What is Defi Staking?
DeFi stakestaking, by its strictest sense, is the act that involves locking cryptocurrency assets in an electronic smart contract in exchange to become a validator within the DeFi protocol or Layer 1 blockchain, and receiving rewards for completing the duties that this role demands. In a wider sense, DeFi staking is often utilized as a generic phrase for all DeF operations that require a short-term engagement of cryptocurrency assets.
In the following paragraphs we’ll take a deeper examine staking, as well as two other types of DeFi investing: the yield mining and liquid miners.
We’ll attempt to discern the subtle and less subtle distinctions between them, and the major problems that the emerging DeFi sector is currently facing. Let’s get started.
Different Types of DeFi stakes
As previously mentioned the purest type of staking is locking a quantity of crypto assets to be accepted as a validator within the Proof-of-Stake (PoS) blockchain.
Contrary to Proof of Work consensus algorithms which ensure that transactions are valid involves a large amount of computational energy, PoS relies on validators who have a stake in the performance of a network via their staked crypto assets. Validators must perform their tasks carefully, or they risk the possibility of losing a part or even all of their stakes. Furthermore Validators can get staking rewards when they create and validate blocks. This encourages good behaviour.
Although lending and borrowing platforms offered the first solid application for decentralized finance The advent of yield farming demonstrated the power of DeFi. It is the process of moving crypto assets across several Defi Staking platforms in order to maximize profits. The idea is that people put their assets in the lending process or liquidity pool, and earn an income that is passive through interest, and an amount of revenue generated by the platform of their preference. But, they are able to transfer their assets to different platforms and pools to earn higher rates of return.
Of course, investing in a variety of instruments with the aim to maximize your earnings or to hedge against risky situations is among the most important investing strategies employed in traditional financial markets in addition. However, DeFi staking enables never-before-seen flexibility, as the combination of 24/7 access to markets, smart-contract-driven automation and lack of intermediaries allows for investors to jiggle between multiple DeFi protocols with little to no downtime. This flexibility opens up numerous opportunities to develop diverse DeFi strategies for staking.
Mining of liquidity
It is a type of yield farming which involves the supply of crypto assets to a liquidity pool. These pools are essential to allow trading without intermediaries in the form of cryptocurrency exchanges that are decentralized (DEX) also known by the name of the auto market maker (AMM). An average liquidity pool consists of two different assets that comprise one particular trading pair.
The basis of the whole system is based on liquidity providers that make their assets accessible to a pool of liquidity. To do this, liquidity providers receive various financial rewards, which include a portion of the fees that the pool collects. Certain DeFi staking platforms incorporate their own tokens into the reward program. We’ll explore this further. DeFi protocols must have strong reward programs to ensure that staking is economically feasible as a liquidity provider.
Some drawbacks to DeFi’s stakestaking
Although it does have some major advantages over traditional investing there are some disadvantages to DeFi Staking that need to be considered. One of them is the so-called ‘permanent loss’ that occurs when you use mining liquidity.
Since the algorithms that adjust prices in the liquidity pool are focused on keeping a balance between the prices of the assets inside the pool, the same tokens may have different values inside and outside of the liquidity pool. This is why the removal of your tokens from an account is at the cost of losing. Staking reward programs are designed to combat this issue and ensure that liquidity providers get paid for their work.
Another disadvantage is the limitations of scalability in the present Generation of Layer 1 blockchains, notably Ethereum which is the host to the vast majority of current well-known DeFi protocols. The issue of scalability can lead to price increases for gas and makes DeFi operations expensive. The hope of finding a feasible solution to this issue lies in Ethereum 2.0 as well as many other Layer 2 solutions, which include roll ups.
Why Should You Invest in DeFi’s Stake Platform Development?
After we’ve talked about the ways in which DeFi stakes can benefit users, let’s look back to the reason why business owners are now investing into DeFi Staking platforms for development.
First of all it’s a fantastic opportunity to get users on your platform. The more attractive reward terms you provide your users, the more likely they will donate their money to the platform’s liquidity pools. Therefore the more liquidity a platform can provide its users, the more secure it is in the eyes of its users.
In addition, by offering the opportunity to stake, your platform can make more money from transactions since the number of transactions will increase. This is the reason why many lending and borrowing platforms and cryptocurrency exchanges are now introducing yield farming and liquidity mining mechanisms.
DeFi’s staking platform comes with Features
The selection of features you choose for your platform is largely contingent on the staking method you’ve selected, as well as the kinds of possibilities you would like to offer customers, and whether you intend to introduce the staking model as a element in a digital wallet or exchange as well as a separate platform for Staking-as-as-a-Service. This list of features is the most basic list. It is what you must look out for when choosing the features you want to use for DeFi Staking Platform Development.
Friendly Interface For Users
The user experience of the site is the most significant issue for the vast majority of DeFi platforms. Your role as developer is providing the users with an interface that makes it easy for them to navigate the website. This is not just about the appearance and feel that you have created for your DeFi Staking system however, it also applies to the user interface’s logic, the information it provides to users, and more.
From signing up to choosing the assets to stake and liquidity pools, everything needs to be clear and not cause any problems. All pertinent information must be presented in a logical format on the dashboard. The more useful information that you give to your users, the simpler they will be able to make a staking choice. For instance, Aave shows a lot of information on charts, including the size of the market, the total amount of borrowing, and annual interest on loan and deposit of assets.
DeFi Staking Platform Development Process:
The DeFi Staking platform development process is a part of the typical software development process and comprises of the following phases:
The Discovery Phase:
It is the first step to create any product. This is where the things are identified and clarified, including the purpose for the venture, desired customers, the competition, the functional requirements and those that are not and more. Additionally the discovery stage makes sure that a client and a development team share agreed upon the vision of the project.
To guarantee a top-quality user interface, and also to develop an original user experience You will require expert advice from professionals who have worked on DeFi platforms prior to. We’ve previously discussed the importance of platform UX, and it is among the major problems with decentralized applications. It is important to design easy and simple navigation that will aid users to quickly and efficiently accomplish the desired tasks.
Smart contracts protocol development. Creation of smart contract is among of the most challenging processes in the DeFi developing a platform staking process. This is the place where the logic that governs how your platform operates is explained. Poor architecture and issues with smart contracts affect the reliability for the DeFi product. You must ensure that you work with highly skilled blockchain experts who are able to provide an extremely high quality of code.
Integrations with DeFi:
DeFi protocols are fairly easy to integrate with one another However, developers must be certain that they are compatible, and that integrations won’t harm security.
Once the core technology of the platform is developed, the developers can begin to build the user interface by using the frameworks best suited to the project’s specifications.
Testing and then launching:
Before putting a product to the market, QA specialists carry out all necessary tests to ensure that the app functions according to its intended purpose, is safe of security flaws and is in compliance with specifications for performance. It is also recommended to conduct an audit of smart contracts that is conducted through third party developers. In the course of the audit, experts review the code, spot weak points and improve the protocol.
The Brisk Logic team will be delighted to assist you in the development of your DeFi-related product. Our engineers are experienced in the creation of market places for DEX, NFT lending and borrowing methods, DeFi aggregators, staking platforms, and various other blockchain-based software. The portfolio of Brisk Logic includes over 250 of its successful ventures. One of the advantages when working for Brisk Logic is that they offer the full spectrum of services for software development that range from design, business analysis, programming testing, support, and even testing.