StaFi Protocol (FIS)

StaFi Protocol

Type	Liquid PoS token
Consensus mechanism	NPoS
Total supply	100.000.000
Website	https://m.stafi.io/

Basics

• Based in: China
• Founded in: 10-2018
• Mainnet release: 7-9-2020
• From their Github (as of 10-2019):

"StaFi Protocol: PoS Staking Network Introduction enGithub Repo"

• Stafi lets users stake their PoS tokens and gives them "receipts" of the tokens which they can then use elsewhere in crypto.
• From CMC (7-9-2020):

"Stafi (short for Staking Finance) is a DeFi protocol that aims to unlock liquidity of staked assets. STAFI Protocol solves the contradiction between the token liquidity and Mainnet security by issuing ABT tokens, which provides the liquidity of your Staking Assets. ABT token increases the staking rate to a higher level (100%, theoretically), and it could be tradable, its security is guided by STAFI Protocol which ensure ABT token is the only collateral that can apply to redeem staking asstes from original staking blockchain ( Tezos, Cosmos, Polkadot, etc,.)"

History

• The founder Liam Young has been providing staking services since 2018.

Audits & Exploits

• Bug bounty program can be found here (13-11-2020) with a maximum of $2000.
• Had a Certik audit on their rBridge (13-11-2020):

"We have invited CertiK to audit the smart contract part. Our engineers are working on code optimization, which is estimated to take about 1 week. We will update CertiK’s audit progress on the DAO forum."

Governance

DAO

• FIS holders have limited voting powers.
• As of 18-9-2020 there were 100 out of 100 validators on the network, but 0/13 seats of the council, and 0 candidates. Also there were no proposals on the governance portal to be found.
• From their blog (23-6-2020):

“If unfortunately, there is still a security incident in a project that SC has supported, SC will start an emergency loss reduction mechanism.”

This does imply Admin Keys that control the smart contracts, which is only to be expected, since the Foundation as of now also decides (3-6-2020) which projects get integrated.

• Will move towards community control over the treasury in two phases (19-10-2020).

Treasury

• From the Whitepaper (8-2020):

"In order to achieve the decentralization and sustainable development of the protocol, part of the system's transaction fee income will be sent to the protocol treasury to support subsequent development and community work. The sources of the treasury are mainly inflation incentives, circulation fees, transaction fees, Slash deposits, etc. Via a proposal system, holders of FIS would be able to vote on parameters of the platform as well as features to be developed. For the avoidance of doubt, the right to vote is restricted solely to voting on features of the Stafi protocol; the right to vote does not entitle FIS holders to vote on the operation and management of the Foundation, the Distributor or their respective affiliates, or their assets, and does not constitute any equity interest in any of the aforementioned entities.

If the FIS in the treasury is not used up within a certain period, the burning plan will be initiated. In the early days, the Protocol eagers for much participation, so the foundation will decide the use and burning of the national treasury. When the agreement is sophisticated, the use of the national treasury will be open to the community."

• As of 18-9-2020 there was a total of 196,594 FIS in the treasury.
• From their blog (19-10-2020):

"The Treasury’s DAO governance tool was provided by our partner Commonwealth Labs (core development team of Edgeware). Commonwealth Labs is the most professional DAO solution provider in the Polkadot ecosystem, and has already cooperated with Plasm, NEAR Protocol, Kusama, Kulupu and other projects." 

Token

Token allocation

• According to their blog (2-9-2020): Public IEO 0.8%, Ecosytem Growth 5%, Seed Round 5.7%, Private Rounds 6.1%, Advisors 6%, Team 15%, Foundation 21.4%, Community Rewards 40%
• From their blog (2-9-2020):

"For transparency purposes, please keep in mind that the total supply can grow beyond 100M FIS after the 1st year. However, as you can see in Token Economics, product usage results in FIS revenue burn, meaning it can in fact offset and potentially turn inflation into deflation."

• From the Whitepaper (8-2020):

"Stafi's initial annual inflation rate is divided into two parts, for the validator SV and SSV respectively. The annual inflation rate for SV is [2.5%, 10%], dynamically adjusted according to the Staking rate, and the annual inflation rate for SSV is [1%, 2%], dynamically adjusted according to the number of service calls. Theoretically, the total inflation rate will decrease year by year, and with the adoption of SC."

