Stader — Deep Dive

This article has been written for the layman to understand the underlying concept, the working, the vision and the benefit of the Stader platform.

Staking

Now why would you lock up your tokens for staking? It’s simple. You get to earn more tokens as rewards. Now why would you want more tokens? It’s because you believe the value of the tokens are going to increase in the future (i.e. you believe in the future of the particular blockchain).

Imagine you could lock up Tesla your stock in a special locker and you get rewarded with more Tesla stock. From high up above this is exactly how staking works.

Now you might be wondering how you can get into staking to make those extra tokens. Firstly, you’ll need to have the tokens of the particular blockchain. For the Ethereum chain, you’ll need ETH, for the Terra chain you’ll need LUNA, etc. This makes you a “stakeholder”. Secondly, you’ll need to head to the staking platform of the respective chain and then follow the process. Once you’ve been chosen as a validator, your system validates the transaction and adds a block. You earn a reward. Seems pretty simple and straightforward, right? It is only if you are a “chosen” one.

The blockchain chooses the stakeholders at random with an algorithm. The algorithm almost always prefers stakeholders with the highest number of tokens because it gives the chain sees them as its “strongest believer”. So in order to be chosen as a “validator”, you will need to own a lot of the chain’s tokens. Seems a bit unfair, right?

To increase the choice rate, people generally pool their tokens together into one wallet and then collectively stake to earn more rewards. The rewards are then proportionally divided among the stakeholders in that particular pool. Now, this seems like a good option. Now, where do you find these pools? and even if you do how do you trust them to not run away with your hard-earned tokens?

This is what Stader solves for everybody, and much more!

💡 Staking is now being seen as a great way to earn passive income in the crypto world.

How Stader Works

Stader pools in all the LUNA from fellow stakeholders into its wallet and stakes it for you. After the staking and validating process is complete, Stader gets LUNA and gives you LunaX.

Why is Stader doing this? It’s because Stader’s LUNA staking pool will increase in size which helps it land more staking opportunities and earn more rewards and airdrops for the stakeholders.

Stader plans to implement a similar pooled staking system on the Solana and the Ethereum 2.0 chains too.

Stader for you, the stakeholder

Now what can one do with LunaX?

In addition to converting it to LUNA, one can also start using LunaX for DeFi and Gaming (This is within horizon of the Stader Labs vision) and further increase returns. For example, you play a hand of online Blackjack with 1 LunaX and win an additional 0.5 LunaX.

To the stakeholders in general LUNA and LunaX are the same. The stake holders can now do the following:

  1. Convert LunaX to LUNA and hold it in their wallet
  2. Convert LunaX to LUNA and reinvest in the Stader pool (For true believers in the ecosystem)
  3. Swap LunaX to another token on a

To carry out this entire process Stader has 3 types of Smart Contracts:

  1. Delegator Contract: Where users can deposit and withdraw tokens to stake
  2. Pools Contract: This contract pools all the tokens into one wallet address
  3. Validator Contract: This contract stakes the pooled funds and also collects the rewards and airdrops

There is a 4th type of contracts called Strategies Contracts that can be used to engage rewarded tokens in DeFi and gaming.

To sum it all up, here is a diagram that explains the staking process on Stader.

Get Started with Stader

  1. Firstly, you’ll have to get a Terra wallet. Follow the steps in this link to create a Terra wallet. Estimated time: 4 minutes
  2. Purchasing LUNA. You can purchase LUNA from your favorite exchange and load it onto your Terra Wallet
  3. Visit staderlabs.com and click on “Stake now”
  4. Connect your wallet
  5. Start your staking journey!

Once you earn the rewards in LunaX you can swap them for other tokens on TerraSwap!

Looking ahead

Follow Stader: https://twitter.com/staderlabs

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Investing @ IOSG

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