StaFi Protocol, what is it, and why is it so special?
Today, we’d like to give you a quick introduction to the StaFi Protocol, the first-ever decentralized finance (DeFi) protocol focused on unlocking liquidity of staked assets.
So, what is StaFi🚀?
StaFi stands for Staking Finance and with protocol aims to solve the contradiction between Mainnet security and token liquidity in Proof-of-Stake consensus. The token holders are staking through staking contracts built within the StaFi protocol and then get alternative token: rTokens such as rXTZ. The rTokens are tradable, and it is possible to earn staking rewards from original chains simultaneously.
StaFi consists of three layers, the bottom, contract, and application layers. The bottom layer is mostly based on a blockchain system created by Substrate, a blockchain architecture built by Parity that integrates many development modules, including the consensus module, P2P module, and staking module.
The contract layer supports creating various staking contracts for different assets such as XTZ, ATOM, and DOT. Digital asset holders can stake through a staking contract that consists of the inflation incentives obtained by the ordinary stake. However, the difference is that the holder can also receive rTokens.
rTokens are an alternative token obtained by the Staker through the staking contract. If you stake XTZ, you can get rXTZ, for example. The ratio for these assets is 1:1. Holder rTokens means you can get incentives from tokens staked. Additionally, rTokens can be traded on the market. After the transaction, the staking contract will adjust the reward and redemption rights.
Finally, the third layer, the application layer, supports third-party StaFi-based APIs or customized APIs to create a decentralized bonded asset trading market for rTokens to circulate, transfer, and trade on the StaFi Protocol.
Furthermore, the protocol runs wholly decentralized and is connected to Polkadot as a parallel chain. Meaning it shares Polkadot’s underlying consensus, plus, Polkadot also guarantees the main security and performance.
Now you might wonder: why are there so many projects being built on Polkadot? Well, this all has to do with the ease of making a parachain with the help of Substrate. There are six reasons why building on Polkadot is a good idea:
- The first is native Polkadot compatibility — any blockchain built with Substrate will be natively compatible with Polkadot, which means when Mainnet comes, you can connect to Polkadot as a parachain effortlessly.
- Second, upgrading a blockchain without a hard fork is possible. The runtime is Wasm binary stored on-chain and can be updated using the chain’s governance mechanism.
- Substrate also allows any network to plug in the functionalities when needed while keeping the freedom to customize.
- Polkadot also enables interchain connectivity, which means that by connecting a blockchain to Polkadot, the blockchain will pass arbitrary messages to other chains within the network.
- Then there is the case of instant security. By connecting a blockchain to Polkadot, the blockchain will be secured with Polkadot’s pooled security.
- Finally, it is possible to write blockchain logic in any language that can compile to WebAssembly.
Nominated Proof of Stake
The StaFi protocol has been based on the Nominated Proof-of-Stake (NPoS) mechanism for selecting a validator set. NPoS is derived from Delegated Proof-of-Stake (DPoS), which solves the tendency to centralize validators. However, within the NPoS mechanism, there are two types of stakers known as nominators and validators.
In NPoS, the block rewards are distributed to all validators instead of distributed based on portions of the delegated staking assets. That way, the nominator will automatically balance the delegation among multiple validators. StaFi provides a limited number of validator positions, which will expand slowly as time goes on and the network grows. Nominators can select up to 16 validators, and the validators perform consensus block-producing and guarantee the chain’s finality.
To maintain StaFi protocol, Stafi Validators (SV) and Stafi Special Validators (SSV) are vital. SV’s are responsible for the security of the entire protocol; SSV’s are there to ensure the safety of all staking contracts is guaranteed.
StaFi’s native asset is called FIS, and it is involved in three situations known as staking, value capture, and gas. Staking is used to come to decisions in the protocol and assure cybersecurity and long-term development.
The FIS native asset is the “gas” of the system. Which means it prevents a large sum of spam from popping up in the system. Additionally, FIS charges will be distributed to validators and the Protocol Treasury. The distribution ratio can be adjusted based on preset concerning parameters.
FIS is also a medium for the value capture in the StaFi system, which mainly provides value for the liquidity of rToken. The staking contracts of StaFi don’t just offer staking services to stakers but also help to guarantee liquidity. Service fees will be charged by the protocol from users to value to StaFi Network.
rTokens, also known as reward Tokens, is an alternative token given to actively staking token holders. Because the staking tokens lock up on the original chain, the lockup relations will be written to staking contracts; rTokens is the only authentication ticket manipulated by Staking contracts.
The total supply of FIS token is 100.000.000 and has an initial circulating supply of 3,791,657. The inflation rate in the first year is 10%. The image below illustrates the Mainnet distribution schedule.
How To Nominate on StaFi?
To start nominating on StaFi, first go to https://apps.stafi.io/#/explorer. If it’s your first time navigating this website, you will be asked to authorize the application via a pop-up. Select: “Yes, allow this application access” to continue.
In the dashboard, select “network” in the top menu and then select “Staking”.
On the staking dashboard, select “Account actions” and then “+Nominator” (see image above). A pop-up will appear. You can select a Stash Account and a Controller account (top two) on the pop-up, then fill in the bond amount and select “Next”.
It is possible to select up to 16 different validators. You can select them by address, name, or click on them in the validator list. When you finish selecting, press “Bond & Nominate”.
If you would like to show us some support, Stakin is running a few validators on StaFi. You can nominate some of the 2 below ones:
- Stakin 1: 357AoHhKLNZW9cK3pu6J98jAKrSsV6raywc5vDiduu67Xt9M
- Stakin 2: 331Pge38bWTnCtKxD32G6j6keekLxLs3E8aAScGvftLXxaRs
You will be asked to confirm, fill out your password and then click “sign-in”. In the staking dashboard, you will see a successful transaction.
Congratulations! You’ve now nominated your validators!
More Information and Sources
DISCLAIMER — This is not financial advice. Staking, delegation, and cryptocurrencies involve a high degree of risk, and there is always the possibility of loss, including the loss of all staked digital assets. Additionally, delegators are at risk of slashing in case of security or liveness faults on some protocols. We advise you to do your due diligence before choosing a validator.