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DeFi Protocol StaFi Nearly Halves Commission Fees for Staking

source-logo  coindesk.com 01 March 2023 20:44, UTC

StaFi, a decentralized finance (DeFi) protocol, has nearly halved its commission fees on its liquid staking derivatives product in a move to bolster its platform's adoption and growth, the company announced Wednesday on its blog.

The protocol will now charge users a 10% commission fee, the proceeds from which will be evenly distributed among validators and the StaFi DAO Treasury. Previously, the protocol charged its users a 19% staking commission.

"In order for StaFi to be a mutually beneficial ecosystem, it is crucial to incentivize stakers to participate in the project and contribute to its growth," StaFi said in its post.

Staking is a consensus mechanism that validates transactions for proof-of-stake blockchains such as Ethereum, offering users a path to collecting yield on their cryptocurrency holdings.

Under the new 10% commission fee model, 5% of the fee will be allocated to validators, while another 5% will go to the StaFi DAO Treasury. The distribution of the remaining 90% ETH reward will be determined by assessing the ratio of the validator’s capital to the user’s capital.

The new model should incentivize stakers and validators to engage with the StaFi protocol, according to StaFi. But offering more attractive rewards for users will come at the cost of decreasing the StaFi DAO Treasury's own income, potentially limiting StaFi's ability to pay contributors and fund projects on its protocol.

StaFi's move to slash commission fees comes in the run up to the Ethereum Shanghai Upgrade, a network upgrade that encompasses a collection of improvement proposals, including one to allow investors to collect their staked, or locked-up, ether. The upgrade, which is slated for March, is expected to boost the number of stakers within the DeFi ecosystem, offering StaFi an opportunity to attract more builders to its protocol.

Read More: Upcoming Upgrades That Will Shape the Ethereum Ecosystem

coindesk.com