rATOM, a decentralized DeFi product produced by StaFi that solves the liquidity problem of staked ATOM on Cosmos mainnet.
rATOM token is a synthetic staking derivative issued by StaFi to users when they stake ATOM through StaFi rATOM product. rATOM tokens are anchored to the ATOM assets staked by users and the corresponding staking rewards. rATOM tokens can be transferred and traded at any time.
rATOM product can help ATOM stakers solve two major issues:
1) There will be no need to wait for a 21-day redemption period to transfer or trade staked ATOM assets. rATOM product users can transfer and trade rATOM assets at any time to liberate liquidity and hedge price risks.
2) There is no need to learn the complicated Tendermint consensus mechanism or staking reward calculation rules if you want to maximize staking rewards. With rATOM product, users only need to follow a few steps to deposit ATOM into the rATOM contract, which will automatically select the best validator for delegation by the profit maximization strategy.
When a user deposits ATOM into the rATOM contract, StaFi will calculate the amount of rATOM to issue to the user based on the current exchange rate between ATOM and rATOM. When a user holds rATOM, StaFi will calculate the amount of redeemable ATOM based on the real-time staking reward of ATOM.
The rATOM exchange rate Ci grows with the increase in staking income. It is determined by the total number of ATOM locked in the staking contract Qstk, the total number of redeemed ATOM Qred, the number of staking rewards Qrew, the number of slashes Qslh, the commission rate Rcom, the total number of rATOM issued M, and the total number of burnt rATOM N. The calculation formula is as follows:
Through rATOM, StaFi solves the following problems for ATOM holders:
1) There is no need to worry about the liquidity of staked ATOM. Users can trade rATOM on Uniswap at any time in the future.
2) The rATOM contract integrates a strategy for maximizing staking rewards, which automatically selects a group of Original Validators with the highest rewards on the chain for staking.
3) The current Tendermint mechanism of the Cosmos mainnet is rather complicated for ordinary stakers to learn, such as understanding the consensus mechanism, whether restake is allowed or not, the determinants of reward, how to select the best validators, etc. The rATOM product can save users all these hassles, and maximize the staking rewards for users who want to stake on the DOT chain in a one-stop manner.
rATOM product serve to solve the liquidity of ATOM staking. The core participants are as follows:
Stake ATOM through StaFi rATOM App.
Original Validator (OV)
Validators on the Cosmos chain who apply to be validators of rATOM product are called Original Validators (OV). For details, please refer to StaFi rToken Paper.
StaFi Special Validator (SSV)
The validators who control the asset relationship in the Staking Contract is called SSV. SSV mechanism adopts a distributed key management solution with the panel rotated on the chain. For details, please refer to StaFi WhitePaper SSV.
Based on the Tendermint consensus mechanism of Cosmos and the influencing factors of staking rewards, the rATOM product adopts the following staking rewards maximization strategy:
1) Diversified delegation. The ATOM tokens deposited by the user will be distributed to several(N) mini staking pools. N will be based on the scale of the deposit. Each staking pool will then select several (M) validators for delegation by the profit maximization strategy, so as to reduce the slashing occurrence probability of a single node;
2) 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.
3) An automatic delegation strategy that maximizes staking rewards. The solution monitors OV’s on-chain data in real-time, such as commission ratio changes, commission volume ranking, slashing, off-line rate, and other indicators. This ensures that in each Era, the system selects the best OVs for delegation while simultaneously reinvesting profits.
4) A strategy that minimizes the potential loss. When the system detects that the node is slashed or the online rate is lower than the standard, the rATOM staking contract will automatically initiate the redelegate operation and re-select other qualified validators for delegation.
Through rATOM, StaFi can help users avoid slashing in the following ways:
1) Staking Contract favors those validators who do not have slashing history to become official OVs.
2) Validators with a higher proportion of self-bond will be preferred for OVs so that OVs are motivated to avoid slash.
3) Staking contracts will select several OVs for each nomination so that an certain slashed OV will not have a huge impact on user funds if it gets slashed. Therefore, even if an OV is slashed (the probability very low), staking rewards will not be affected.
4) When slash is detected on a delegated node, the rATOM contract will immediately execute the Redelegate operation on the above node to minimize the loss.
Users do not need to claim staking rewards when using rATOM product, and the on-chain staking contract will automatically select the Compound model to redelegate the staking rewards, which will generate the best staking APR.
When a user mints rATOM, the nodes of the cross-chain bridge service need to monitor the Cosmos on-chain services in real-time and pay related cross-chain fees. Therefore, the commission in minting rATOM can be calculated through this formula: N * (StaFi chain Gas Fee + Cosmos Chain Gas Fee), and the payment is made by FIS, StaFi mainnet token.
N is a flexible parameter:
1) In most cases, N is set to 2. Under this circumstance, the user only needs to pay twice the gas fee on the two chains as the service fee for the cross-chain bridge service node.
2) However, when there are frequent dust attacks, StaFi will set N higher in order to increase the cost of external malicious attacks. When the attack disappears, N will be restored to 2.
The rATOM product will charge part of staker’s staking rewards as the commission, which includes the commissions charged both by the validator and StaFi. The commission collected by StaFi and Original Validators will not exceed 20% of staking total rewards.
When a user redeems staking assets, s/he only needs to apply for redemption on StaFi’s staking dashboard. The redemption process is mainly divided into two steps:
Step 1: Enter the amount of rATOM , which can’t exceed your rATOM balance.
Step 2: Confirm and apply. The system will burn the rATOM token you applied, and calculate the amount of redeemable ATOM by the exchange rate. The balance, after deducting the service charge, will be sent to the user’s wallet address.
The service charge (Feered) is determined by the users’ applied quantity for redemption M, the current rATOM/ATOM exchange rate Rc, and the redemption rate Rr :
Rr is currently set at 0.2% in the initial stage.
StaFi will create rich, multi-level circulation scenarios that stretch across different chains for rATOM holders:
1) When rATOM product is launched, rBridge will at the same time support rATOM two-way cross-chain bridge function from StaFi network to Ethereum, so that users can have access to DeFi applications on Ethereum using rBridge product.
2) StaFi will establish rATOM/ETH and rATOM/ATOM pairs on DEXes such as Uniswap and Balancer, and launch liquidity mining incentive campaigns to ensure the liquidity of the pairs.
3) StaFi will not only support the circulation of rATOM in the Ethereum ecosystem but also empower rATOM’s engagement in the DeFi protocol of Polkadot and Cosmos through cross-chain bridge services.
StaFi will establish a common standard for Cosmos projects that are based on Tendermint consensus. The standard can be applied quickly for the development of other rTokens that belong to the Cosmos family. Therefore, StaFi will soon launch rLUNA and other Cosmos-based rTokens after rATOM is accessible.
In the future, StaFi will open the general and standardized liquid staking solution for Tendermint based PoS projects to the community. At the same time, StaFi will launch a grant to encourage community to participate in the development of Tendermint-based rTokens.