Staking ICP tokens on the Internet Computer (ICP) protocol is a fascinating journey into the world of decentralized governance and rewards. By locking up ICP tokens to create a "neuron" within the Network Nervous System (NNS), users participate in shaping the network's future while earning rewards. Let's dive into the key attributes and processes involved in native staking, and discover how platforms like stakeGeek enhance the experience with added liquidity and simplicity.
Key Terminology
Neuron: Think of a neuron as your ticket to influence the Internet Computer's future. When you stake your ICP tokens, you create a neuron. These neurons come with attributes like staking, maturity, dissolve delay, and voting power, making them the cornerstone of the ICP governance system.
Maturity: Maturity represents the rewards your neuron has accumulated from voting. It's like a savings account that grows over time. You can either keep it in your neuron to boost your voting power or convert it into ICP tokens through a process called spawning.
Dissolve Delay: This is the time your neuron has to wait before it can be dissolved and your staked ICP can be accessed again. The longer the dissolve delay (ranging from 6 months to 8 years), the higher the rewards you earn.
Voting Power: Your voting power is a combination of the amount of ICP you’ve staked and the length of your dissolve delay. The more you have of both, the more weight your vote carries in governance decisions.
The Staking Process
Staking ICP tokens involves creating a neuron, which then takes part in network governance by voting on proposals. The more you participate, the more rewards you earn. These rewards get added to your neuron's maturity, which you can either auto-stake to increase voting power or spawn into liquid ICP.
Native ICP Staking Rewards Distribution
The process of distributing rewards in the ICP staking model is methodical and fair:
- Proposal Submission: Governance proposals are submitted to the NNS.
- Snapshot and Ballot Creation: At the start of each proposal, a snapshot of all eligible neurons is taken, recording their voting power.
- Voting Period: Neurons vote on the proposals during a set period.
- Daily Check for Completed Proposals: Each day at 4pm UTC, the NNS checks for completed proposals and distributes rewards accordingly.
- Reward Calculation: Rewards are calculated based on the voting power of participating neurons.
- Maturity Update: Rewards are added to the neuron's maturity at the end of each day.
- Auto-Stake or Spawn: You can either auto-stake the rewards to increase voting power or spawn them into liquid ICP after a 7-day delay.
The Challenge of Liquidity
One major downside of native staking is liquidity. Once your ICP is staked, it becomes illiquid until the neuron dissolves, which can take up to 8 years. Similarly, auto-staked maturity increases voting power but remains illiquid. This is where platforms like stakeGeek come in.
Enter stakeGeek: Simplifying Staking with Liquidity
StakeGeek offers a more user-friendly and liquid staking experience compared to the native NNS method. Here’s a quick comparison:
How stakeGeek Works
Staking ICP on stakeGeek is straightforward. Users log in with a supported wallet or Internet Identity, navigate to the Stake tab, enter the desired amount of ICP, and confirm the transaction. After 8 days, they receive xICP tokens in their wallet, representing the staked ICP at a 1:1 ratio.
Staking Reward Distribution: Rewards are distributed automatically. The common neuron within stakeGeek votes on ICP governance proposals, earning rewards that are auto-staked. New xICP tokens equivalent to these rewards are minted and distributed daily.
Understanding the 8-Day Delay
The initial distribution of xICP tokens takes 8 days to ensure fairness. This period matches the duration of active proposals, ensuring new stakers do not dilute existing rewards.
Fast Liquidity on the Open Market
With xICP tokens, users can enjoy fast liquidity by trading them on the open market. This means you can convert your staked assets into liquid ICP without waiting for the standard unstaking process.
Delayed Liquidity through Unstaking
Alternatively, users can unstake their xICP using the native unstaking mechanism, which takes 6 months.
Example of stakeGeek in Action
Imagine Alice wants to stake 100 ICP with an APR of 8%. She logs into stakeGeek and stakes her ICP. After 8 days, she receives 100 xICP tokens. Alice starts earning daily rewards immediately. If she sends 10 xICP to Bob, he starts receiving rewards based on the xICP he holds. For liquidity, Alice can sell her xICP on the market or use the unstake mechanism to get ICP in 6 months.
Security and Governance
StakeGeek ensures the security of staked ICP through:
- Operating entirely on the Internet Computer blockchain with no Web2 involvement.
- Undergoing third-party audits.
- Transitioning governance to a DAO managed by the community through the launch of an SNS (Service Nervous System).
xICP Token and Platform Fees
The xICP token uses ICRC-1, ICRC-2, and ICRC-3 standards, ensuring compatibility with various DeFi protocols. A minimal transaction fee applies to token transactions, with staking and unstaking fees during the beta period. Future fees will be determined by DAO governance.
Common Neuron Voting
The common neuron within stakeGeek votes on ICP governance proposals. Initially, it follows the GEEKFACTORY known neuron to ensure 100% participation. Post-beta, voting mechanisms can be adjusted based on DAO decisions.
Technical Overview
StakeGeek is built entirely on the Internet Computer blockchain, utilizing multiple canisters (smart contracts) for various functions. These canisters include the Canister Proxy, Neuron Registry, Stake Controller, Lock Service, xICP Token Ledger, xICP Ledger Proxy, ICP Ledger Proxy, Reward Controller, Snapshot Service, and Unstake Controller.
Conclusion
Native staking on the Internet Computer protocol is a robust mechanism for governance and rewards but comes with liquidity constraints. StakeGeek offers an innovative solution with liquid tokens (xICP) that retain the benefits of staking while providing flexibility and ease of use. This platform ensures secure, transparent, and efficient staking processes, enhancing the user experience within the ICP ecosystem.
