Loom Derivatives with Stake Capital DAO #StakeDAO
Stake Capital is one of the world’s leading blockchain companies in both staking services and the #DeFi (decentralized finance) movement. It has been operating for over a year, capturing millions of dollars in AUM and validating more than 12 PoS chains (disclosure: invest at your own risk).
With ~48M Loom, Stake Capital has been validating on Loom (https://dashboard.dappchains.com/validator/Stake%20Capital) over the past year with the lowest commission fee 10%. On November 25th, 2019, Stake Capital released an exciting Light Whitepaper laying out its new DAO structure and some new exciting features. But how does this matter to Loom Basechain and its stakers? We will try to answer this question here.
More security for Loom Network and Freedom for its stakers
Currently Loom is offering its stakers the opportunity to get rewarded with an annual yield of up to 20% for a locking period of 12 months. While the longer staking period offers more stability for the network, this might not fit well for everyone in a volatile crypto market.
To tackle that, Stake Capital introduces a new product: the LToken. The LToken is effectively a bond-style maturity mechanism of your locked Loom tokens that stakers would be able to trade should they want to adjust the durations of their portfolios. New LToken is issued for resulting yield rewards, thus the pool achieves a 1-to-1 supply peg with the underlying asset.
In effect, if a staker locks 100,000 Loom tokens for 1 year on the 1st of January 2020, he would expect to receive 120,000 Loom tokens on the 1st January 2021. By staking with Stake Capital, our staker would be able to access the LToken pool and receive 100,000 Loom LToken on the 1st January 2020 and receive his pro-rata staking rewards as the year advances. Should for any reason our staker have to exit his position on Loom Basechain after 5 months of locking, he would be able to do so by selling his Loom LToken to another buyer who still wants to enjoy the 20% annualised yield for the remaining 7 months (instead of the initial 12 months).
As you can see, this new solution is a great tool to incentivize the stakers to lock their tokens for the longest period they can by giving them the comfort they need by keeping control of their portfolio while also benefiting Loom Basechain with a more stable amount of staked tokens.
In short, “LLOOM” (Loom’s LToken) aims to maximize staking potential by getting the highest annualized yield percentage while being tradeable at anytime on DeFi platforms.
Giving control to the stakers
While Stake Capital is currently offering the lowest validator fee to secure Loom Basechain, we are considering (based on the feedback of our community once the DAO is launched) to go even further and give the power to the community in setting this important parameter. This is made possible with the introduction of the Stake Capital Token (SCT) and stablecoin cashback.
With this mechanism, Stake Capital is able to actively engage its community by granting them SCT tokens. SCTs represent an incentive for Stake Capital’s users, granted pro-rata of the USD-denominated fees that are generated through Stake Capital’s DeFi services (on Loom Basechain, but also on Cosmos, IDEX, Livepeer and many more).
Holders of the SCT token will then have the option to stake their token into the DAO’s smart contract and thereby receive on-going stablecoin reward payments based on their SCT holdings as a proportion of the current supply of staked SCT. Because these stablecoin rewards will come from DeFi service rewards — and thereby indirectly from commissions collected from investors — investors will have a strong incentive to stake their SCT token long-term upon receipt. The SCT token that service investors lock-up indirectly acts as an economic discount against the commission they are charged by the Stake Capital DeFi services they invest in.
Coming back to our initial point regarding how Loom Basechain stakers will be able to set the validator fee, the ability to make influence the fee rate for each supported protocol will be granted to SCT token holders. A higher fee / commission will concentrate more value in the SCT token, encouraging increased investor engagement in the Stake Capital DAO and token. A lower fee / commission may attract more investors unfamiliar with the Stake Capital DAO (since they will simply see a low fee), which in turn may drive an increased number of delegations (unengaged in the DAO) into the system.
In summary
By creating value for both Loom Basechain and its stakers, Stake Capital is aligning the interests of all its stakeholders and promoting the success of its ecosystems. We are excited by Loom Basechain’s project and are looking forward to seeing them bring their interoperability solution to the crypto sphere!
To learn more about the DAO structure, feel free to read our light paper.
If you’re interested in being an early participant, you can register your interest here.
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