Utility

• Staking and txs. FIS holders have limited voting powers.
• From the Tokenomics paper (8-2020):

"FIS is the native tokens of Stafi. FIS is involved in 3 scenarios: Gas, Staking and value capture.

1. FIS is the fuel of the system. It prevents a large sum of spam popping up in the system. FIS charged will be distributed to validators and Protocol Treasury, and the distribution ratio can be adjusted by concerning parameters.
2. Stafi adopts NPoS consensus and uses the underlying motivation design of Polkadot for reference. Based on security design, Stafi tunes up motivation curve in accordance of the Staking ratio of FIS in order to achieve the cyber security and long-term development of the system.
3. FIS is a medium for the value capture in Stafi system (mainly provides value for the liquidity of rToken). The Staking Contracts of Stafi not only provides Staking service for Stakers, but also guarantee liquidity. Service fee will be charged by Stafi protocol from users to value to Stafi network. The proposition of value will be expounded in part 5 of this document."

• From this interview with Liam Young (12-8-2020):

"Our hypothesis is based on the locked market value of the PoS project, and how much share we can get. When users enjoy asset liquidity using Stafi, the system will charge them. The fee is obtained from the Staking reward. When the locked asset value and inflation rate are fixed in PoS market, we can estimate the total number of annual inflation benefits. If we acquire 10% of the total and charge 10% from it as Fee, we can figure out the revenue of Stafi."

Token Details

• From this interview with Liam Young (12-8-2020):

"There will be a price gap between rToken and the original Token, because rToken has the right to profit, but the original Token does not. Moreover, there will be an unlocking period for rToken to exchange the original Token. That gap will float as the market changes, which is 100% determined by the market. We do and will not interfere."

Tech

• Whitepaper can be found here (8-2020).
• Code can be viewed here (7-9-2020).
• Built on: Polkadot, building their own StafiChain (31-12-2021):

"The exploration of the StaFi parachain will also be launched in 2022 Q1. This innovation will not be executed immediately. We will make a conclusion after full research, so stay tuned for more information."

How it works

• From the whitepaper (8-2020):

"Stafi protocol is meant to establish a Staking Contract at the upper level, so that the holder can initiate a Stake through the designated Contract, and at the same time obtain rTokens, an alternative token. The rTokens can trade their possessions at the bonded assets exchange built on the application layer. The holder's Stake process and the rToken issuance process are both automatically executed by the contract code. There is no need for any third party endorsement, and the user holding the Stake token can initiate Stake or redeem at any time, the contract will be automatically executed once the validation is passed. Except for the absence of third-party intervention, the entire rToken distribution rights are given back to the original chain token holders. Further, holders can issue the value-bearing bonded assets of the corresponding value, which is similar to the current method of asset securitization. The biggest difference is that it is each and every individual, but not institutions, who issues bonded assets. The meaning of individual issuance is to resist volatility. Therefore, in theory, this decentralized method should better motivate the original chain holder to obtain rTokens.

Stafi is a decentralized protocol that empowers liquidity. It encompasses 3 layers—bottom, contract and application layers. The bottom layer is mainly based on a blockchain system established by Substrate (which is a blockchain architecture developed by Parity, and the whole architecture integrates many development modules, including consensus module, P2P module, Staking module, etc.). The contract layer support creating a variety of Staking contracts, such as Staking contracts for XTZ, Atom and Dot respectively. The token holder can Stake through Staking Contract, which is consistent with the inflation incentives obtained by the ordinary Stake. But the difference is that The holder also can obtain rTokens. Last, the application layer supports third-party Stafi-based APIs or customized APIs to create a decentralized bondeds asset trading market for rTokens to circulate, transfer, and trade on the Stafi protocol."

• From Crypto Briefing (2-9-2020):

"The project allows PoS token holders to stake their assets and provides them with tokens that represent these staked positions. ATOM tokens become rATOM, Polkadot’s DOT tokens become rDOT, and many other PoS blockchains. 

This is similar to the creation of yUSD, cUSD, or sUSD on existing DeFi platforms like yEarn, Compound, and Sythetix Network. The tokens staked on StaFi include Polkadot (DOT), Kusama (KSM), Tezos (XTZ), Cosmos (ATOM), Matic Network (MATIC), Kava (KAVA), and Harmony (ONE)."

