Defrost Finance
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βοΈ Mechanisms and Functions
Staking Melt
MELT holders can choose to stake their MELT tokens and earn yields from protocol fees and mining rewards.
- 50% of the protocol fees as in H2O will be distributed to MELT Boosters (Please check more details in the Mining Boosting part).
- MELT tokens will be rewarded for the MELT stakers per day on an auto-compounding basis, and the APY could be eligible to adjustment based on community governance. The auto-compounding mechanism is more beneficial for earlier stakers and longer-term stakers.
- There will be no lockup requirement for MELT stakers.
How the new MELT pool works
When you stake MELT you will get sMELT (as staked MELT), a token that represents your share in the pool. Your MELT rewards will start compounding automatically at a rate of 0.2% per day β totaling 107% a year for early stakers.
Initially, one MELT will be equal to one sMELT. As the rewards compound, however, this will inevitably change β meaning every day that passes new users will get less sMELT when committing their MELT.
For example, if on Day One a user stakes 100 MELT in the pool, he/she will get 100 sMELT. One year later that 100 sMELT will represent 207 MELT. If at that time a second user comes along and also stakes 100 MELT, he/she will only receive 48 sMELT.
A second reward β H2O from stability fees
(H2O rewards have been moved to the Mining Boosting contract from 2021/12/27)
Stability fees accrued in H2O will be shared among stakers based on their sMELT share in the pool, with rewards in H2O being adjusted each month based on the stability fee and liquidation rewards accumulated in the previous 30 days.
For instance, if the H2O minted in a given month is 30 million and the average stability fee is 1.5%, 18,750 (30M*1.5%*50%/12=18,750) H2O would be distributed as a reward. Assuming $1million MELT is staked in the pool, the APR for that month would then be 22.5%(18,750*12/$1M=22.5%)
In the first month of operations, about 10,000 H2Os have been collected by the contract from stability fees and liquidation penalties. These will be provided as MELT staking rewards to initial stakers.
Staking and Governance
The Defrost Voting system will be deployed soon, with sMELT and LP tokens on Trader Joe representing users voting power.
Thus, staking in the new single token MELT pool will provide the main and simplest route through which our community can effectively join the governance system.
It is important to note that since the APY compounds, users who do not stake their MELT will inevitably see their share in terms of total circulation decrease, and with it, their voting power and income from stability fees will shrink as well.
Vice versa, staking longer will see their share increase in a compounded manner compared to others.
Last modified 4mo ago