rToken Issuance: Affording Liquidity for Your Staking Assets

Staking is one of the most inspiring ideas that have ever been witnessed in the crypto industry. Staking utilizes a proof-of-stake (PoS) mechanism; which is a blockchain consensus mechanism that allows an individual to mine or verify block transactions based on how many coins they own. Quite similar to traditional banking, in which your interest earnings depend on how much you have locked with the bank.

Staking poises some certain concerns for crypto enthusiasts. Users must lock their assets to gain rewards for securing the network through mining and validation; however, this locking of tokens prevents a lot of things.

Furthermore, protocols of staking imply that a user must wait for a stipulated period of time before he/she is able to withdraw their staked tokens, making it almost difficult to invest these tokens efficiently. Validators lose money because they are unable to invest their stakes in more lucrative opportunities as time goes by.

The liquid staking protocol, which tokenizes stake in some manner, has emerged as a solution to this issue. Users that staked their tokens can now access other ventures and handle their positions in a more versatile and non-custodial manner with the tokenized stake.

StaFi

Staking Finance (StaFi) is one of those projects with remedies to the troubles of staked tokens. It is a Decentralized Finance (DeFi) protocol that enables unlocking the liquidity of staked assets. StaFi does this by issuing alternative tokens, also known as rTokens. The StaFI Protocol resolves the conflict between token liquidity and Mainnet security by providing liquidity for Staked assets.

One of the major benefits of liquid staking is the right to use staked assets as leverage in other financial applications. As a result, it opens up a world of massive possibilities. Tokenized staking positions, for example, may be built into other protocols to allow stakers to control their risk exposure and receive extra gains on their staked assets instead of having their staked assets locked in a blockchain and at the mercy of the market determination. This is the problem StaFi protocol aims to solve for stakers with rTokens; these tokens can be switched easily between people, sites, and even Chains.

rToken

Stafi allows token holders to stake their assets in order to create a new token called rTOKEN. These tokens represent the initial stake position and allow the stakers to obtain stake rewards from the original chain. For instance, Polkadot DOT tokens become rDOT, Tezoz becomes rXTZ and ATOM tokens become rATOM. The Stafi protocol also dishes out a security protocol that ensures these rTOKENs are the only collateral that can be used to reclaim staked assets from the original blockchain.

These rTOKEN tokens are the staker’s licenses, which can be exchanged on centralized and decentralized exchange platforms, or on any exchange platform on the crypto ecosystem. Two types of node operators protect the “rTOKEN” initiative: Stafi Validator (SV) and Stafi Special Validator (SSV) (SSV). The Stafi Validator covers the agreement’s security, while the SSV covers the security of all stake contracts.

rToken Issuance

Trust, exploitation, network attacks, and some other issues facing the issuance of alternative tokens have hampered the excellent innovation.

Stafi protocol is designed to create a Staking Contract at the top level, allowing the holder to execute a Stake using the specified Contract while also receiving an alternate token (rToken). The rTokens can be traded on the exchanges built on the application layer. The contract code executes both the holder’s Stake and the rToken issuance operations automatically. There is no requirement for third-party intervention, and anyone with a Stake token can stake or redeem at any time; the contract will be executed immediately once validation is complete.

According to StaFi, holders can issue the value-bearing bonded assets of the corresponding value, which is comparable to the current asset securitization process. The key difference is that bonded assets are issued by individuals and not institutions. The aim of individual issuance is to make market price fluctuation not be at its worst. This decentralized approach could better inspire the original chain holder to acquire rTokens, and it will help increase the number of rTokens on the market in order to support the bonned assets bond trading market.

StaFi further stated that mass issuance of rTokens is endorsed by Stake Assets, and Stake Assets is endorsed by the public chain/function behind its model. Currently, the Stake model has not been abused, which guarantees the quality of Stake assets. But the problem or risk of this kind of bonded asset is that the regular income of this Stake asset is highly dependent on the Token. Although the holder can continue to earn income through their Stake, income expectation to legal currency is still fluctuating, which causes inconsistent expectations of rTokens trading in the trading market. Leverage may fill the market in great numbers, which brings more opportunities and possibilities to the creation of decentralized bonded assets trading on Stafi.

Conclusion

The cries of users utilizing the proof-of-stake protocol have been curbed to a large extent with the implementation of rToken issuance by the StaFi protocol. Now, users are free to stake their assets on the original chain and also utilize the rToken idea laid out by the StaFi project which enables them to gain more than they anticipated.

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