The Recap of Interview with Cryptocito
Yesterday, we were honored to be invited by Cryptocito to share rATOM — the liquidity staking solution for Cosmos. Liam, StaFi CEO, introduced ATOM staking derivative, Polkadot’s Substrate framework, Cosmos ecosystem partnerships and so on to Cryptocito community.
The full video content is organized below:
1.Context on the background of the founders and the team？
Liam: Hi This is Liam, I am the co-founder of StaFi Protocol. StaFi protocol is a DeFi protocol that unlocks the liquidity of staked assets. Most of the team members behind the protocol are devs, we are a heavy-tech team and more focus on the development of staking derivatives. I used to work as a product manager in an internet company, I’ve joined crypto since early 2018. One of my colleagues introduced Bitcoin to me. I am obess with its vision and decided to put all my efforts to fulfill the decentralized goal of Satoshi after diving deeply into the details of Bitcoin, I quit my job and started my career as a staking service provider at the beginning, its name is Wetez, Wetez has provided 30+ kinds of staking services, like ETH2, Cosmos, Tezos, Solana and etc and it still opens to provide node running services for the institution and projects.
During the last 3 years, we all were maximalist on Proof of stake and always insisted on our road to the staking industry. We believe Proof of stake will be a mainstream in Crypto, we grow ourselves from learning it and also we are doing research, hosting meetups, writing papers, educating the community and providing service.
We know validating, and we know staking, rich experiences on staking leads us to the staking derivatives, so we created StaFi, to solve the contradictive relationship between token liquidity and mainnet security.
2.Explain what liquid staking is and what problem it resolves
Liam: Liquid staking, namely staking derivatives, is a new concept, it indicates the derivatives of your staked asset. In the normal staking process of a PoS project, you stake your tokens to prevent your from dilution by earning inflated reward, while staked tokens are locked on the consensus.
Locking period is an important feature that sets PoS apart from PoW consensus. In the Stake model, the system has stability requirements for tokens staked, which is used to prevent long-range attacks: Nothing at stake. There is also a problem of computational fragmentation. The tokens that have been staked are locked by the system for a certain period. Although the token holders can initiate the unlock at any time, but the tokens will still be untradable during the unlocking period. That is to say, holders still can’t hedge the risk of value fluctuations of the token at that phase. This is underlied by the contradiction between mainnet security and token liquidity as I mentioned before.
The paradox, to a large extent, causes problems in both ways. Many people are too afraid to stake, because it is too risky if the market fluctuates, while the PoS system needs stake to provide security for the consensus, without a higher staking rate, the consensus is easy to be attacked.
StaFi provides a secured solution to address the conflict between the mainnet security and the token liquidity in the Staking model. The token holder gets a liquid staking wen they stake Token, equivalent value of rToken will be issued to the staker. For example, if a user stakes 1 ATOM, he will obtain the corresponding amount of rATOM (we call it reward ATOM) in return. rATOM represents regular yields of tokens and the ownership of ATOM staked on the original chain.
At the same time, rATOM can be traded on any secondary market , DEX like Uniswap, Curve, Pancake can list rTokens pairs. Unlike ATOM that is staked and locked on the original chain, tradable rATOM has no lock period, but still keeps generating returns. As a result, holders of rATOM no longer need to bear the risk of volatility and make timely judgments on market conditions. Not only does it include rATOM, StaFi builds staking contracts to connect different PoS chains, currently StaFi launches rETH for ETH2, rDOT for Polkadot, rFIS for StaFi and rKSM for Kusama, more rTokens are coming on the way.
The StaFi protocol gives holders more rights. Due to financial motives, a holder will join the Stake contract for Staking for the risks no longer exist. This will serve as an adrenalin to Stake rate. Theoretically, projects that are decentralized enough will increase the Stake rate to over 90% (missing tokens not considered) while at the same time maintaining the liquidity over 90% with the help of StaFi protocol.
3.StaFi is built on Substrate(Polkadot). Why did you chose that tech-stack and what benefits does it bring?
Liam: Substrate is a great framework that can fulfill the goal of StaFi development. Due to the support from Parity, Substrate is robust and stable, Substrate based projects like Polkadot have steadily runned for years, and many useful features are added gradually. As an application protocol, the StaFi team doesn’t need to focus on the development of consensus, while we only need to develop applications.
Back to 2019, there are many challenges we are facing. Those challenges are about platform, development, risk and government.The first challenge we are facing is choosing a platform, the choice of platform will determine our choice of framework . There are 3 platforms that can be chosen.
So1/ Should all SCs be deployed in a new Chain?
2/Should all SCs be deployed in different original chains?
If we choose the second way, we will have a token standard problem. Platforms have several languages and layers, learning takes time, and also, rToken will be totally different due to different platforms, rToken is hard to devote itself to the existing ecosystem, such as DeFi on Ethereum.
