Introducing Liquidity Staking: Flexible Multi-Token Staking Technology

Published in

FerrumNetwork

6 min readOct 5, 2020

Dear Ferrum Community,

If we have learned anything in the 2.5 years since we founded Ferrum, it is that the key long term success is the ability to quickly identify opportunities and capitalize on them.

When we launched Staking 1.0 in November 2019, no one knew that decentralized exchanges like Uniswap and passive-income technology like staking would explode in popularity. We also did not know that our own staking technology would become so popular and useful to many different projects. Nearly one year later, our Staking-as-a-Service business has over 20 projects, with millions of dollars worth of cryptocurrency being staked.

We believe that the popularity of staking and farming will only grow, especially during times of market uncertainty when passive income can be more rewarding than active trading. In light of these trends, we have “doubled down” on our staking technology and built a more advanced and valuable version. We are proud to announce Liquidity Staking — Flexible Multi-Token Staking.

In this article, we describe the core concepts behind Liquidity Staking and lay out some of the amazing possibilities presented by this new technology.

But first, what is Liquidity Staking and how does it differ from our traditional staking?

Staking Basics — Traditional vs. Liquidity

Liquidity Staking is essentially advanced version of our traditional staking technology with one critical difference.

Our traditional staking mechanism allows stakers to lock their tokens and earn rewards in that same token based on the length of time staked. It’s like a high-yield decentralized savings account. For instance, with traditional staking, one can stake FRM for 6 months, and earn 30% rewards in FRM at the full maturity date.

Liquidity Staking takes the our time-based locking mechanism to the next level by allowing participants to stake one token, while earning rewards in a different token. This distinction may seem simple, but the implications are massive.

A New World of Staking Possibilities

Although we have just begun to scratch the surface in terms of what can be done with this technology, let’s look at three exciting staking options that have been made possible by our Liquidity Staking technology:

(1) Staking Uniswap Liquidity Pool Tokens and earning native tokens;

(2) Staking FRM and earning tokens from different projects; and

3) Staking FRM and earning FRMx — our forthcoming derivative governance/utility token.

Stake Uniswap Liquidity Pool Tokens to Earn Native Tokens

As many know, when Uniswap liquidity providers deposit liquidity (ETH + native tokens) into a a Uniswap pool, special tokens known as liquidity tokens are minted to the provider’s address. Whenever a trade occurs, a 0.3% fee is distributed pro-rata to all LPs in the pool at the moment of the trade. However, to receive the underlying liquidity back, plus any fees that were accrued while their liquidity was locked, LPs must burn their liquidity tokens (for a full recitation on Uniswap LP tokens, please see this article).

But here is where it gets interesting. “Liquidity providers can also choose to sell, transfer, or otherwise use (e.g. stake) their liquidity tokens in any way they see fit.” Therefore, using Ferrum Network’s Liquidity Staking technology, liquidity providers can actually stake the LP tokens and earn rewards for doing so.

But why is staking an LP token valuable from the standpoint of an LP provider and the standpoint of a project?

For an LP provider, you are now doubly incentivized to maintain your LP token, because not only are you earning the trading fees, you are also earning interest on top of that in the project’s native tokens.

For a project, your LP providers are locked up in a staking smart contract. Meaning LPs cannot remove their liquidity during the staking period. This helps maintain liquidity and reduce slippage, which can in turn increase trading activity.

And if a project decide to offer generous rewards for liquidity token staking, this will incentivize more users to add liquidity to the pool, which in turn incentivizes people to buy more tokens.

Stake the FRM LP tokens and earn FRM

Of course all of the above concepts apply to FRM. In fact, we are looking forward to offering a LP staking round for FRM, where users will stake their FRM LP token and earn FRM as rewards. More news on the timing, structure and other details to follow, but it’s definitely not too early to add liquidity to the FRM Uniswap pool to start accumulating those LP tokens!

We are also pleased to report that many projects see the value in offering this to their LP providers. The first project that will use our Liquidity Staking technology will be announced soon!

Multi-Token Staking

Because our Liquidity Staking allows you to stake one token but earn rewards in a different token, we can now offer staking rounds where participants stake FRM but earn rewards in a different project’s tokens.

The question then becomes, where do the rewards tokens come from? Unlike most farming regimes where the farmed token has no meaningful utility, in our case, the multi-token staking rewards come from the listing fees paid by projects that list on our UniFyre Wallet.

Therefore, instead of earning a useless farming token named after a vegetable, multi-token stakers will earn the utility tokens from solid projects with solid long-term prospects. For instance, you will be able to stake FRM and earn rewards in some of our partner project’s tokens. This is not only an excellent source of passive income, but it’s a wonderful cross-marketing opportunity to expose the Ferrum community to notable new projects and vice-versa.

We are excited to announce the first multi-token staking partners, so you will be able to stake FRM and earn rewards in tokens from other great projects!

FRMx Staking

Lastly, without revealing too much, stakers will be able to stake FRM and earn FRMx, our forthcoming governance/utility token. But why is this beneficial to our ecosystem?

For one, if you stake FRM but earn rewards in a different token, there is no inflation on the FRM token itself. Meaning our stake holders will no longer have to worry about large staking pools being unlocked where extra FRM is suddenly available in the market.

Secondly, the staking rewards can be far higher a FRM/FRMx staking regime, assuming the value of the derivative token greatly exceeds the value of the primary token. This is where the FRMx low supply and fair launch comes into play (more details on the launch are coming soon).

Third, as long as the derivative token has actual utility and is designed in a sustainable manner, then the system itself can generate incredible positive feedback loops, with benefits accruing to the entire Ferrum Network ecosystem.

We look forward to revealing more details regarding the FRMx token later this week!

What’s Next

We are now putting the finishing touches on the Liquidity Staking technology, including an updated UX/UI that we think everyone will really love.

We also continue to prepare for the launch of FRMx, which is an incredible way to showcase the true power of our Liquidity Staking technology. We could not be more excited about it!

Thank You

We want to thank our entire community, and certain individuals in particular (you know who you are), for helping us design Liquidity Staking and the FRMx token. We could not do this without your support!

Very truly yours,

-The Ferrum Network Team

About Ferrum Network

Ferrum Network is building a DeFi ecosystem that interoperates across chains and removes barriers to mass adoption with user-friendly products for swapping, staking, and transferring cryptocurrencies. Ferrum’s non-custodial UniFyre Wallet has already revolutionized the way people send crypto with its “Link Drop” technology, and is transforming the OTC market with risk-free OTC swaps embedded in a shareable link. Ferrum’s Staking-as-a-Service is now used by dozens of projects, and our multi-token Liquidity Staking will revolutionize the staking industry. Look for Ferrum to launch more transformative DeFi technology throughout 2020 and beyond.