• From the Tokenomics paper (8-2020):

"The protocol of Stafi is created by Substrate and adopts Nominated Proof-of-Stake (NPoS), which complete Staking by setting up Staking Contracts in the upper layer to communicate with public chains. The Staking process is immune to Stafi’s contracts, for the latter act as the account book during Staking. Tokens staked through contracts will be written in the contracts and finally be locked-up on the original chain.

In order to maintain Stafi protocol, Stafi Validators (SV) and Stafi Special Validators (SSV) are essential. SVs are responsible for the security of the whole protocol while SSVs guarantee the safety of all Staking Contracts. Under the protocol framework, the election of validators and the motivations for them become paramount, which will be expounded in the third part of this document."

• From this report by Chorus One (6-2020):

"A subset of Stafi nodes that are determined through the Stafi token are assigned to create and control account keys on Proof-of-Stake networks via distributed key generation. These nodes then use a threshold signing algorithm that requires a majority of nodes to sign to carry out transactions from the respective account on the Proof-of-Stake network. This allows users to mint tradable liquid staking positions with their deposited staking tokens, because ownership of a specific account with an active staking position can be transferred relatively easily within the protocol. In Stafi, if N nodes generate a key, M of N are required to sign a transaction. As long as M of N nodes are online and not acting maliciously then all works fine. But if N-M+1 nodes are offline or act maliciously the transactions will fail. The values for M and N will be parameters chosen when the network launches. The set of nodes controlling an account will be rotated regularly to ensure that nodes don’t have enough time to collude to steal funds. How often this rotation takes place is yet to be determined (note: the example in the whitepaper refers to 16 of 21 nodes, with keys rotated every 24 hours, but this may not be the parameters chosen at launch)."

Upgrades

• From their Year End blog (31-12-2021):

"We’ve launched rSwap, updated the rPool function in order to incentivize more rToken trading pairs, rolled out MintType which optimizes the UI/UX of the rToken-mint, and so forth. We’ve not launched any new rToken this quarter, and that’s because after Q3, we are being more cautious in launching any new rToken (taking mainly the liquidity problem of rToken into consideration). We hope that the liquidity issue can be taken more seriously by more participants."

• From their blog (1-7-2021):

"Over the last three months we have had a string of successful milestones for StaFi. The list includes rDOT, rKSM and rATOM being made publicly accessible, as well as the evolution of rETH from V1.0 to V2.0. StaFi developers have designed a general solution base layer for three of the newly-born rTokens, which has made it possible for StaFi to deploy rToken Solution to various projects based on Cosmos SDK and Substrate."

• rETH is live on Mainnet (29-1-2021).

Staking

• From the Whitepaper (8-2020):

"Stafi protocol will create different Staking Contracts to handle different staking tokens. These staking tokens are locked on the original chain to obtain inflation rewards. When rToken is transferred or redeemed, a fee for staking rewards will be charged when the user operates. It will be proportionate to the reward, which is called Liquid Fee in the protocol."

• From their blog (2-9-2020):

"In less than a month, the community managed to grow to over 150 validators and complete most of the incentivized testnet tasks."

Interoperability

• From their blog (13-11-2020):

"rBridge will help with the cross-chain inter-operation between assets on the StaFi mainnet and other ecosystems, including Ethereum, Polkadot, and Cosmos. Therefore, we will keep updating rBridge products in the future, so that FIS tokens and rToken assets issued by SatFi can freely circulate across different public chains at a low cost. We hereby announce that rBridge Beta is officially launched".

Oracle Method

• Will integrate ChainLink (9-10-2020).

Their Other Projects

rDEX

• From their year-end report (5-1-2021):

"StaFi Core proposed the rDEX solution in Q4 to solve the liquidity problem of rToken. In order to solve the cross-chain problem, rDEX will be built on the StaFi chain. At the same time, rDEX can collect the liquidity of all rTokens, to make the exchange deep enough for certain liquidity requirements. Currently, rDEX has been deployed on the testnet, and the audit is about to begin."

Roadmap

• Can be found in the whitepaper (8-2020). It focuses mainly on on-chain governance and more token alternatives.
• Updated roadmap for Q4 2020 was released (21-9-2020):

"Polkadot’s Parachain is currently being tested and deployed, and the Stafi team will consider participating in the parachain auctions once the opportunities arise.

