Community Interview with Blank Lee of StaFi, May 30th
We had the opportunity to talk directly with Blank Lee the Chief of Research for StaFi about their Liquid Staking solution for ATOM. He had some really engaging questions asked to him, and the responses went on into the night, so I wanted to transcribe this up for those of you that may have missed it!
Stafi is the first DeFi protocol that enriches staking assets with liquidity. The Protocol was initiated in Feb 2019, with a mission of improving the relations between DeFi and Staking, creating a safer PoS public chain and a better underlying asset for DeFi, namely rToken (e.g. rAtom, rXTZ). With rToken in place, the development of DeFi does not actually compromise the security of the original chain. Meanwhile, rToken holders will earn interest without losing liquidity of their staked tokens.
rToken is a derivative token pegged to the staking asset with a 1:1 ratio. On the basis of it, a myriad of applications can be developed. At the same time, token holders do not have to choose between staking and DeFi-they can do both!. When it is widely applied, Stafi Protocol will be an indispensable infrastructure in the DeFi world.
Blank Lee is the chief researcher of StaFi. He was a former senior rating analyst in crypto since 2017. Now he is in charge of product design, operations and marketing in StaFi.
StaFi Protocol
💌 Contacts
Q: ELI5? (“Explain it like I’m 5”)
A: 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.
StaFi rATOM App is a decentralized DeFi product that unclocks the liquidity of the Cosmos token ATOM staking. rATOM token is a staking derivative of ATOM issued by StaFi when users stake ATOM through StaFi rATOM App. rATOM tokens are anchored to the staked ATOM and the corresponding staking reward. rATOM will bring the flexibility to trade at any time while still receiving staking rewards. With rATOM App, ATOM stakers could enjoy efficient liquidity and maximized staking rewards at the same time.
Q: You reference Keplr in your documentation but are there any plans to support mobile platforms such as cosmostation?
A: Yes, now we are developing the mobile version for all rToken App including rATOM.
Q:At the end of your white paper you say “What if the underlying assets can be expanded to more forms of encrypted assets, or even derived from non-encrypted assets?” Which I understood to mean staking IRL fiat assets against rToken. If this was the meaning would there ever be any consideration given to issuing rToken against physical assets such as, at the extreme, a house?
A: Yes, that is StaFi’s final vision, we want to boost the liquidity for all the assets with limited liquidity, like staked PoS tokens and other assets like you mentioned. But for now, we are focusing on the staked PoS tokens.
Q:If I stake my atom with StaFi, will I still receive my apy rewards as if I had delegated it myself?
A: Yes, you will still get the staking rewards, and the APY will be higher than most self-delegators because of the Maximized Staking Strategy built in rATOM App.
rATOM token is a staking derivative of ATOM issued by StaFi when users stake ATOM through StaFi rATOM App.
rATOM tokens are anchored to the staked ATOM and the corresponding staking reward. rATOM will bring the flexibility to trade at any time while still receiving staking rewards. With rATOM App, ATOM stakers could enjoy efficient liquidity and maximized staking rewards at the same time.
Q: Will I still be able to vote on governance proposals?
A: No, rATOM for now will not support direct onchain goverance on Cosmos, but we want to work with Cosmos Foundation to solve that.
Q: If I transfer rAtom to someone else, would I be transfering my apy rewards as well as power to vote?
A: Yes, Only The ones who have the rATOM token, will have the right to redeem ATOM tokens from the contract.
Q:What if my atom is still bounded, how will the other person redeem rAtom and get my atom if it is still bounded with me?
A: Everyone’s staked ATOM will be delegated into Cosmos’s validators by the rATOM contract, so everyone’s stake is well preserved in the contract.
Q: Are the $ATOM that I use to receive rATOM no longer secured by my cold wallet and are now held in custody by StaFi?
A: Yes, you are right. In this way, your ATOM could no longer just stayed in your wallet. It could be circulated in Ethereum’s DeFi protocols now, like participating in Yield Farming programs in our strategic partner WrapFi, transferring in Metamask, lending USDT with your rATOM voucher tokens.
And your ATOM will be safely preserved in StaFi’s contract, and related smart contracts are strictly audited by third-party security agency and experts.
Q: Is there a scenario, such as a slashing event, where the number of rTokens (reward tokens) does not equal the number of “sTokens” (staked tokens) even though they’re created with a 1:1 ratio? And if so how does this get addressed and in what type of timeframe?
A: First, the slashing risk is existed because of the PoS projects’ rules. We have proposed different strategies to prevent slashing happening.
In all kinds of rTokens, the ETH2.0 slashing risks is the biggest because of the no-delegation mechanism and considerable punishment, and we proposal a 8-eth deposit requirement for validators and other tools to help validators, so that our validators for ETH2.0 have not been slashed for now.
