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DeFi Staking is the process of locking your crypto on a DEX platform for liquidity mining, yield farming, and liquidity provisioning. DeFi Staking Platform development comes in three primary stages, smart contract, crypto wallet, and security testing.
Cryptocurrencies have reshaped global economics. It has given everyone an equal chance at success, not just the elites at the top. Unlike private equity or real estate, the crypto industry is open to all. And not just to traders or investors but to entrepreneurs, startups, and more.
With a daily trading volume of $120 billion, cryptocurrencies have been at the trillion-dollar mark for some time. And DeFi contributes to an average of 5 percent of that, netting a range of $5 to $6 billion daily.
According to DefiLlama, the total value of all assets locked in the DeFi space is over $50 billion. And this represents the stability of the DeFi space and all its protocols. Much of this TVL comes from liquidity provisioning, staking, and farming. Among these, we are going to discuss DeFi Staking.
People overlook that ideas and methods get recycled very often in the tech space. The tools and techniques used to analyze, trade, and use crypto are much the same as stocks. Thereby it is only natural that money-making ideas from the stock market find their way to the crypto space.
For example, let’s translate the stock market strategy, the ‘Rule of 72’, to the crypto market. The ‘Rule of 72’ suggests that if the annual rate of return is 10 percent, then in 7.2 years, an investor could double their initial investment. Meaning; if you invested $10,000 in stocks, thanks to compound interest, in 7.2 years, you would have assets worth $20,000. In other words, investors could double their wealth by simply holding on to those stocks.
But this method of growing wealth does not equate to holding crypto. The only way to make money from crypto is by selling the crypto at a higher price than your buy price. And that’s why you need methods like staking.
Staking is a process where users can lock their crypto in a smart-contract protocol to earn a passive income. Imagine it as getting a rate of interest from your savings or dividends from your stocks. So while investors hold the crypto for the market to turn, they earn a passive income from the crypto they hold.
DeFi Staking is the same staking process done in a DeFi exchange (DEX). But why choose a DEX? Accessibility is your answer. Due to the permissionless nature of DeFi, anyone with a stable internet and a crypto wallet can use this infrastructure. Thus, making it available to all.
There are three types of DeFi staking methods available to all crypto users.
DeFi staking employs the same basic concept as traditional staking but operates differently. Users of DeFi exchanges can lock their crypto in a smart contract, and in return, they gain interest. And the interest amount depends on the amount of crypto staked and the percent of interest (APY or APR).
A liquidity pool is a supply of cryptocurrencies locked in a smart contract. Users known as liquidity providers pool together two crypto tokens of equal value to create a market. They receive trading fees as interest. The interest is proportional to their share of the total liquidity provided.
For example, users can provide their crypto tokens as liquidity for a specific pair like WBTC/USDT. The DEX will use the liquidity to execute more trades, thereby collecting more fees. The fee collected from the transactions will make up the interest.
The idea is to make more crypto with your crypto. And the method of doing it is via lending it. Imagine a bank that loans money to users but reverses that scenario. Imagine lending your money to the bank. But the money here is your crypto, and the bank is a DeFi exchange.
The difference is in the duration of it. Yield farmers only lend in the short term, often only for a few days. Farmers are constantly looking for higher yield protocols where they can shift their crypto for the best returns. But, this strategy can quickly become complicated, hence riskier. And since the yield percentages are low, smaller stakes are not worth the return. And that is why only crypto whales attempt such techniques, as their higher capital ensures sizeable returns.
The idea behind liquidity mining is the same as yield farming. But there are a few key differences. The primary difference is the end goal. Yield farmers lend their crypto to maximize yield, while liquidity mining is it to provide liquidity. Yield farmers are often whales who trade in bulk, while liquidity miners are not.
In the case of liquidity mining, the span of the lent crypto also tends to be longer than yield farming. Unlike yield farming, liquidity mining mostly happens with stablecoin pairs.
Now that you have a basic idea of DeFi staking. Let’s venture into the concept behind a DeFi staking platform.
Crypto-staking platforms are a dime a dozen. I can even list a few off my head, Cake DeFi, Nebeus, and Stakefish. But these sites are not decentralized; they mandate crypto hodlers to register and move their crypto into the platform.
And that is why popular DeFi Staking platforms are hard to find. For example, Yearn Finance, GOGO, and GRO are all DeFi staking platforms. These platforms do not demand you to register your identity, and all you need to do is to connect a DeFi wallet to use these platforms. Some platforms even allow entry with only an email address. This decentralization is inherently a good thing as it provides privacy to all.
Why is a DeFi staking platform better than a centralized one? Well, for one, the user has complete control over their funds, which also removes the responsibility for the platform in case of misuse.
But the most vital aspect of a DeFi staking platform is its permissionless nature. These DeFi protocols are accessible to all; without intermediaries or censorship. And this makes it a free and fair system.