If we choose the first way, the token standard problem will not exist, but the new problem will be diverse as well. The new problem is different depending on the platform, there are limited options we can select, the first one is Ethereum, second one is Substrate, the third one is Cosmos SDK.
Almost all Defi infrastructure are built on Ethereum, and the base assets are ERC20 token, those are ETH, DAI(Stable Coin) and others, if rToken is ERC20, and SC is built on Ethereum, rToken is easy to access to the the existing ecosystem, they can be exchanged, they can be used as collateral or any other cases in Ethereum. But due to the complexity of SC, the management of assets should be executed by validator, while ETH is PoW consensus now, we can’t do a custom request to the miner right now, which means SC can not be built on Ethereum.
While our choice is limited to Substrate and CosmosSDK, they are totally different tools. After we dived into the details, and we realized that substrate is our best option, we are gonna to build an independent but parachain compatible chain to fulfil our target. rToken will be one kind of standard, and we are going to bring a bridge between rToken and ERC20, or use interoperabilitas of polkadot to make a connection.
4.Focus on the Cosmos ecosystem: what partnerships do you have with Cosmos projects？
Liam: 1)Talk about IRISnet/Coinswap, Gravity DEX, Osmosis and other partners
We’ve launched rATOM for Cosmos, ATOM holders can staker ATOM via StaFi and get rATOM in return, earning reward while owning the right of trading. We are building use cases for rATOM, rATOM could be integrated into Cosmos eco, playing a role as an underlying asset, it can be used for leading, being a collateral, minting derivative tokens, etc.
Due to the launch of IBC, cosmos sdk based projects can communicate with each other, esp for the token transfer, IBC directly form some DEXes built upon on different huds, same token standard can be transferred to different hubs, so there are many DEXes have been built, like Coinswap, Osmosis, Gravity.
Providing liquidity for rTokens is one of the important use cases, while integrating rATOM into its eco is a main way to get rATOM adopted. StaFi has teamed up with Coinswap to list rATOM/ATOM pairs in the near future. At the same time, StaFi has many talks to the other DEXes based on Cosmos, like Osmosis and Gravity, listing rATOM and providing a co-incentive program will be possible.
Except for rATOM, StaFi has built a standard staking derivative framework for unlocking the staked asset of the CosmosSDK based projects, projects like Terra, BandProtocol, Akash, Binance Chain , etc are easily integrated into the StaFi solution(We call it rTendenmint Solution). We will soon see the launch of rLuna, rBand, rAKT and others, most of the launch will depend on the eco-development of the project itself.
With more projects built upon CosmosSDK, we will consider offering technical support and grants for the project who wants to adopt a liquid staking solution of StaFi, this solution will be helpful and easy to integrate, projects can be easy to get their rToken via integrating several lines of codes, like web analytics code.
That’s a big program, it will take time and effort, but once it is done, we will see the prosper growth of Cosmos staking derivatives in the coming years..
5.Liquid staking for ATOM？
1)Which rTokens are currently live？
Liam: Currently StaFi launches rETH for ETH2, rDOT for Polkadot, rFIS for StaFi, rKSM for Kusama and rATOM for Cosmos, more rTokens, like rSOL, rBNB and rMATIC are coming on the way. Underlying structure will support our deployment on Substrate based projects and CosmosSDK based projects, projects like Plasm, Bandprotocl, TerraProtocol are on the list. We have a strict standard to deploy liquid staking solutions,including decentralization, community, ecosystem, etc. Anyone who is interested can read our documentation on StaFi website.
2)Which benefits do end users have from rTokens？
The benefit logic is simple. Assume for a PoS chain, inflation incentive is provided to attract stake. If you are a holder, you may not be a staker, if you are a staker you may not be a holder of staking derivatives. Many holders are afraid to be a staker, because of the locking period, holders will hesitate to stake due to the fluctuation during the locking period. Compared to the holder of staked assets and the holder of liquid staking, a reasonable holder will choose to hold staking derivatives if derivatives are secure.
Except for the security, the only problem for the holder of staking derivative will be the liquidity issue, slippage will be shown if the depth of trading is low, or the pool asset is small. StaFi have launched many incentive programs to incentivize the liquidity of rATOM on Uniswap, and corporate with DEXes on Cosmos/Polkadot to provide liquidity, progress like rETH on the beginning, things get better with we have more adoptions, so no need to worry about the liquidity problem.
3)What is the security model？Express the process of how the staked tokens are made liquid.
This answer will be technical, I will take rETH as an example.
StaFi will deploy StakingContracts on the Ethereum 1.0 chain, and interact with the Ethereum 2.0 Staking Deposit Contract. Meanwhile, StaFi will also monitor the staking information of the Ethereum 2.0 Beacon Chain.
