of staking or lending crypto assets in order to produce huge returns. Yield farming protocols reward liquidity providers for staking or locking their crypto assets in a smart contract-based liquidity pool. These rewards might come in the form of a portion of transaction fees, loan interest, or a governance token in relation to liquidity mining. The value of the distributed rewards rises as more investors join funds to the related liquidity pool.
Originally, the majority of yield farmers stake well-known stablecoins like USDT, DAI, and USDC. Currently, the most popular DeFi protocols run on the Ethereum network and provide governance tokens for liquidity mining.
Yield Farming is a very unique initiative of the DeFi space but it would be right to warn you that it is risky and unpredictable and demand you understand it thoroughly before engaging in it. However risky and unpredictable it might appear, this application of DeFi continues to increase in popularity mostly due to the additional initiative of liquidity mining.
Liquidity mining involves the act of a yield farming protocol issuing their token also known as governance token as additional compensation to farmers.
How to Earn Staking Rewards on StaFi with Yield Generation
StaFi is a DeFi platform that enables yield farming in one of the best ways possible. It utilizes the contract layer of the StaFi protocol and enables a staker to earn maximum returns.
Staking Contract (SC) refers to the contract that initiates contact with the original chain at the StaFi contract level. To link Tezos with StaFi, for example, an XTZ staking contract will be created. When user A with XTZ initiates a Stake operation on XTZ-SC, the Staking Contract will first generate a multi-signature address, and he will transfer XTZ to that address through the Tezos original chain. If the transfer is successful, the contract will carry out the Staking operation of the multi-sign address. If the attempt is successful, the tokens will be locked to the original chain. The StaFi protocol will then get proof of the Tezos original chain (Proofs), which will activate the contract to produce an alternative token, in this case, rXTZs in equal amounts to XTZ, and deliver them to the staker.
The original chain and the StaFi protocol must cooperate for the Staking Contract to be updated, and the contract status of each chain must be monitored. When the holder initiates a Staking request at the Staking Contract, the StaFi protocol is used to generate the multi-sign account. At the same time, the Stake user’s signature completes the transfer of the personal asset to the multi-sign address. This transfer is done on the original chain. When the Contract collects the transfer information, a Stake request from the multi-sign address to the original chain is initiated. After the Staking on the original chain is completed, StaFi captures and verifies the Stake state of the address on the original chain, and the corresponding rTokens are issued on the StaFi protocol immediately after the validation is successful. The capturing and monitoring of every piece of information is critical to the overall security of the protocol. To ensure the final validity of the original chain, the StaFi protocol captures the original state using time delay and multi-pass validation.
By utilizing the StaFi protocol, staked tokens are then made liquid (rTokens). This extra liquidity may then be used by traders to farm for higher yields by engaging with other DeFi protocols.
rToken enables users to obtain staking incentives and access liquidity at any moment by trading rTokens immediately. Users can also redeem the corresponding amount of staked tokens at any time.
If you are seeking protocols that enable you to earn high returns in the DeFi space, StaFi is the go-to project.
Their provision of alternative tokens which can be traded anytime is a very unique initiative. StaFi helps project tokens gain additional liquidity; in the sense that users can stake the native token while also farming for more yield with StaFi’s alternative token. This helps in solving the dilemma stakers face when deciding whether to stake or use their tokens to engage in DeFi yield generation.
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