As for rATOM Solution, the slashing happening odds and losses is greatly limited because of our Staking Reward Maximization Strategy(SRMS Algorithm):
The SRMS includes the following 4 parts:
Diversified delegation.
Strictly select original validators candidates.
Automatically delegate to the OVs with highest staking APY.
Minimizes the potential loss when the OVs get slashed.
Check it in:https://medium.com/stafi/the-first-atom-liquid-staking-app-ratom-is-live-on-mainnet-now-8af3a335b4ea
Q: For instance, what are the metrics that are considered for your Staking Reward Maximization algorithm and how do you resolve when multiple/many validators have identical metrics? Also how does StaFi’s algorithm protect against allocating to a single validator which in theory could weaken network security?
A: Strictly select Original Validators candidates. The rATOM product will evaluate the performance data of original validator candidates from the metrics including online duration, slashing record, self-bond ratio, node identity, commission ratio, etc., to ensure that excellent validators with relatively low commission are selected.
Q: Why would I want to use my bonded ATOM on Ethereum where I end up dealing with high fees, slow speeds? It also brings the value which is locked in one network and brings it to another, why would I want to take my value out of Cosmos when the fees and congestion of Ethereum are exactly what i am trying to avoid?
A: First, the base cost of staking your ATOMs through StaFi is very similar to that of delegating ATOMs on Cosmos. Only when you want to join in Ethereum’s DeFi to earn more yields, you could swap your rATOM into ERC-20 to participate in the yield farming programs for rATOM holders.
It is very simple for you, if you find you could earn more than the costs, you will pay for the costs.
Q: What is the trust model? Why should ATOM delegators trust Stafi in what is otherwise an entirely trustless network?
A: I dont think StaFi is a trustless network, now nearly 20 million USDT assets including ETH, FIS, DOT, KSM, ATOM are staking in StaFi, also the top DEX Curve has listed StaFi’s rETH/ETH Pool, Yearn Finance has integrate StaFi into its Valuts.
At the same time, all smart contracts are fully audited by third-party security agencies and experts to make them safe.
Q: Do you plan to move your service to the Cosmos ecosystem and off of Ethereum in the future? If not, why? And further expanding why then would I want to use my ATOM on Ethereum?
A: StaFi is developed on Substrate, and now we are multi-chain developed, so we will consider to join in Cosmos network in the near future. We do think Cosmos network is very wonderful and great.
Q: Why not focus on the GravityDEX and Osmosis as options?
A: We are keeping an eye on the recent the development of GravityDEX, and think it is a big thing in Cosmos network. And we will consider to work with GravityDEX to list rToken trading pairs on GravityDEX.
Q: What happens in the event that Stafi disappears? Worst case scenario but it’s good to know that these risks have been covered. Trust and all.
A: You dont need to trust a team, you could trust the code, and this is all DeFi meaning about.
All contract for StaFi App is open-sourced, so you could go through and check the codes :https://github.com/stafiprotocol/stafi-node
Q: How does ATOM earn rATOM?
A: rATOM token is a staking derivative of ATOM issued by StaFi when users stake ATOM through StaFi rATOM App.
rATOM tokens are anchored to the staked ATOM and the corresponding staking reward. rATOM will bring the flexibility to trade at any time while still receiving staking rewards. With rATOM App, ATOM stakers could enjoy efficient liquidity and maximized staking rewards at the same time.
Q: Do we need to unstake our ATOMs on chain and move it to StaFi Protocol?
A: Yes, you have to unstake your ATOMs on chain and stake it through StaFi’s rATOM App.
And now we working with WrapFi to launch a Yield farming programs for rATOM holders.
Q: How does the protocol determine the optimal number of validators as the network expands?
A: The rATOM will decide the total number of validators based on the mechanism of different PoS Chains. In ETH2.0 liquid staking solution rETH App, there is no amount require for validators, because ETH2.0’s unique staking design, anyone with 32 ETH could join in as a validator. In cosmos, we will choose the best top 5 to 10 performance elected validators to generate the best APY for rATOM holders.
Q: Regarding SSVs, if the criteria used to select NEW SSVs still determine that a validator in the current group has the best block producing rate, staking ratio, etc do they stay on as SSVs or does the system automatically select the next best validator with lessor attributes? Or does their existence in the current SSV group preclude them from being considered in the next group? And, Are there any differences financial incentives/rewards when performing SSV tasks vs SV tasks?
