OBSOLETE - Staking
Maximizing Returns with Staking
Cryptocurrency staking means “locking up” a digital asset or being a validator in a decentralized crypto network.
Staking is the primary value-accrual strategy of many DeFi protocols. For Gyro, users would stake their GYRO through Gyro’s dApp website to earn rewards. These rewards derive from bond sales proceeds and may vary based on the number of GYRO staked within the protocol and the reward rate which is set by an algorithmic monetary policy.
When you stake, you:
1. Lock in GYRO and receive an equal amount of sGYRO.
2. Your sGYRO balance then rebases up at the end of every epoch automatically.
3. sGYRO can be eligible to be transferred so it is composable with other DeFi protocols.
To do it is easy!
1. Go to the Gyro website and select “stake.”
2. Send your GYRO to the staking contract and receive sGYRO at a 1:1 basis.
Remember that sGYRO is a transfer-restricted rebasing token so it’s not meant to be traded or used for anything except holding.
When you unstake, you:
1. Go to our website and select “unstake.” Send sGYRO back to the staking contract to receive GYRO at 1:1.
2. Burn your sGYRO and receive an equal amount of GYRO.
3. Unstaking also requires the user to forfeit the most recent rebase as an exit fee.
In cryptocurrency, rebasing is the process of adjusting the value of a derivative (sGYRO) to its underlying base (GYRO).
Because Gyro’s protocol distributes GYRO by sending them to the staking contract without asking for sGYRO back, this increases the ratio of GYRO staked to sGYRO outstanding. Thus, resulting in a rebase to correct the difference.
For example: there are 100k GYRO staked and 100k sGYRO outstanding. The protocol produced $5k profit for the day, which it uses to mint and back 5k GYRO. It sends those GYRO to the staking contract; there are now 105k GYRO staked and 100k sGYRO outstanding. sGYRO supply needs to increase by 5k, or 5%, to return to balance. So, sGYRO is rebased up by 5%.
Rebases occur retroactively. For example, at the end of epoch 10 triggers a rebase of profits from epoch 9. This delay lets you see what you’re missing if you want to unstake or what you’ll get if you want to stake.
The reason to stake — Compound Interest
Annual Percentage Yield (APY) is a measurement of compound interest. This is different from Annual Percentage Return (APR), which is a measurement of simple interest.
Staking on Gyro allows users to receive compounded returns automatically. When users stake GYRO, they receive sGYRO. sGYRO represents our staked GYRO. sGYRO can always be exchanged 1:1 for GYRO, but it rebases to reflect profits. This means we can compound; for example, every day of our first week we rebased ~0.45% per epoch. If you held 100 GYRO, your first rebase of the week was 0.45 GYRO and your last rebase of the week was 0.49 GYRO. This is a 10% increase in yield! If we had simple interest, every epoch would be 0.45 GYRO.
Staking is how profits are distributed equitably to the participants. By way of sGYRO, everyone will get the same percentage profit for each epoch. Therefore, the act of rebasing also gives us the chance to compound yields without having to harvest or do anything apart from holding.