Liquid Staking Rates — How StaFi liquid staking rates compare to Bank deposit rates.
Growing up, I saw my dad always taking a large chunks of the money he made everyday at the store to the bank. Of course he wasn’t going there to spray money, I always thought.
Nah! Dad wasn’t raining down the money on the bank staff like a confetti. We needed money at home and Dad wouldn’t be so extravagant as to give such to the bank every day especially knowing he wasn’t campaigning for any election. I later found out that he was putting it in a fixed deposit. Like many others, he was looking for passive income in a pretty safe way by depositing funds in the bank to earn deposit interest on his money while it stayed there in the bank.
Few days ago, I was prompted to take a look at deposit interest rates across selected countries and economies. It was a mixed bag of feelings but my mind tilted towards negativity with regards depositing my money in the bank. Well, there are some really cool interest rates like in Argentina (29.3%), Ghana (11.5%), Somalia (25%), Yemen (15.3%), Uzbekistan (16.3%), Turkey (13.4%) and Madagascar (13.2%), many were not so cool. Countries like Mauritius (1.7%), South Korea (1.2%), Japan (0.3%) and Czech Republic (0.3%) among others are simply ridiculous. My country Nigeria sits at 4.7% according to this world bank data site and even that is pretty poor.
Why would I invest my money to get just 4.7% at the end of the year? Now I was grown, I began to seek alternatives and I saw one.
The best things, sometimes, are found in the most obvious places and it is safe to say that with blockchain technology, my search came to an end. I was lucky enough to come across liquid staking and when I checked for platforms where I could actually do this, StaFi protocol popped out. What exactly is liquid taking and why was I so convinced that I’d rather put my funds in StaFi protocol for higher rewards then take it to one of the local banks for those miserly rewards. Let’s take a short walk as I try to see how StaFi’s liquid staking rates compare to conventional banking rates.
StaFi and Liquid Staking
StaFi protocol is a project that offers liquid staking solutions for a number of crypto assets across various proof-of-stake chains. To better understand liquid staking (there is no solid alternative), let’s get down to staking.
Staking is an activity in the blockchain and cryptocurrency space where owners of crypto assets lock their crypto assets in a wallet or staking platform like StaFi with the primary aim of securing the network while earning rewards for this act. Of course, you should be rewarded for helping to make sure that the network is still running and functional. However, rewards from staking many POS assets are not so high that when the APRs are checked, countries like Mauritius and South Korea will be having a good laugh. StaFi protocol decided to pour water into staking and give us liquid staking. Far from it, there is no water in liquid staking.
The ‘liquid’ in liquid staking is tied to liquidity in blockchain technology and economics at large. When you’re talking about liquidity, you’re looking at how easy it is to convert an asset into another asset or even cash to hedge against inflation or the opposite. Staking takes the liquidity of your assets away. These assets are locked up the moment you stake them in these platforms. For many, you would even need to wait for an unbonding period of which a whole lot can happen in that time. When you stake an asset, say BNB on the StaFi mainnet, you will be issued staked representatives of your staked BNB, rBNB. Your BNB will be locked up in the StaFi chain to give you rewards. The rBNB is pegged 1:1 with your staked BNB and ensures that you can seek for yields outside despite having your BNB locked. This includes looking for lending, borrowing or other activities in the DeFi space that gives you high returns. You can even get to provide liquidity with your rToken pairs to earn rewards. All these will still look like stories until we add figures to them. Let’s compare yields when I decide to deposit $1000 worth of funds in a bank in Nigeria for a year and how much I get from staking my BNB on StaFi protocol.
Bank deposit rates vs liquid staking APRs
We will be comparing yields between bank deposits rates and liquid staking rates without taking into consideration the possibility of auto-compounding.
In the first case, I take my $1000 to deposit in the Nigerian bank with the average deposit rate sitting at 4.7%. This means that at the end of the year, I’ll be getting 4.7% of $1000 added to my initial capital.
That’s 4.7/100 x 1000 = 47
At the end of the year (inflation aside) I should be having $1047 dollars for doing nothing. That’s pretty cool.
Let assume I use my $1000 to get BNB and I deposit my BNB on the StaFi protocol platform. I will have a basic staking reward of 11.2% standard for staking BNB. I will be issued about 3.3 FIS per BNB staked as an rBNB minting incentive. We wouldn’t add this in the calculations. Now with my rBNB, I can provide liquidity for the rBNB/BNB liquidity mining pool. I get to receive LP tokens which I can take for a mouthwatering APR of about 80%.
That’s 80 + 11.2 = 91.2% APR.
This would give us 91.2/100 x 1000 = 912
At the end of the year inflation aside I should be having $1912 which is almost double of my initial capital.
The rewards I got from liquid staking is 19 times bigger than what I would get from depositing in the Nigerian bank and much bigger when compared to a Japanese bank.
Let’s embrace liquid staking as an efficient way to earn rewards without fears of liquidity issues whilst enjoying high octane rewards.
StaFi website: https://stafi.io
StaFi Twitter: https://twitter.com/stafi_protocol