The entire back-end architecture of rETH includes 3 layers:
1) The top layer is for user fund management and settlement. Users participate in Staking through the Staking Contract deployed on Ethereum 1.0. The system will mint and send back rETH based on the amount of ETH Staked and the current exchange rate. The system will also be responsible for the clearance and settlement of funds deposited and redeemed by users.
2) The middle layer is for distribution and settlement of staking funds. StaFi will deploy Staking Pools based on the amount of funds locked in SC. StaFi will deposit 32 ETH in each Staking Pool, and stake to the Ethereum 2.0 Deposit Contract after matching validators.
3) The bottom layer is for management and monitoring of Ethereum 2.0 nodes (Original Validators). StaFi will provide Original Validators with a set of standardized onboarding tools. Validators can use this tool to operate the Ethereum 2.0 node client. At the same time, this tool will also monitor the events of the Ethereum 2.0 beacon chain on a live basis, including but not limited to, node operation status, the issuance of staking proceeds, the time and number of disconnections, the occurrence of Slash, and the validator drop-offs.
4)Which “risk”should users be aware of?Who holds custody?Is there a multi-sig wallet?Who validates the liquid rTokens？
Before you start to use rETH App to stake ETH, please be aware of the following potential risks:
1) Smart contract security There is an inherent risk that rETH App could contain a smart contract vulnerability or bug. The rETH App is open-sourced, audited and covered by an extensive bug bounty program to minimize this risk.
2)Redemption Risk Since ETH2.0 will not support transfer and redemption until Phase 2 goes live, the redemption of rTokens will follow that timeline. We will tag along with ETH 2.0 and support the function in time.
3)ETH 2.0 — Adoption risk StaFi rETH App is aimed to provide the liquid staking services of ETH2.0, which still has the chance to fail to reach required levels of adoption. So there exists a significant fluctuations in the value of rETH tokens when the beacon chain development could not match the community’s expectations.
4)Slashing risk ETH 2.0 validators risk staking penalties, with up to 100% of staked funds at risk if validators fail to validate transactions or double signing. we require any validator to pay 4ETH as a deposit. When Slash occurs, the deduction will be made from the deposit pool to protect users’ assets.For details please read:https://medium.com/stafi/stafi-reths-solution-to-the-slash-of-eth-ae44e3767fb0
5) rETH price risk Now rETH tokens could be traded against with ETH on Uniswap, but the rETH/ETH price on Uniswap would be lower than the real exchange rate in rETH App because of the inefficient liquidity and AMM algorithm.
StaFi is driven to mitigate the above risks and eliminate them entirely to the extent possible. Despite this, they may still exist.
6.The FIS token utility and accessibility: how did you get list on Binance？Do you have a partnership with them？
Liam: Staking derivatives is a trend, we believe in it, I think Binance listing team know it as well, there are not so many projects focus on this space, StaFi is the first one and is leading the way. Latter comers are following StaFi, some even make a copy, but we do know ideas worth nothing, we keep building the protocol and make it open to the public.
We did not have a partnership with Binance ,we got noticed by their team and one day FIS was listed, they will never tell the project when they will list the token. So all the effort we made has been seen, so I think that’s the reason FIS got listed.
FIS is the native token for StaFi Protocol. FIS to StaFi is similar to Dot to Polkadot, preventing system abuse and value capture. In StaFi, the specific functions that FIS acts as are as follows:
Validators in StaFi consensus need staking FIS to join the consensus network, and the nominator who wants to obtain motivation also needs Staking FIS to nominate.
2. Tx Fee
In order to avoid system abuse, the initiator of a transaction has to pay FIS to get computing resources. In this way, invalid transactions will be eradicated.
3. On-chain governance
FIS holders can participate in the tinkering of StaFi Protocol parameters, vote for Protocol upgrade and determine development courses. Anyone can hand in proposals to the Protocol, but only holders of FIS can vote for or against a proposal, 1 FIS accounts for 1 ballot.
4. Capture the value
Fees collected by rToken will be buyback and burn FIS, which will return the value to the FIS holder.
7.Final words: how can we find your and get in touch？
Liam: I would like to recommend using the rToken product directly , it’s easy to use and you will know how great the product is. Here is the rToken portal: https://app.stafi.io/
The other info is：
Telegram Chat: https://t.me/stafi_protocol
About StaFi Protocol
StaFi is the first DeFi protocol unlocking liquidity of staked assets. Users can stake PoS tokens through StaFi and receive rTokens in return, which are available for trading, while still earning staking rewards. rToken is a synthetic staking derivative issued by StaFi to users when user stake PoS tokens through StaFi rToken App (https://app.stafi.io). rTokens are anchored to the PoS tokens staked by users and the corresponding staking rewards. rTokens can be transferred and traded at any time.
rToken App: https://app.stafi.io
Telegram Chat: https://t.me/stafi_protocol
Telegram Announcements: https://t.me/stafi_ann