The Need to Extend the rToken of StaFi to the Cosmos Ecosystem
It is no longer news that cryptocurrency and blockchain technology is revolutionizing global finance. It has been experiencing a lot of adoption lately, and it is down to the fact that projects are looking to solve problems facing traditional finance.
It started with an email ushering in a new kind of money. Bitcoin began the financial revolution, and it is a digitalized kind of money that depends on a robust, secure, and effective blockchain technology to oversee transactions.
The idea of Bitcoin revolved around a proof-of-work (PoW) consensus mechanism, which involves extensive work put in by interested users who seek to earn the coin by participating in the governance of the network.
The proof-of-work system of Bitcoin is revered based on its security protocol, but it hinders adoption. Users moan over the difficulty involved in taking part in the network operations, which gave birth to proof-of-stake.
The Proof-of-stake (PoS) consensus mechanism does not involve extensive work like proof-of-work, and it is more rewarding for users hence the reason it garnered a lot of attention and adoption after its introduction. It is one of the significant reasons cryptocurrency is widely adopted today, but its flaws also began to be laid bare as time went on.
The proof-of-stake system involves locking your assets, popularly known as ‘staking’, in a particular smart contract and for a particular period before you can participate in the governance of the network and earn rewards. In this case, users cannot access their funds until the expiry date, which gave birth to many “what ifs” and “why nots”.
This issue of not being able to access your funds until the expiry date continued until the idea of staking derivatives popped up.
Staking Finance (StaFi) is the first decentralized finance (DeFi) protocol to solve the problem between Mainnet security and token liquidity by unlocking the liquidity of staked assets. StaFi solves this problem by issuing alternative tokens for staked assets.
rTokens are the alternative tokens issued by StaFi for tokens staked on the original chain. These alternative tokens are issued on a 1:1 basis and can be traded, lent, or borrowed at different venues.
For example, if a user stakes ATOM on the Cosmos blockchain through the Staking Contract provided by StaFi, the user will get rATOM.
The unique thing about StaFi’s rToken initiative is that users no longer have to worry about the liquidity of their staked assets. StaFi liquidifies these assets and enables full participation of DeFi activities with rTokens.
StaFi has always continued to work towards the growth of rTokens. As with every idea in life, there is always room for improvement. rTokens have been met with drawbacks, but the StaFi foundation always provides remedies. One of such limitations facing rTokens and the solution provided by the StaFi foundation is rTokens on the Cosmos ECO.
The Cosmos ecosystem is popularly known as the “Internet of Blockchains”. It is an ecosystem that ensures interoperability between blockchains and enables them to function to their fullest capacity without sacrificing decentralization, scalability, or security.
The Cosmos ECO has experienced immense growth lately, with over 40 vertical public chains currently based on the Cosmos SDK. The Cosmos SDK is the software development kit provided by the Cosmos ECO for developers to build independent blockchains for different use cases.
THORChain, Crypto.com, Osmosis, and Kadena have become a part of the Cosmos ECO, and StaFi feels the need to further publicize their project by introducing rToken to the Cosmos Ecosystem.
StaFi already has a connection with Cosmos but with certain limitations. Users who stake ATOM on the Cosmos blockchain through the Staking Contract provided by StaFi get rATOM but must undergo a complicated process before trading or redeeming it.
Under the previous rToken protocol, to mint, trade, and redeem rTokens on the Cosmos ecosystem, users must pass through the following processes:
- For minting, users must hold StaFi projects Native token $FIS before they can mint rATOM on the StaFi chain.
- For liquidity mining or transactions on Sifichain, users must cross-chain rATOM to Ethereum blockchain for ERC-20 rATOM and then perform another cross-chain to Sifichain through the Ethereum>Sifichain Bridge which can be a very daunting task.
- To redeem rATOM on Sifichain, users must cross-chain from Sifichain to Ethereum and again from Ethereum to StaFi chain.
The above processes hindered the adoption of rTokens for Cosmos Ecosystem users, but StaFi is remedying this problem with StaFiHub.
StaFiHub is a parallel chain of the StaFi project built on the Cosmos SDK to support rTokens on the Cosmos Ecosystem.
StaFiHub will help rToken users easily obtain and trade Cosmos ecosystem staking derivatives. The extension to Cosmos Eco is expected to help promote the StaFi project and its rToken ecosystem.
Some Benefits of the StaFiHub
- Effectively provide Liquid Staking Solution to all Cosmos ecosystem projects.
2. Encourage adoption of rTokens by providing a more user-friendly Cosmos Eco experience.
3. Enable collaboration with more PoS projects.
Staking Derivative remains the most inspiring and interesting initiative in the crypto space. It enables DeFi enthusiasts to fully participate in DeFi activities without the hindrances of staking in PoS chains. It also increases benefits as users are also entitled to rewards from staked assets on the original chain, even while liquidizing these assets.
rTokens from StaFi enable full participation in DeFi activities for users but face hindrances on some chains. Creating StaFiHub and expanding to Cosmos ECO will eliminate these hindrances and promote the rToken ecosystem.
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