StaFi Protocol: Using Staking as an On-chain Governance Mechanism

A method for managing and applying modifications to cryptocurrency blockchains is called an on-chain governance mechanism. The blockchain protocol is packed with rules for initiating changes in this sort of governance. Changes are proposed by developers through code updates, and each node votes on whether to accept or reject the modification.

On-chain governance oversees transactions that take place on the blockchain and are reliant on the network’s current state for their validity. Only when the blockchain has been updated to reflect the transactions on the public ledger are these transactions considered genuine. Because they can’t be changed once they’ve been authenticated and logged on the network, it provides security and transparency. On-chain transactions, on the other hand, have some disadvantages, such as higher fees and slower processing times.

To keep blockchain transactions secure, verifiable, transparent, and quick, on-chain transactions are designed to happen in real-time. In fact, however, this is rarely the case. Before verifying a transaction, on-chain transactions can take a long time to acquire a sufficient number of verifications and authentications from network participants. Additionally, each time a block transaction is added to the blockchain, miners must validate the transactions by utilizing computers to solve complex math problems.

On-chain governance ensures transactions are also immutable, which means they can’t be changed, which adds to the security by preventing a hack that alters transaction information. Transparency is provided by sharing transactions with all network participants, which helps prevent transactions from being tampered with by a fraudster through a malicious attack.

Whether an on-chain or off-chain transaction is the best option relies on the participants and what they want the most. An on-chain transaction would be optimal if the goal is security, immutability, and a validated transaction, but if low transaction fees and speed are crucial, an off-chain transaction would be better.

It’s worth noting that on-chain governance was initiated to solve a lot of the issues that exist in off-chain governance, such as ambiguous decision-making processes and a platform for supervision. It has the potential to make decision-making more open, accountable, and binding, as well as to build new governance systems. However, it has been a contentious topic in the blockchain community, with the majority of the critiques directed towards coin voting. StaFi protocol aims to improve upon the mechanism while also addressing some of its controversies.

Through staking, which is performed utilizing nominated PoS consensus, Staking Finance (StaFi) modifies and enhances the idea of an on-chain governance mechanism. Incentives and security are built into the lines, and they serve as the foundation for participation and voting power. PoS’s security and incentive mechanism perfects the on-chain mechanism. As Staking introduced a new type of incentive strategy for PoS, it results in a new business model. StaFi applications that use staking as an incentive have been widely used and are constantly evolving as blockchain technology advances. Staking has emerged as one of the most essential ideas in PoS projects, bringing new user experiences as well as new difficulties to be solved, particularly in terms of user security.

Though StaFi focuses on Staking Finance’s liquidity difficulties, the overarching goal is to assure high-quality security and reward participants. The incentive is set up in the form of Token Staking incentives. Simultaneously, when a user engages in Staking, he or she becomes a virtual member of the consensus, which necessitates stability and security, a procedure that is in line with the on-chain governance system. That explains why Staking Token has a lock-up mechanism.

Staking Finance (StaFi)

StaFi’s protocol is built on Substrate and uses Nominated Proof-of-Stake (NPoS) to complete Staking by establishing Staking Contracts in the upper layer to connect with public chains. The Staking procedure is unaffected by StaFi’s contracts, which serve as the account book during the process. Contract staked tokens will be written in the contracts and eventually locked up on the original chain.

StaFi Validators (SV) and StaFi Special Validators (SSV) are required to maintain the StaFi protocol. SSVs ensure the safety of all Staking Contracts, whereas SVs are responsible for the protocol’s overall security. The selection of validators and their reasons become more important in the protocol structure.

Staking as a method for on-chain governance

It is self-evident to anyone who understands Bitcoin that it is created with a maximum supply of 21 million over time. This method used can be verified by looking at the source code. This level of transparency is quite effective. It serves as the foundation for all system consensus and mathematically ensures that everyone is following the same set of rules.

StaFi achieves transparency among stakeholders by using proof of stake consensus, which aligns to On-chain governance in that the process of creating consensus is completely transparent. On-chain models must conform to open-sourcing their governance process, similar to how Bitcoin exposes the rules for minting new coins so that anybody can observe how a blockchain decides to update. A blockchain with on-chain governance, for example, would publish information about its governance model, which ranges from voting style, to quorum thresholds, to majority thresholds, as well as voting times, and other governance characteristics. The process for changing these governance traits would open for public consumption..

StaFi operates an open-source transaction while maintaining security and transparency of holders’ assets with the help of reward Tokens (rTokens), an alternative token entrusted to holders as an equivalent of their staked assets in carrying out other transactions while still earning rewards from their staking assets. Staking tokens will be locked up on the original chain, and the lockup relations will be written to Staking Contracts; rTokens will be the sole authentication ticket that Staking Contracts will alter. Holders of tokens can change the contracts’ relationships, do further Staking, and redeem original tokens, among other things. Meanwhile, a user can earn incentives from Staking tokens by holding rTokens.

Substrate includes an A + B consensus mechanism. A is in charge of block selection, while B is in charge of block finality. StaFi uses an election system for block selection. Staking FIS or accepting the nomination of Staked FIS gives a validator their block weight. After the B consensus confirms the new block, the chain with more than twenty three percent Staked FIS votes becomes the final chain, and the most recent block producer is rewarded.

StaFi offers up several SV posts to the public to preserve the network’s security and reliability. In the final consensus selection, users who rank high in the quantity of Stake will be shortlisted. However, once the network has matured, the StaFi protocol uses on-chain voting to decide whether or not to recruit more SVs.

Certain spans of time in the world of StaFi are determined by the number of blocks generated in that period — each block being produced in 6 seconds, give or take. 1 epoch equals 1 hour; 1 Era equals 24 epoch, 24 epoch equals 24 hours. The election for the following era will take place during each Era. Multiple block producers are allowed in each Slot, and the VRF method is used to pick BPs using the consensus process. When more than one block is generated in a Slot, the block that reaches the network’s farthest end is the final block, and the producer of that block is rewarded.


On-chain governance’s transparency ensures that no aspect of the governance system is hidden or obscured, and its accountability ensures that a full public audit trail is provided, allowing all transactions involving governance decisions to be traced and accounted for. As a result, the StaFi protocol can be thought of as a foundational framework for crypto assets. The protocol can liberate Staking Tokens by using rTokens to back them up in the market. StaFi makes money by supplying liquidity. The value chain is made up of multiple models interacting with one another.

Stay connected with the StaFi project using the Links below:

Official Website |*| Telegram || Medium |*| Twitter




I’m a TECH Lover, Blockchain Enthusiast, Strategic Digital Marketer, Content Creator, Crypto Trader & Data Analyst…

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Helen IMAH

Helen IMAH

I’m a TECH Lover, Blockchain Enthusiast, Strategic Digital Marketer, Content Creator, Crypto Trader & Data Analyst…

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