A: The private keys of the Staking Contract will be comprehensively managed by the StaFi Special Validators (SSV) on the StaFi chain using multi-party secure computing (MPC) and multi-signature. StaFi will adopt the MPC scheme to form 21 fragments of the private key to the Staking Contract Pool, which will be distributed to 21 validators in the SSV Group on the StaFi chain. 16 of the 21 SSVs are needed to fully recover the private key, and then control the operational authority of the Staking Contract deployed on ETH. Regarding how the SSV on the Stafi Chain will be chosen and rotated, please kindly refer to the Stafi official website:https://docs.stafi.io/stafi-whitepaper/stafi-whitepaper
Q: Many people promote all the benefits of their product but don’t educate anybody about the risks or concerns.
I believe you have a really good idea but what flaws do you forsee and how do you plan on solving them?
A: Really good one.
We always will disclose the potential risks on our App. Now you could go through the potential risks on our website:https://docs.stafi.io/rproduct/reth-solution/reth-risks-disclosure
Q: What led to the decision to build StaFi on Polkadot over Cosmos? A project of this scale seems a better fit in the Cosmos ecosystem…thinking specifically in regards to sovereignty and the impact of the pseudo-centralized Relay Chain.
A: Because StaFi are interacting with multi-chains, and we need leverage Polkadot’s XCMP to communicate with different chains, and Webs foundations gives us a generous grant. So we are initiating on Polkadot and develop StaFi chain based on Substrate.
Q: I don’t know if this question comes from a lack of understanding. But it requires some preamble to understand where I am coming from.
So if you don’t already know stafi supports liquid staking for multiple chains including the eth 2.0 beacon chain which is currently live.
As I understand it you deposit eth into the contract then you receive a rETH. At the time of writing 1 eth for 0.9947 rETH ( https://rtoken.stafi.io/reth ) basically a one for one ratio which is the same price as when rETH first launched, meaning that people who have held there rETH for this time have not be rewarded for it. There is no mechanism to increase the amount of rETH you hold so your rETH just stays in your wallet and stays the same. When the docking happens (your rETH / (total supply of rETH)) * (total eth staked plus staking rewards and minus slashing) = how much eth you receive on the PoS chain.
Doesn’t this incentives people to convert a load of ETH to rETH just before the docking making them a quick buck which would increase the supply of rRTH and steal the returns of people who have been staking since the start?
If this is the case the value of rETH should approach that of ETH as people take advantage of this arbitrage. This would mean that people who hold rETH are not rewarded for doing so defeating the whole purpose of minting rETH in the first place. Is this a problem that exist with rETH and if so how will this be rectified for your implementation of rATOM?
Is an oracle needed to price the value of the rTOKEN against the underlying supply of the token in the stafi protocol?
What integrations will you try to prioritize for rATOM?
A: 1.There is no mechanism to increase the amount of rETH you hold so your rETH just stays in your wallet and stays the same.
No, you are wrong, you will get more ETH by keeping the same amount of rETH tokens because of the staking rewards generated.
The exchange rate 1 eth for 0.9947 rETH is starting from 1:1 at the very beginning. And you see now 1 ETH only could redeem for 0.9997 rETH, because of the staking rewards in ETH2.0 generated.
2. The mechanism is the same for rATOM, say if you stake 5 ATOM tokens now, and the rATOM/ATOM ratio is 1:1. After one week, the rATOM/ATOM ratio will go up, let us say 1.05, because of the ATOM staking rewards generated by delegating them to cosmos validators. So after 1 week, you could redeem 5*1.05=5.25 ATOMs with your 5 rATOM held.
3. Now we are working with WrapFi to launch a liquidity farming programs for rATOM holders. They will reward 167K WRA tokens for rATOM stakers, and 1,000,000 WRA tokens for rATOM/ETH trading pair liquidity providers on Uniswap.
So which means, not only you could strade ATOM on uniswap by staking them to mint rATOM, but also could join in the first liquidity farming programs designed for Cosmos.
A message from StaFi:
The First $ATOM Liquid Staking App rATOM is Live on Mainnet Now
Hi community, we have deployed rATOM contracts on mainnet now. Welcome to experience the first liquid staking of $ATOM.
rATOM App will help you enjoy the maximized staking reward and friendly liquidity of staking ATOM at the same time. Now the estimated $ATOM staking APY through rATOM is around 9.8% .
The rAsset Swap Function has supported $rATOM, so you could mint ERC-20 rATOM tokens, and trade it on Uniswap. Stay tuned for the liquidity farming programs of rATOM/ETH on Uniswap which will come very soon.
More Details:
rATOM App: https://app.stafi.io/rATOM/
rATOM related docs: https://docs.stafi.io/rproduct/ratom-solution
https://twitter.com/StaFi_Protocol/status/1391707240566968322?s=20
