Explaining Stader Labs (Like You Are 5)
A crypto-newbs “I’ll-take-you-by-your-hand” guide to understanding Stader Labs, the purpose behind the protocol, how to use it (with screenshots), and what the future of staking looks like.
POV: You’re new to crypto and want your crypto holdings to work for you. But you don’t want to put them in some degen yield farms that deal in shitty, highly volatile tokens that don’t serve any purpose.
Stader might be the protocol that you didn’t know you needed.
Stader gives you a decent APR on your staked assets while also allowing you to contribute to the decentralization of a Proof-of-Stake-based chain, which is the most important tenet of any blockchain.
“Whutt!. . . What the heck is Proof-of-Stake?”
During the creation of a block, the people participating need a mechanism to reach a consensus to make sure the transactions recorded on that block are all true and legitimate.
The OG Bitcoin uses the Proof-of-Work (aka PoW) mechanism to reach consensus. The miners (people participating in block creation) need to use their hashing power which requires tons of electricity.
This energy-intensive nature is the number one point of attack from no-coiners and crypto-agnosts against PoW.
So over the years, developers have come with a variety of alternatives, and Proof-of-Stake (aka PoS) is one of them and is widely used across the broader crypto ecosystem.
Rather than relying on hashing power to allow people to participate in block creation, the PoS focuses on collateral. Meaning in order to become a validator (a person who validates a block and makes sure the transactions are true), locking in a certain amount of crypto assets is compulsory. So the validators have skin in the game and a reason to stay honest.
The person participating in the consensus is called a validator or a node. The more assets a validator locks in, the higher the chances of him getting selected to validate new blocks.
What is Stader Labs trying to do?
Stader is trying to simplify staking. It allows users to earn a passive income by locking in their assets and becoming a delegator. Meaning they stake their coins and delegate the validator role to someone else.
This has multi-faceted benefits: Decentralization is enhanced as more validators get to participate in consensus, the delegator earns rewards, the validator gets his commission.
Why is Stader Labs working in the Proof-of-Stake ecosystem?
Out of the total crypto market cap of 1.91 trillion, PoS tokens account for half a trillion, and the capital staked in these chains is north of $150B.
According to Stader Labs, the PoS network is inevitable to grow much faster than the rest of the crypto market because of several reasons, primarily because PoS is eco-friendly and will continue to stay in demand. Staking is at the heart of PoS chains. Without staking, these blockchains won’t exist.
And the onset of staking pools, delegation (the ability to lock in your crypto tokens and allow someone else to be a validator), and rewards incentives will draw a lot of eyeballs as crypto continues to go mainstream.
What problems is StaderLabs trying to solve?
When it comes to staking, there are three main problems that delegators run into:
Selecting the right node to delegate to: There’s little information present about the performance of validators. Most delegators participate for rewards incentives (no diss, only facts) and aren’t generally devs — they don’t understand the technicalities of performance metrics and risks of staking to a node.
Redelegating: When a node’s performance is not satisfactory, the delegates have to repeatedly go through the cumbersome process of finding the right node.
Monitoring: Keeping an eye on your staking position, including tracking, monitoring, and staking rewards, is quite a headache. And doing this for several validators just multiplies the tedious work.
According to Stader Labs, around 80% of the delegators think of staking as a tedious and time-consuming process and would love to have a solution that simplifies their job.
Stader is trying to empower the delegators by helping them choose the right nodes and pools based on their preference. Its smart UX/UI reduces 95% of the effort by providing delegators with customer products, tools for smart delegations, governance, and rewards management.
Plus, it also allows them to use their staking rewards to earn extra yield. The staked tokens can be put into a curated set of cross-chain lending protocols to get a loan against or can be put into liquidity pools in pairs, among other things.
The team behind has created Stader in a modular fashion. Meaning just like your lego used to fit with Adam’s legos when you were like 5. Stader’s code can easily plug into the code of other protocols, allowing third-party devs to integrate them or build their product atop Stader.
Not only that, the founders envision building APIs to integrate Stader in centralized crypto exchanges. To reduce the friction for crypto-newbs to participate in staking.
Stader x Solana
Stader is ready to work with over 1400 validators serving their time to make the Solana blockchain more secure and robust.
The protocol will be launched in phases.
With phase 1, the liquid staking solution will be launched, which allows users to participate in a slew of defi protocols to increase the yields on the staked rewards.
Phase 2 will see the arrival of simplified staking solutions to allow delegates to invest in a basket of validators with the click of a button.
Phase 3 awaits the release of degen vaults, which offers token holders to pick strategies custom-tailored to their risk tolerance.
How to use Stader (with screenshots)
Stader is yet to release on Solana. Here’s the walkthrough on the Terra blockchain — it’s going to stay the same for Solana (for the most part!)
- Go to staderlabs.com. Click on Stake Now to enter the protocol interface.
2. Connect the wallet.
3. Under the “Liquid Staking” dropdown on the left, click on pools to stake LUNA for LunaX. LunaX is the staked representative of Luna. Initially, when you stake, 1 LUNA = 1 LunaX. But as time goes on, your staking rewards will continue to accrue. In other words, LunaX will grow in value in relation to LUNA, 1 LunaX = 1.420 LUNA or something like that.
4. Go to the “Liquidity Pools” section to put your LunaX to earn extra yield: provide liquidity in a liquidity pool with LunaX and LUNA. You might have to convert half of your LunaX to LUNA if you don’t have LUNA already in your wallet as liquidity providing works with a pair of tokens. You can also see the history of your transactions.
5. Click on “Rewards” to avail your farmed tokens (SD tokens earned by providing liquidity) or any other airdrop.
6. Under the StakePools drop down on the extreme left, you can find the category of validators you wish to delegate your coins to. Against each category, you can see the APR associated.
The blue-chip validator bucket contains the A-list validators who’ve shown a track record of being available at the time of block creation, and they don’t get slashed. The community bucket contains the validators that the community deems valuable to the network.
7. The strategies subsection under “Stake Pools” is meticulous (or any other word that describes how good it is.) You can change the slider on the auto compound reward to change how many stable coins that you get as rewards are staked back.
8. The “Portfolio” gives you a bird’s eye view of what your investment is up to.
Stader Labs’ future
Currently, Stader is live on Terra mainnet (the second biggest blockchain by total value locked in defi). It’s soon going to be released on Solana and will continue to make inroads to other major PoS based blockchains, including the forthcoming Ethereum 2.0, Cosmos, Near, and other Ethereum-forked blockchains.
Stader intends to unlock a new world of staking derivatives. Down the road, Stader would allow DAOs and developers to create their own custom staking solutions by providing them a pool of validators, releasing staking-based cross-assets ETFs, among other things.
In a nutshell, it wants to become the leading staking protocol across the broader crypto ecosystem.
