The project wants to implement liquid staking on Polkadot and potentially other blockchains as well.
One of the drawbacks of staking funds for consensus is that they cannot be used for anything else while locked up.
“Liquid staking” implemented by Stafi would allow users to maintain the ability to transact with their tokens while also participating in consensus and receiving staking rewards on their money.
Bonna Zhu, head of business development in Asia at BitMax explained that Stafi is a candidate for the exchange’s incubation program, supporting the project in a variety of ways.
Stafi has closed a seed fundraising round for $600,000 with investments from such as:
- Focus Labs
- Spark Digital Capital
- B-Tech, a Bitmax-affiliated accelerator.
Meanwhile, it has previously received grants from the Web3 Foundation, which supports development for the Polkadot ecosystem.
Stafi works in a similar way to various automated yield chasing protocols on Ethereum, except that it is limited to staking.
Its users must deploy their funds to a Stafi smart contract that takes care of staking them. Users receive an “rToken” such as rDOT that represents their stake in the pool.
The token is fungible and can be transferred and exchanged. The rTokens can be redeemed at any point for their share in the pool with additional tokens accrued from staking.
This approach creates a synthetic token representing staked DOTs, which should have a one-to-one ratio with the underlying collateral.
One potential vulnerability of this approach is when part of the underlying stake gets “slashed” due to validator misbehavior.
Liam Young, CEO and co-founder of Stafi explains:
“In technical terms it’s a redistribution. We will launch algorithms to distribute the delegators to different validators. So if one of the validators gets slashed, the delegator is slashed as well. […] Maybe with a bit of delay, but the rToken will get slashed as well.”
But he notes that the project will take care in choosing validators who will continue working optimally. Furthermore, insurance against slashing can also be provided in the future.
One of the main use cases for rTokens is to use them as collateral in DeFi projects, including even decentralized exchanges and lending protocols.
“You can use that for payment, of course. But I think that the main function of this is going to be used as collateral for additional borrowing and lending, or to use it as margin for trading.”
Stafi also plans to expand to other blockchains as well, including Ethereum and Tezos. One future goal is to list the rTokens on existing decentralized exchanges and lending protocols to integrate them in the wider DeFi ecosystem.
The project has recently launched an incentivized testnet, called Satara.
Its Mainnet launch is planned for “early September,” although Young notes that the exact date will depend on the performance of the testnet.