ERC20 Bridge — Sept-Oct.

Given the entire DeFi ecosystem majorly is built on Ethereum, we think it’s necessary to create an ERC20 version of rToken in order to tap into the broader ecosystem. And we will be building a bridge solution to make this happen. The bridge will serve two major purposes: 1) conversion of substrate based rToken into ERC20 rToken; 2) conversion of substrate based FIS into ERC20 FIS. After conversion, FIS and rTokens can be traded on any Ethereum based DEXs, such as Uniswap, Balancer etc. The main groundwork of building a bridge includes:

1. The development of ERC20 bridge.

• Pallet module development.
• Bridge logic development.
• ETH smart contract development & deployment.

2. ETH bridge comprehensive testing, including (testing) function, performance and security, etc., as well as sorting documentation and code.

3. Code audit and bug clearance.

4. Preparation for launch

rToken — Oct-Dec

The Stafi team will be working on 4 major types of rTokens:

1. Substrate-based rToken
2. CosmosSDK-based rToken
3. ERC20-based rToken
4. Other PoS-based rToken

In order to standardize the issuance process for rToken, rFIS will be the first rToken to be rolled out by the end of November. Later, we will begin testing rDot and rKSM. Since DOT and KSM are also based on Substrate, thus we expect the integration process to be a bit faster. This experience will come handy for us when we’ve set the rToken standards for Substrate-based projects. The main development works will include:

Nov.

1. Development of rFIS function.
2. Comprehensive functional test of rFIS & sorting documentations and codes.
3. rFIS audit and rollout
4. StakingDrop stage2.

Dec.

1. Completion of the overall design of the integration of Substrate-based projects, & setting the solutions to the key problems of each module.
2. Trial run for all key processes with off chain mechanism.
3. rDOT/rKSM development"

• From their year-end report (5-1-2021):

"We failed to launch rFIS and rDOT as mentioned in the roadmap. The main reasons are:

1. Didn’t expect that audit would take so much time
2. Didn’t make a sophisticated plan for the launch of ETH2.0
3. Not enough manpower in our team

Fortunately, we’ve met a lot of like-minded developers who are interested in StakingDerivatives during Q4. Many of them expressed a willingness to participate in the future of StaFi, and we also selected 2 developers who would be joining the Core Team. Some others who didn’t join us have become open contributors to StaFi, which greatly strengthened the development capabilities of StaFi.

The details of Q1 are as follows:

1.rToken development

Including rETH, rFIS, rDOT/rKSM, rXTZ/rATOM, etc.

Among them, rETH and rFIS are already under audit; rDOT/rKSM is under development, and rXTZ/rATOM will be started in Q1. In addition, we have discussed the possibility of developing StakingDerivative with many PoS public chains including Solana, Near, Avalanche, Nuls, CapserLab, Cartesi, etc. We will gradually support rSOL, rNEAR, rAVA and other rTokens in a phased manner, making the ecosystem of rToken more flourishing.

2.rBridge development

• Including two-way bridge, rToken bridge, BSC bridge, SOL bridge, etc.

3.StakingDrop development

Including rToken Mint incentives, Dex liquidity incentives

4.Integrations

Projects including Unilend, Easyfi, Dforce, etc., have expressed a great interest in Staking Derivative, and we will probably reach a partnership with them in the future. At the same time, integrating rToken into existing mainstream DeFi protocols, such as Curve, Compound and Aave, etc., will also be our focus. We have also discussed with many teams in terms of rToken Index, rToken StableCoin, and other possibilities. We believe there will be interesting attempts."

• New tokens, integrations and the rBridge are still all on the roadmap. From their blog (1-7-2021):

"We are optimizing the tokenomics of the StaFi protocol, and seeking to complete decentralization upgrades for RPC Node/Light Client, Relay Node, etc., which is essential to our safeguard endeavor."

• From their Year End blog (31-12-2021):

"We proposed the rAVAX solution to the Avalanche Foundation, and conducted in-depth research on rNERA. For the Cosmos-SDK based projects, StaFi proposed an all-around solution called StaFiHub.

