From Tokens to Trust: Starknet’s Innovative Staking Model Explained
Backstory
Starknet is preparing to launch a staking protocol, a significant innovation for Layer 2 solutions. This feature, set to go live on November 26 2024, will allow users to stake STRK tokens, helping to secure the network while earning rewards in return. Validators are required to have a minimum of 20,000 STRK tokens and run a full node to start staking. This would in turn set the groundwork for future roles in network security.
The staking protocol is designed with several key elements.
First, rewards will be based on the amount staked with the commission set by the validator. A minting curve will also dynamically adjust rewards based on total STRK staked to balance inflation (capped at 1.6%) and participation. Withdrawals will have a security lockup of 21 days and parameters for validator commissions will be set initially, with more flexibility expected in future protocol updates.
Architecture
The staking protocol’s architecture is designed to provide scalability, security, and adaptability. Its main components include:
- Staking Contract: Manages staking activities, reward distribution, and delegation.
- Delegation Pool Contract: Facilitates token delegation to validators, tracks delegators’ shares, and handles reward calculation and unstaking.
- Reward Supplier Contract: Calculates and allocates rewards based on the staking and delegation pool.
- Minting Curve Contract: Regulates the minting curve for rewards, adjusting dynamically according to total staked STRK.
With these components, Starknet is taking steps toward decentralization, adding new responsibilities to stakers in phases to enhance network efficiency.
This staking protocol signals the beginning of more innovations and user engagement within Starknet’s ecosystem.
There are other advantages to expect, however.
Economic Implications of Starknet Staking
Staking rewards encourage users to hold their tokens over longer periods instead of frequently trading them.
This long-term holding supports network stability, helping to cut down on the volatility that often comes with frequent trading.
Staking also creates new economic opportunities for a range of participants, even those without the technical skills needed for mining or operating complex nodes.
Through staking rewards, participants can earn passive income, which enriches the Starknet ecosystem.
By locking tokens into staking contracts, Starknet effectively lowers the circulating supply, which can help stabilize or even boost the token’s value.
This reduced supply, combined with the demand for transactions and network involvement, creates economic balance and supports price stability.
Lastly, the staking model also strengthens network security, as participants have a financial stake in maintaining the network’s integrity.
With the risk of losing their staked tokens due to actions that harm the network (such as slashing for malicious behaviour), participants are motivated to uphold a secure and reliable network.
Conclusion
Starknet’s new staking protocol is a huge step toward strengthening its network and engaging its community.
By allowing users to stake STRK tokens for rewards, Starknet encourages long-term holding, which supports price stability and reduces token supply.
The protocol also promotes decentralization and security, giving participants a financial stake in the network’s integrity.
Altogether, this staking model not only benefits individual users but also lays a strong foundation for Starknet’s future growth.
