FIS (StaFi) is a decentralized protocol that enables staking rewards for liquid POS cryptocurrencies. It aims to solve the problem of illiquidity associated with staked tokens in proof-of-stake (POS) networks like Polkadot, Cosmos, Ethereum 2.0 etc. In this article, we will explore the core technologies powering the FIS protocol.
The key innovation in StaFi is ‘rTokens’ — tokenized rewards that represent derivative claims on the staking rewards. rTokens are minted when users lock their original tokens in the StaFi protocol. For example, locking DOTs in StaFi protocol mints rDOTs.
rTokens are freely tradable ERC20 tokens and replicate the economics of the underlying staked assets. This solves liquidity needs as users can trade rTokens in secondary markets while still earning staking yields. The protocol handles reward accumulation and distribution automatically.
StaFi uses smart contracts to enable the minting and burning of rTokens as well as reward calculation and distribution. When users stake tokens, the protocol mints rTokens to the user’s wallet via a smart contract. The staked tokens are locked in the protocol while rTokens can be freely traded.
The smart contracts connect to the API of the various POS chains to track rewards accrued to individual staking accounts. When users redeem rTokens, the smart contract burns the rTokens and unlocks the underlying staked asset plus the yields earned during staking.
A key priority is ensuring the protocol remains secure against potential economic attacks. To guarantee complete backing of rTokens, StaFi over-collateralizes the rTokens by 150% using the staked assets. It also implements token burning, slashing, and freezing mechanisms as additional protective measures.
StaFi dynamically tracks ratios between rTokens and staked assets. If the collateral ratio drops due to price fluctuations, users have incentive to burn rTokens to raise the ratio, avoiding penalties. This novel staking derivatives model ensures economic security of rTokens.
StaFi aims to support rToken minting for various POS chains including Polkadot, Cosmos, Ethereum 2.0, Terra and more. To achieve this cross-chain infrastructure, StaFi has built the ‘StaFi Hub’ — a protocol that connects the different chains and the StaFi application layer.
The Hub enables staked assets on different chains to be used as collateral backing for rTokens on Ethereum where most of the decentralized finance (DeFi) activity occurs. This unlocks cross-chain liquidity for users.
StaFi needs to interact with external data to operate properly across chains. This includes data like staking yields, collateral ratios, token prices etc. To securely obtain this data, StaFi integrates ‘oracle’ networks like Band Protocol which retrieve and deliver data to blockchain applications.
Oracles enable StaFi to connect with real-world data for accurate reward calculation, collateral valuation and maintaining protocol security. As more chains are added, oracles will be key to interfacing with their APIs and data.
In conclusion, core innovations like rTokens, smart contracts, economic security, cross-chain infrastructure and oracles power the StaFi network. Together, they enable users to earn staking yields on their POS crypto assets while unlocking liquidity across chains. StaFi aims to expand DeFi usability for the rapidly growing POS ecosystem.