In addition, StaFi Core proposed the rDEX solution in Q4 to solve the liquidity problem of rToken. In order to solve the cross-chain problem, rDEX will be built on the StaFi chain. At the same time, rDEX can collect the liquidity of all rTokens, to make the exchange deep enough for certain liquidity requirements. Currently, rDEX has been deployed on the testnet, and the audit is about to begin."

Usage

• Nearly 2,000 addresses have staked $205 million (2-9-2020).
• From this blog (3-9-2020):

"In fact, 20% of the staking amounts were new staked assets and 40% are NEW staking addresses. This yet again shows that StaFi doesn’t only make staking liquid and enables new DeFi products — but also increase security of PoS networks!"

• From their blog (1-7-2021):

"StaFi has reached cooperation with Curve, jointly providing a great trading scenario for rETH/ETH. The current exchange rate of rETH to ETH is stabilized at between 0.99 and 1.02, and the total amount of rETH and ETH in the liquidity pool has reached 13,387, with the market value reaching $26,427,546.00.

What’s more, Yearn’s Vault product has integrated rETH, with an APR of 12.31%, and the current TVL is about $7.9M."

Projects that use or built on it

• Curve
• yEarn

Competition

• Stake DAO, Rocket Pool, Acala and Kira Network.

Pros and Cons

Pros

• From this interview with Liam Young (12-8-2020):

"There is still no authoritative paper stating that Liquid Staking will have an impact on the security of the PoS consensus. In our research, unlocking Staking assets will increase the security of the PoS public chain. As we all know, the security of many PoS chains is based on the staking rate. A 100% staking rate means 100% absolute security, and a lower staking rate means that it is easier to buy more tokens than staking tokens from the market. Many users refrain from Staking because they don’t like lock period and that’s why some chains have a low level of Staking rate. There’s security concerns in it. When Liquid staking is introduced, many no longer worry about the lock period. So more users are Staking, making PoS chains safer."

• From this report by Chorus One (6-2020):

1. "Potential to build a unified liquid staking experience across all PoS networks with powerful network effects.
2. Doesn’t require interchain accounts so is portable to any PoS chain that can support threshold signatures with distributed key generation.
3. Governance rights stay attached to tokens, allowing for a more flexible governance model."

Cons

• From this report by Chorus One (6-2020):

"Stafi’s token will need to generate enough value to secure all of the bonded assets. There are issues around validator collusion to steal private keys, which means the Stafi chain will require a high number of nodes to minimize the probability of collusion. Stafi has an incentive protocol with slashing mechanisms to guarantee security and correct behavior of Stafi nodes, which plans to include multiple assets as collateral in the long run. These security requirements imply that Stafi will need to extract a lot of value in fees to pay for this security. 

1. Prone to security issues if Stafi token value is low. 
2. Risk of node collusion to steal private keys, so needs a high number of nodes.
3. Potentially limited liquidity because tokens will only be fungible for a specific validator."

• Has been open about having limited manpower, acknowledging that some marketing campaigns weren’t well supported technically and that the development of rToken’s general solution base layer took more time than expected (1-7-2021).

Team, Funding, Partnerships, etc.

Team

• Full team can be found here (7-9-2020).
• Built by Yellow Hat DAO
• Liam Young; co-founder

Funding

• BlockPI; StaFi was part of their $3M seed round (28-1-2022).
• Gets support from the Web3 Foundation (7-9-2020).
• Did a private sale of about $10M (2-9-2020):

"Institutions like Focus Labs helping with token design and marketing in the US, Russia and Europe; Spark Digital Capital securing support in China… Among our supportive contributors there are also quite a few prominent DeFi founders, community leaders, exchange executives, staking pools, Polkadot ecosystem influencers, DAO summoners."

• Some (2-9-2020) members of Crypto Briefing’s management team invested in Stafi.

Partners 

• From their blog (24-9-2020):

"Bluzelle will help to support data for StaFi’s staking contract, such as pledge, redemption, transaction, as well as mapping information between rTokens & Staked tokens."

• Is a partner of Zenlink according to its website (11-11-2020).
• Partnered with Huobi (12-11-2020).
• Works together with Reef Finance to let liquid stake tokens also earn yield.
• Is mentioned by Oasis Network as of its partners (30-12-2020).
• A genesis member (28-3-2021) of the Polkadot DAO Alliance (PDA).
• Is one of the announced partners of Unmarshal during their first months (5-4-2021).