INTRODUCING STAKING: THE EVOLUTION OF SAVINGS ACCOUNT WITH DECENTRALIZED FINANCE “DeFi”

HOW STAKING WORKS

  1. Staking period, which is the minimum duration your staked coins can be in the pool before you can withdraw them. This is usually in days, and is put in place to protect the pool from malicious actors.
  2. Withdrawal fee, which is a little percentage of your interest paid to the staking pool. This is for maintenance and development of the pool’s infrastructure.
  3. Deposit limits, which are the minimum and maximum amount of coins a single user can stake. This is to protect the pool from “monopoly of operation”. Most staking pools run their operations based on Decentralized Autonomous Organization, DAO, also known as Decentralized Governance, where the users (stakers) vote to choose the kind of operations and rules they want for the pool. Here, the voting power of an individual is dependent on the amount of coins he/she has in the pool. These deposit limits are in place to ensure that a single person or few people doesn’t have all the power to the operations of the pool.
  4. End-Of-Stake penalty, is the fee paid to the pool if you want to terminate your staking contract before the end of the staking period. This applies to some pools, while it doesn’t to others.

HOW INTERESTS ARE PAID

HOW INTERESTS ARE GENERATED

  1. Using the coins in the pool to run nodes. Blockchain protocols using Proof-Of-Stake consensus rely on the staked coins to secure their blockchain. These staked coins are used to verify and confirm transactions on their blockchain. In so doing, fees are generated and paid to the nodes in form of miners’ fee, for securing the blockchain. Staking pools use the staked coins to run nodes, or contribute to larger nodes, thereby generating profits for the pools, and consequently for you, the staker.
  2. Staking pools also lend out the staked coins to borrowers, and the borrowers repay the loan with interests. These interests are paid out to the stakers with respect to the predefined rule of operation of the staking pool. The loans are secured by collaterals that the borrowers deposit on the staking platform. Most times, the collaterals are usually higher in fiat value than the borrowed funds.
  3. Liquidity Pool is another way for the staking pools to generate interests. With the ever-growing interest in DeFi, Decentralized Exchanges’ transaction volume keep soaring, due to the transparency, security and integrity of DEX(s). The operations of decentralized exchanges heavily rely on liquidity provided by the liquidity providers (LP).
    Liquidity providers deposit coins to the DEX smart contracts. And every transaction done on the pair deposited attract certain percentage of profit to the LP. Staking pools provide liquidity in DEX, to get profits, which are shared to the stakers as interests.
  4. Different staking platforms with their native coins devise other ways to generate interest for the stakers. An example is deducting a minimal percentage of coins from every transaction carried out with their native coins. This is returned back to the pool to serve as interest for the stakers.
    This means, most staking platforms have their coin-flow mechanism to keep their pools active.
  • Delfy Farming and Staking, where you can stake tokens and LP tokens to generate income with the best APY.
  • Delfy Swap, a decentralized exchange where you can swap your tokens easily, even without being a tech or blockchain savvy.
  • Delfy Lending and Borrowing, giving you a platform where you can borrow and/or lend your tokens, while generating income. Whether you’re borrowing or lending, you generate interest.

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