TOSv2 phase 1 parameters: Staking & Locking
How parameters work for staking and locking in phase 1 of TOSv2
Special thanks to Keven.J, Suah.K, Praveen.S, Zena.P, Ale.S, and Darren.K for productive feedback on the posting
You can check the Korean version of the article here.
The long-awaited TOSv2 is finally here. In phase 1 of TOSv2, core functionalities, including ETH bonding, are available. Of course, it would be extremely cumbersome to properly use such functionalities unless you fully understand the parameters constituting the working mechanism.
Unfortunately, we have too many parameters to cover in an article. Therefore, two writings will split the burden. In this posting, I will explain parameters related to staking and locking.
Note: You can check the article on parameters related to ETH bonding here.
Staking
Staking is similar to bank deposits. You stake TOS and get LTOS. LTOS is to calculate staking rewards(interest) in TOS.
Minimum staking period
How long do you have to stake TOS for staking rewards? Well, there is no minimum staking period in TOSv2. Additionally, you can unstake TOS whenever you want.
Of course, staking rewards are proportional to the staking period.
What is LTOS?
We introduce LTOS to calculate staking rewards in a gas-efficient way. If users stake TOS, they get the equivalent amount of LTOS. The LTOS index gets updated and thus reflects staking rewards as the staking period increases.
In the figure above, right after staking, the LTOS index is 1, which means 1 LTOS equals 1 TOS. As time passes, staking rewards accrue to stakers by increasing the LTOS index. For example, if the LTOS index is 3, stakers can redeem 1 LTOS for 3 TOS.
Note: The LTOS index is updated only if Treasury has sufficient TOS for staking rewards. Plus, LTOS is non-transferable.
LTOS index update interval
The LTOS index update interval in TOSv2 is 8 hours. The LTOS index gets updated at 04:00, 12:00, and 20:00 KST.
Reward rate
The reward rate shows the amount of TOS that stakers obtain as staking rewards per LTOS index update interval compared to the amount of TOS staked. It determines how much the LTOS index increases every 8 hours.
Since the staking APY is 10%, we can calculate the reward rate as follows:
reward rate = (1+10%)^(1/1,095)-1 = 0.0087045%
The following relationship would be useful to understand the calculation above:
1 year = 365 days = 3 LTOS index update intervals per day * 365 =
1,095 LTOS index update intervals
Locking: staking with lock-up period
Locking is staking with a lock-up period. Locking TOS has two benefits: staking rewards (LTOS) and governance token of TONStarter (sTOS).
Weekly lock-up
Users must lock TOS to get LTOS and sTOS. They can set the weekly lock-up, whose maximum is 156 weeks.
Notably, the lock-up period always ends on Thursday (00:00 UTC+0) due to the original design of sTOS.
What is sTOS?
As for locking, LTOS is not all the rewards you can expect. sTOS is also crucial. sTOS holders can participate in IDOs of promising projects on TONStarter. Sharing a part of profits generated by projects on the platform in the form of airdrops is possible, too.
The number of sTOS for users is proportional to the lock-up period and the amount of TOS locked:
# of sTOS
= (# of TOS locked*(1+staking APY)^(lock-up period/52)) * (lock-up period) / 156
The number of sTOS left after x weeks since locking is as follows:
# of sTOS left after x weeks since locking
= (# of sTOS users get) * (lock-up period-x) / lock-up period
You can get more detailed information about the sTOS mechanism in sTOS upgrade in TOSv2.
Implications
- Attract relatively risk-averse users
Before TOSv2, without projects on TONStarter, the only utility of TOS was to lock TOS in TOS DAO to get sTOS. However, it was too risky, as users could not do anything with volatility during the lock-up period. The absence of staking APY only exacerbated the issue.
After TOSv2, it changes. If you are afraid of sudden market shocks while waiting for promising IDOs, staking TOS is possible with 10% interest in annual terms. You can unstake TOS whenever things go wrong. Of course, you can still lock TOS to obtain both LTOS and sTOS if you are confident in the fundamentals of the TOS ecosystem.
- Foster stable ecosystem by favoring long-term TOS holders
The fruits of augmented LTOS and sTOS rewards in TOSv2 go mostly to long-term TOS holders. It is because such rewards are geometrically proportional to the lock-up period. For this reason, users have more incentives to stake or lock TOS for longer. It can contribute to TONStarter not swayed by myopic activities.
