Decentralized Finance platforms continue to gain traction across multiple blockchains despite initial skepticism. And for good reasons, traditional financial institutions have held many by the jugular while shortchanging them.
Though DeFi attempts to unseat its traditional counterpart by offering financial products to everyone, these decentralized finance protocols aren’t entirely flawless. Liquidity crises – often orchestrated by inaccessibility to staked resources by users have kept these platforms from reaching their potential.
Unsurprisingly, most DeFi deploy the staking model in their hunt for the largest TVL. Though a great concept, it’s not flexible for users. There’s also the security framework to worry about. This calls for a holistic approach, if derivatives truly intend to be disruptive as claimed.
StaFi rToken Solution
As a response to the liquidity issues bedeviling DeFi staking contract, StaFi protocol was created. With StaFi, stakers can use their assets while having them staked. It’s a classic case of "having your cake and eating it".
StaFi protocol achieves such a feat through the use of synthetic derivatives called "rToken (s)" - that take on the value of specific assets. Though StaFi plans to make an army of rTokens, there’s only a handful of them at the moment.
Currently, rTokens like rETH, rFIS, rDOT, and rKSM are on the loose. A bridge between ETH and StaFi chain makes for the mobility of the rTokens as the need arises.
On staking their asset, users of StaFi protocol get the relevant rToken through the interplay of contracts and special validators. These can be traded on the rTokens exchange, but this is equivalent to giving up rights to the original token staked on the relevant chain.
Anyone holding rTokens can trade them on both decentralized and centralized exchanges, as long as these platforms are connected to the StaFi interface. Since prices can rise significantly while the original asset is staked in a DeFi platform, trading rToken offers an easy way out of a likely quagmire. Though a StaFi construct, transacting rToken is largely dependent on the platform used. While DEX can offer multiple pairs based on independently added liquidity, CEXs are more rigid in their offering.
No matter the trading platform, rTokens have a future like any other cryptocurrency, though their destinies are tied to the original token.
DeFi Liquidity Nightmare Over?
Most DeFi platforms require stakers to lock their assets in the staking contract, limiting liquidity flow. rToken changes the game by offering stakers a leeway to access liquidity locked without disrupting the DeFi setup.
To support the widespread acceptance of rTokens in the DeFi space, StaFi protocol is currently at work, connecting the different chains to the StaFi chain.
Users can put rTokens to work - lending or borrowing of these rTokens on a DeFi platform is also possible. StaFi network serves as the missing link between the native chain and the DeFi platforms.
Besides their liquidity unlocking capabilities, rTokens are all compatible with the Ethereum network, regardless of their original chain. This gives the synthetic derivatives an edge as they are more reliable.
To amplify the functionality of rTokens, more applications are being built for these synthetic tokens. At the moment, rETH, rDOT, rSKM, rATOM apps are either already in use or still work in progress.
While rTokens take on the valuation of staked assets on StaFi protocol, these synthetic derivatives don’t share the same supply. The amount of rTokens in circulation is wholly dependent on the staked assets. For instance, if there are 200,000,000 staked ETH on the StaFi protocol, rETH total supply will match that exact number, regardless of the actual supply of ETH on the mainnet.
Through rTokens, security and liquidity flow can be achieved on DeFi platforms. And StaFi protocol is anchoring this transition. Of course, there are still a few hitches that need to be resolved, but rTokens can be the DeFi saviors we never knew we needed.
Read more about StaFi Protocol here: https://m.stafi.io/