Tranquil stONE (HRC20 token) is a liquid staking derivative, which allows users to stake their ONE tokens with validators, helping secure the network and earn staking rewards. Unlike traditional staking, stONE can be used in DeFi dapps such as Tranquil Lending.
The contract address is 0x22D62b19b7039333ad773b7185BB61294F3AdC19.
DeFi use cases of Tranquil stONE include:
Depositing it as collateral on Tranquil Lending to borrow other assets
Providing liquidity for the stONE-ONE LP, earning LP fees as well as incentives
Swapping stONE for ONE using the LP to skip the undelegation wait time if funds are needed urgently
As a longer term, more ambitious goal, we aim to build liquidity for other pairs (e.g. ETH-stONE, USDC-stONE, etc.), so stONE can be used in place of ONE as the currency of choice in the Harmony DeFi ecosystem.
In addition to being more liquid and usable in DeFi, Tranquil stONE is also better than traditional staking:
Auto-compounding of staking rewards every hour to earn higher APY.
In traditional staking, you will have to manually collect and re-delegated rewards for compounding
More tax efficient since taxable event only occurs during unstaking
In traditional staking, you create a taxable event every time you collect rewards
How it works
Here is the main flow for staking and unstaking
Staking: Users stake their ONE token with the LiquidStaking smart contract and receive stONE tokens as receipt, representing their staking deposit. The trusted relay node listens to these events and delegates the deposited ONE tokens to a whitelisted validator.
Unstaking: Users redeem / burn their stONE token and the trusted relay node will undelegate a corresponding amount of ONE from a validator. After the undelegation delay of 7-9 epochs, the user can withdraw the undelegated amount.
Rewards: The stONE token represents a share of the total amount of ONEs under control of the protocol. The trusted relay node will collect and compound rewards periodically, which will increase the total ONEs under its control. This will update the exchangeRate, which determines the value of ONE to stONE.
The stONE implementation takes the following design decisions:
Non-Rebase Index - To be compatible with DeFi, stONE is a non-rebase token, with collected rewards being reflected in an increasing exchange rate between stONE and ONE. This is similar to wrapped stETH.
Trusted - Currently, there is no way to send staking transactions through the EVM. Therefore, Tranquil stONE is designed as a trusted solution, similar to Lido, using trusted relay nodes that listens to onchain messages and send the required staking transactions.
The core Harmony team has a roadmap item to support EVM-based onchain staking transactions. Our goal is to migrate to a trustless, non-custodial solution once this feature is available. We want to work together with the Harmony team and will be reaching out to see how we can help on this roadmap item.
How do I collect my staking rewards?
With stONE, you do not manually collect staking rewards. The protocol will automatically collected and compound it. The rewards will be reflected in the stONE exchange rate. Initially the exchange rate will be 1-to-1. As the protocol collects rewards, this exchange rate will gradually increase, so you can redeem stONE for more ONEs than you deposited.
Which validators do you use and how are they selected?
The validators used by stONE are all stored on-chain in the smart contract. The selection logic for selecting a validator also occurs on-chain. Each validator will have an allocation score that determines how much ONEs will be delegated to it.
Initially we will choose 5-10 reliable validators at launch, but longer term, the list of validators and their allocations will be determined by governance using the TRANQ token.
Validators should meet the following criteria:
5% commission rate or less
Support multiple BLS keys
Over 99% uptime and election rate
In our vision, validators would need to stake and lock the TRANQ token in order to vote for an allocation. They will also be able to "bribe" other TRANQ stakers for their votes, similar to the bribing system used by Curve. This design will create demand and accrue value to TRANQ holders beyond just protocol fees.
What are the protocol fees for using stONE?
Tranquil stONE will collect a protocol fee in addition to validator commission fee for collected rewards. The exact protocol fee will be determined by governance and a portion will be returned to TRANQ holders via the locked TRANQ staking pool. Another portion of the protocol fee will be used to create a reserve fund to pay for the gas costs of staking transactions and insurance against slashing events.