StaFi: How Staking can be a Financial Operation

In the early days of cryptocurrency, the only way to earn more of the cryptocurrencies, notably Bitcoin was either to mine or trade them. This continued for a while until an easier and better alternative was created; Staking.

What is Staking

Staking is the process of acquiring and saving a cryptocurrency in your wallet and receiving benefits for it. Staking became a wonderful alternative to mining and trading of cryptocurrencies shortly after it was discovered as many found it to be less costly and stressful compared to mining and trading; and also, more rewarding in the long term.

Staking has been considered by many as one of the simplest ways, to make money in the crypto space. You can gain interest for your money by just purchasing and saving a particular coin for a particular period of time. Staking is only possible on a blockchain with a Proof-of-Stake mechanism. On such blockchain, new coin miners are chosen on the basis of their coin stake; the more coins you save, the more your gain.

Unlike Bitcoin’s Proof-of-Work mechanism, where mining rewards are distributed through a computational process and with a lesser probability of successful distribution, the Staking system guarantees rewards and a stable stream of income. One more advantage is that the value of your staked coins does not depreciate; it can only be affected negatively by market price fluctuations.

How Staking Works

The standard staking methods generally involve storing your coins in a wallet or lock them in a smart contract or masternodes. When the minimum staking amount is staked, a node will deposit that amount of coin into the network. Then the validator gets a reward if the node creates a block successfully. This is similar to mining rewards in a proof-of-work system.

Some cryptocurrency projects brought variability to the staking and voting process so that attackers will find it difficult to control the outcomes. When validators try to cheat or attack the network, they will lose part of their stake.

Staking platforms will also make it possible for individuals to be able to assign their earned income and voting rights to someone or some people they trust, these person(s) in turn will earn all the block validation rewards and pay some sort of dividends to their loyal supporters in exchange for their vote.

StaFi

StaFi is a decentralized finance protocol that provides liquidity for staked assets. It comprises three layers, the bottom, contract, and application layers.

A number of staking contracts, such as XTZ, Atom, and Dot, are supported by the contract layer. Individuals can stake through the StaFi Staking Contract, which is compliant with the inflation rewards received from an ordinary stake. The difference is that the holder will also get rTokens; an additional incentive provided by the StaFi project.

Staking Contract will generate a multi-signature address when an individual holding a token associated with the StaFi network initiates a Stake Operation. For example, XTZ of the Tezos platform will be initiated as XTZ-SC.

The individual will have to transfer XTZ to the multi-signature address generated through the Tezos original chain. If the transfer is successful, the contract will conduct the Staking operation of the multi-signature address, and then the tokens will be locked into the original chain. Finally, a proof of the Tezos original chain will be received by the Stafi protocol, after which the contract will be activated to produce rXTZ tokens with the same value as XTZ and have them sent to the staker.

Staking Finance majorly involves staking for reward, staking as a service, and staking as an operation. These three are the main components of the Proof-of-Stake (PoS) mechanism.

The financial world of Staking Finance has continuously evolved from reward to service and is currently transforming into Operation Finance.

Staking as a Financial Operation

The operation exercise gives staking a third layer of financial importance. Initially, Staking was only known for consensus actualization. However, Staking performs another role in the financial space, which is Staking as an operation. This means that Stakers can perform further operations other than just staking for reward or service.

On StaFi, staked assets can provide a variety of network operations, such as data encryption, transmission, and streaming. The staking contract of StaFi preserves the custody of the original tokens allocated to an individual with staked assets. This preservation is done in a multi-signature specialized account created by the staking contract on the original chain. This account is backed up by a team of StaFi Special Validators (SSVs) picked on-chain. Afterward, the staking contract transfers these tokens in a multi-signature account to trustworthy validators and mints a matching number of rTokens to be distributed to the StaFi address of the individual.

Staking is used by various projects in various ways, but they all use it to communicate with the business of the outside world. A large number of Crypto projects launched their mainnet in 2017. The introduction of Proof-of-Stake on a broad scale brought a resounding effect to the growth of Staking.

Some examples of platform performing financial operation through staking include:

• Filecoin

Launched in 2017, Filecoin is a decentralized storage platform designed to store data. Filecoin didn’t adopt the proof-of-stake consensus mechanism, but they have similarities. Tokens are staked in PoS protocol, but in Filecoin, storage space is staked. Tokens can be slashed in the PoS mechanism, but storage space can’t.

Users may get rewards by staking storage space or offering retrieval services in Filecoin’s Staking.

• Algorand

Staking is one of the fascinating features of the Algorand blockchain. The staking feature on Algorand somewhat differs from that of other staking platforms. Many platforms with the Proof-of-Stake mechanism compel you to either become a network validator or to delegate your coins. For Algorand, this isn’t the case. With Algorand’s cryptocurrency ALGO, you only need to keep at least 1 at your address and you can start collecting rewards automatically. There are no additional actions needed. Whenever another operation occurs on your address, these prizes are automatically claimed. The operation may be either the sending or receiving of ALGO. Before having earned your staking rewards, you are eligible to send them out while pending.

• Nucypher

Nucypher is a cryptocurrency project that was established in 2017. A vast number of individuals aggressively submitted codes they wrote after its creation, but the press attention was minimal. Nucypher began to garner the public recognition it long yearned for and deserved in late 2019. They secured a strategic investment of over $ 11 million and the project soared.

Nucypher is a distributed system of key management that offers resources for encryption and permission control. It’s in the privacy layer of Ethereum.

In Nucypher, a miner stakes Nu in order to participate in consensus block-production. In the meantime, the individual has to perform encryption exercises. When a miner is rewarded for block-producing, he is also paid for encryption exercises performed; these rewards are paid by either the data owner or the data user. If the miner spills data or commits any acts of mischief or neglect to perform duties, the individual’s staked Nu will be slashed.

Conclusion

Blockchain application possibilities are limitless, these include, identity authentication, ad transactions, health insurance, credit files, secure messages, content copyright, anti-counterfeiting regulatory compliance, etc. People are discovering new areas. Recently, major companies like PayPal and Singapore’s biggest bank have all seen the limitless possibilities of blockchain and are adopting it. There will continue to be more cases of such adoption.

Currently, the blockchain financial system built on the basis of staking is steadily improving and is progressing towards a rich, deep scale. Today, we’re no longer concerned about block production alone when referring to staking. What remains immune, however, is that Staking is still the most crucial measure to preserve the security of the whole network. In addition, StaFi is having what it takes to stand out among its counterparts around the finance space of blockchain.

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