Introduction

What is STAKE on Hyperliquid?

STAKE on Hyperliquid

STAKE is an upcoming decentralised staking protocol planned to deploy on the HyperEVM. Powered and governed by the HIP-1 standard protocol token STAKE, with upcoming DeFi interoperability enabled by the liquid staking receipt token stHYPE.

At it's core STAKE provides a simple way to get rewards on your digital tokens. The STAKE protocol enables anyone to provide HYPE collateral to and receive a share of rewards from the most reliable and performant Hyperliquid node operators.

1. Staking pool. Protocol to manage deposits, staking rewards, and withdrawals.

2. st[token]. Unlike staked tokens, the STAKEst[token] are freely transferable instead of locked as in the case of native staking. STAKE lets users operate with staked tokens by leveraging collateral, lending, farming, and other kinds of DeFi protocols.

3. DAO. STAKE liquid protocols management entity, responsible for picking node operators, configuring the protocol parameters and much more.

📝 To dive into the details of governance design and implementation, proceed to DAO

1. Node Operators. Entities that manage a secure and stable infrastructure for running validator clients for the benefit of the protocol. They’re dedicated staking providers who can ensure the safety of funds belonging to the protocol users and correctness of validator operations. We only work with the best.

The HyperEVM is and remains a primary focus of STAKE.

Liquid staking

Problem statement

Traditionally, staking in Proof-of-Stake (PoS) protocol based projects has been about locking one’s tokens in one project for a long time and expecting a fixed, predetermined staking reward in return. While it guarantees the return on staked tokens much like a bond, it also limits the opportunities of generating higher returns on those tokens from the DeFi ecosystem. If you’ve staked all of your crypto holdings, you can’t invest or trade in more profitable crypto pairs on exchanges.

Solution

Liquid staking allows using the st[token] in other trading opportunities to let the user get the best of both worlds - a reward on your staked tokens, as well as the returns from new trading opportunities. Liquid staking introduces various fundamental benefits by:

• Making staking process simple - no need to worry about hardware setup and maintenance;

• Making it possible to get rewards on as small a deposit as users want (i.e, HYPE token may have a minimum requirement in order to run a validator);

• Providing the st[token] a building block for other applications and protocols (e.g., as collateral in lending or other trading DeFi solutions). Liquid staking gives an opportunity to maximize the potential while having the best of both worlds;

• Providing an alternative to or even encompassing exchange staking, solo staking, and other semi-custodial and decentralised protocols.

Comparison with other staking options

Solo staking is great, but it comes with some disadvantages. Setting up a validator node requires a pristine technical understanding, can bring with it a minimum deposit, plus slashing and offline penalties can get very severe if the staking is managed improperly and finally the staked amount is locked up for a significant period.

Solo staking is similar to other option SaaS staking in that you are having your own validator keys. Nevertheless, with SaaS you must trust a third-party (usually centralised), which may act maliciously, attacked or simply regulated.

Alternatively, it may eventually be possible to produce staking rewards for HYPE via centralised exchanges. Needless to say, crypto tokens and CeFi are not suited well together from the fundamental standpoint. It is also worth mentioning the economic aspect - by staking within some centralised entities, the user does not receive a corresponding token in return and, thus, loses the opportunity to perform any subsequent activity within DeFi or the same centralised entity, where tokens were staked. Yes, APR, when staking on centralised exchanges might be higher, but with a significant amount aggregated within the centralised entity comes a huge potential influence to the ecosystem that was fundamentally designed decentralised.

Through the use of a liquid staking solution such as STAKE, users can eliminate these inconveniences and benefit from non-custodial staking backed by the actively maintained validators set. Liquid staking is unlocking the potential of PoS by giving users the ability to not only stake their tokens, but have the liquidity to use those tokens in DeFi projects that way not only increasing rewards for the individual, but growing the staking participation in general.

STAKE on Hyperliquid APR

APR provides only the current estimation of the rewards without any upfront forecasts.

User's APR (STAKE staking APR) = Protocol APR * (1 - Protocol fee)

Protocol APR

By Protocol APR we mean gross annual percentage rate — the overall rewards received by STAKE validators to total pooled HYPE estimated as moving average of the last 7 days.

Slashing

In addition to rewards, penalties and slashing can be applied to validators.

Although we currently do not know the specifics, a penalty is a form of reducing the validator’s stake, which is not online or doesn’t meet certain specifications criteria when attesting the blocks. As a result of it, APR can also reduce.

Performance of STAKE validators The better the underlying operator sets are, the more robust, resilient, and performant the underlying protocol.

Protocol fee

STAKE applies a 10% fee on staking rewards that are split between node operators and the DAO Treasury. The fee can be changed by the DAO pending a successful vote.

Security

The security of STAKE is highest priority beginning at the time of its initial deployment, but still users should investigate risks involved before engaging with it. We are constantly working on security improvements:

• Using of DAO for governance decisions & to manage risk factors.

• Having multiple audits finished (upcoming).

• Having a committee of elected, best-in-class validators to minimise staking risk.

• Using of non-custodial staking service to eliminate counterparty risk.

We currently have an internal set of attributes that we think are important for the decentralisation of the protocol, and how STAKE is faring against these targets.