Stake is a protocol built and maintained by Vestige that offers trustless on-chain staking contracts on the Algorand blockchain. The purpose of Stake is to allow any project to create an on-chain incentive mechanism for their tokens, be it liquidity provision, marketing purposes, or token distribution without having to go through a middle man, and without needing to rely on third party “untrustworthy” computation.
The reason why this protocol is needed and important to the Algorand ecosystem is because of the way Algorand Standard Assets (ASAs) differ from other assets in other Smart Chains. This is because in many Smart Chains certain incentives are written into the token itself (ie the famous reflection tokens that took the DeFi world by storm in ‘21). This is not possible in Algorand due to the standardization of token issuance and the divorce of ASAs from code. Due to this, these incentives need to be built through smart contracts. We believe that Stake can cover this gap and provide the Algorand DeFi space an incentive to distribute tokens to DeFi users and to encourage these users to participate in more aspects of the DeFi space, such as liquidity provision by increasing the potential rewards they receive from this mechanism.
Stake works by having two different smart contracts working together. that is in charge of the following functions:
This is where the pool creator “sets-up” the pool. The pool creator sets a series of parameters like number of tokens offered, starting time for the pool, number of slots available, and pairing “staked”. After these parameters are set, a fee is paid that consists of three parts:
Part One: to be paid in VEST
Part Two: Paid in either STBL or xUSD
Part Three: A proportional to the offered tokens (currently set at 15 Basis Points from the offered amount, i.e. 0.15%). Once the fee is paid, the pool is live.
After the pool is live users can “stake” the token requested on the escrow account, for doing this, every timestep they will receive “rewards” in accordance with the previously set parameters, until the offered tokens are exhausted. After this period ends, the pool will be considered “dead”
After all rewards have been distributed the pool enters its final stage, where it becomes “dead”. By this we mean that the pool can only have funds re-claimed from it, after all tracked funds have been reclaimed, the pool launcher can do a final call in which all untracked funds (these are funds that are “lost” due to users opting out of their rewards) are returned to them, ensuring that no tokens are ever lost, and that token linearity is maintained. It is up to the pool launcher to then decide what they wish to do with these tokens.
Stake also has the added benefit of having an Admin contract that keeps tabs on all launched pools and that gives the Vestige team the ability to change fees for pool launching. Note: these decisions can eventually be delegated to DAO-like governance protocol, should the Vestige team ever decide to do so.
Another mechanic the protocol has is the VEST incentives that are natively built into it. These incentives are for people that launch pools where the demanded token is one of the pre-approved tokens. These tokens are VEST and VEST-LP tokens, and they have the added benefit that the pools launched with these tokens as the stake-able ones have a heavily discounted launch fee. Not only this, but these pools are heavily featured on the Vestige site, allowing new projects to create buzz around their token! This can be seen as a good marketing campaign for new projects that are looking to advertise their ASA. The set of pre-approved tokens can be changed by the Vestige team, and is one of the parameters that can be changed by the Admin contract.