StaFi: Staked Finance Solution that Tops Others
Getting access to liquidity of staked assets was almost impossible, until StaFi came into the scene with its protocol that allowed users to stake the protocol’s tokens via StaFi-implemented smart contracts, and get tradable rTokens. The StaFi protocol was the bridge between liquidity and staked assets.
In a recent development, the crypto community saw the earliest phases of the implementation of Ethereum 2.0, with its deposit contract going live. This is an indicator that at some point ETH staking will come to the crypto community, and it is something to look forward to. Interestingly, based on some reports from the Ethereum Foundation, there will be a fixed staking amount of 32 ETH, and annual returns of from between 5% to 20%. However, there are some factors that can hamper the seamlessness of ETH staking, and they include:
Stakers need to deal with the problem of high entry barriers, because stakers need to understand the intricacies of nodes and the operations involved in validator nodes. It is also important to take cognizance of the fact that there is no delegation with Ethererum 2.0. There is the possibility of not getting rewards after staking, if there is no proper management of the stakes.
Another issue that stakers have to deal with is the capital intensive nature of ETH staking. It is imperative to note that stakers need to stake a minimum of 32 ETH, which is a lot for many people who may be interested in staking ETH 2.0, but do not have that amount.
Scalability is another problem that validators may need to deal with. There is the likelihood that having insufficient capital may make it difficult for the system to scale, as the high entry barrier may limit the number of nodes that can get created and maintained.
There is an uncertainty clause to be bothered about, and that stems from the liquidity risk when ETH is staked. At the moment, ETH 2.0 is just beginning phase 0, and it needs to get to phase 2 before stakers can redeem or unstake their investments. Interestingly, getting to phase 2 could take a long while, even as much as years before actualization.
The aforementioned factors can make it really difficult to stake ETH, and by default, a lot of investors may begin to consider alternatives that are more accommodating to a majority of the crypto community.
Rocket Pool and Stkr
Rocket Pool and Stkr are two different protocols that may have some solutions to the problems mentioned above. However, for Rocket Pool, they are not quite certain about their approach to ETH staking and liquidity, as the protocol has some uncertainty concerns about the phase 2 part of Ethereum 2.0. One of their concerns takes into cognizance the transfer of rETH balances and transactions to the ETH 2.0 blockchain when the process gets to phase 2. It may also interest you to know that when ETH is staked, it will get locked till ETH 2.0 gets to the second phase, which may take some time to achieve.
Stkr is a similar platform that seeks to bridge liquidity and ETH staking. Its asset is the aETH that can function as a smart contract for decentralized finance, and it takes staking ETH a notch higher than Rocket Pool by allowing investors to either spend or sell the assets that they stake. That means, they do not have to wait for phase 2 of ETH 2.0 before they can perform the spend or sell operations with their stakes. However, stakers cannot transfer their rewards until ETH 2.0 gets to phase 2, and they also have slashing risks to consider when processing their rewards for staking.
In both protocols mentioned above, the minimum staking amount still remains 32 ETH, which is one of the major discouraging factors for so many potential investors who may not have all that to invest in a system that is designed to be illiquid for a long while.
The Perfect Solutions from StaFi’s rETH
A lot of potential stakers may get discouraged in staking ETH as a result of the illiquidity involved until ETH 2.0 gets to phase 2. Illiquidity and other factors mentioned above are challenges that should be and can be surmounted. The StaFi team went to the drawing board and came out with workable solutions that make it easy to achieve liquidity in ETH 2.0 staking. Here are some major solutions:
Stakers are at liberty to use the staking contract that StaFi made available in Ethereum 1.0 to perform ETH staking at the minimum cost of 0.01 ETH, as opposed to the minimum of 32 ETH required by Ethereum 2.0. This makes it possible for a lot of stakers to get involved, and thus enhance the scalability of the protocol.
Running validator nodes require knowledge about nodes and validators, as well as time and funds to maintain the nodes. However, that issue is solved with the staking contract that has been implemented by StaFi. The protocol is designed to match available validators that are performing well, with staked ETH. Basically, stakers are saved the stress of spending time, maintenance fees, and running validator nodes.
Genuine validators will get some allocated and staked ETH in the staking contract that’s powered by StaFi. These validators would oversee the establishment and maintenance of the right numbers of validator nodes.
Illiquidity is one of the limiting factors of Ethereum 2.0, but StaFi is correcting that with the use of rETH tokens which can be utilized in different DeFi applications, and can also be traded. Furthermore, there will also be a liquidity program that will facilitate the sale of some parts of their staked ETH.
StaFi’s technological framework for this bridge involves the deployment of its staking contract on the Ethereum 1.0 framework, and then communicating with the staking deposit contract of the Ethereum 2.0 framework. Furthermore, StaFi has its protocol ready to effectively monitor the activities of staking information that may be contained within the beacon chain of the Ethereum 2.0 framework.
It is clear to see that StaFi has more to offer than Rocket Pool and Stkr, who may be seen as competitors, as they offer similar services.
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