What makes DeFi staking protocols stand out? Why does the DeFi space have a TVL of $50 billion? These questions are easier to answer if you understand what, DeFi staking offers.
Crypto on-ramp is a service that connects fiat to crypto. DeFi staking platforms allow users to convert fiat money to cryptocurrency. Most DeFi platforms can connect with DeFi wallets like Metamask or Trust. And these wallets accept credit and debit cards to convert from fiat to crypto. Hence moving crypto into a DeFi staking platform has never been easier than it is now.
And this is the other thing people fail to understand about DeFi. It’s so easy to get started. You can download a DeFi wallet and add it to the browser without charge. Buy crypto via the wallet with complete anonymity and safety. And deposit that crypto and withdraw it out of DeFi protocols with ease. And that’s all you need.
Portfolio management is the other boon of smart-contract and blockchain tech. As you all know, blockchains are nothing more than digitized record-keeping databases. And this makes crypto allotment and portfolio management far more concise.
The gains calculator is another practical feature. Staking rewards are disbursed and calculated daily. Since the stake rewards are crypto, the price fluctuates with the market. In the case of an automatic subscription, stake rewards will combine with the stake for compounded interest. And the gains calculator is vital to track the progress of the investors and the platform.
Like all crypto platforms, charts and reports are commonplace. What differentiates a DeFi staking platform is that all the data in the charts are transparent. The data on the charts can be found on-chain and verified. After what’s happened to FTX recently, can you trust any centralized exchange? I didn’t think so.
Thus a DeFi staking platform is a much better option for entrepreneurs and investors.
Crypto-based businesses are innovative ventures. Although, I would suggest starting one before global regulations kick in next year. Because expanding a licensed firm is more practical than launching a new one under new laws. And believe me when I say that the FSB and OECD are planning on crypto regulations for G20 nations.
You can either develop a DeFi staking protocol on your own or approach a DeFi staking platform development firm to create it. I’ll list out four steps to build a DeFi staking platform. And these four steps are unavoidable.
Tokenomics is vital for any blockchain-related projects. And it’s no different for DeFi staking platform development.
Crypto tokens must have utility. I would suggest creating internal use cases for your crypto token. But be careful how you use it; creating value for a crypto token out of thin air is never a good idea. I suggest pegging it to a fixed-value source like a stablecoin or something tangible to reduce exposure.
But above all, tokenomics must address some key questions.
The best approach is to piggyback on an existing DeFi Aggregator protocol and accept the percentage of the yield.
I wouldn’t recommend spending much time or resources on UI/UX. For example, Yearn Finance is one of the most popular DeFi protocols but has a very rudimentary UI.
When starting, keep the site design rudimentary and focus more on seamless function. You can redesign or find a template later, as platform investors will have aesthetic preferences.
The good thing is that most DeFi staking platform needs better UI/UX development. So there will be no criticisms in that regard.
Well, you cannot skip DeFi staking platform development. There are three main parts to this development process.
The intriguing thing about DeFi staking platform development is the smart contracts. Smart contracts assess the staking platform’s tokenomics on a blockchain. And smart-contracts also create these blockchain bridges to connect with many blockchains. You can also deploy smart contracts without an admin backdoor for updates. Or use a proxy smart contract to raise updates once the app gets deployed.
For a DeFi protocol, a crypto wallet is a gateway to entry. So you must develop an integration portal for popular wallets like Metamask, Trust Wallet, and Coinbase ahead of launch. I recommend building connectivity for cold wallets like Ledger and Trezor devices. And if you’re willing to go one step forward, design a social media login like email. It is always better to offer users several means of entry into the platform.
Once deployed on a blockchain, any software is immutable without network consensus. And this is why security tests are often run on a blockchain testnet before deployment.
In dealing with DeFi projects, new protocols get released every day. We need to account for new versions of protocols that will work off the latest smart contracts. We will need to reintegrate with them. Maintenance is the part that takes time, money, and effort, so divide enough resources for that.
Use services like Sentry to track site performance and identify new errors. Mixpanel is another service like Google Analytics to determine the behavior of the site’s users. You can catch most pain points while prototyping, but you never know which features users will use the most.
And this is why you need to consider outsourcing this process. And there are many companies with expertise; that offer services in DeFi staking platform development.
There are two parts to this, development and regulation. DeFi staking platform development can take six months and a small team of developers. Overall, the cost can make up to $100,000 over six months. The longer the development process takes, the costlier it will become.
Licensing and regulation are the other sides of the coin. Licensing a crypto business will be costly, depending on your location. In the US, depending on the state, it can be as low as $20,000 up to $170,000.
While the licensing cost is unavoidable, you can conserve cost in development. By outsourcing software development to a DeFi staking platform development company, you can limit the development cost
DeFi staking is a growing industry with billions in TVL. Businesses do not have to streamline much since DeFi staking is a niche market. Competition is sparse, building brand loyalty is straightforward, and you do not have to spend much on marketing. And this is why a DeFi staking platform is the business of the future.
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