Collateral Assets

One of the distinguishing characteristics of DeFi, setting it apart and making it an attractive alternative to traditional financial systems, is its permissionless composability. Unlike the traditional system, which is hindered by permissioned structures, high barriers to entry, and associated costs, DeFi actively promotes and facilitates composability. In simple terms, DeFi protocols can be compared to Lego blocks that can be interconnected to construct fascinating structures. This means that each protocol has the ability to connect with others, enabling the output of one protocol to become the input of another. This remarkable feature allows users to interact with DeFi protocols in limitless combinations, akin to stacking Lego blocks on top of one another.

Composability brings several benefits to the DeFi ecosystem. Firstly, it significantly enhances capital efficiency, surpassing what the traditional financial system can achieve. By enabling seamless collaboration among different protocols, users can optimize their activities and capital allocation, resulting in increased efficiency and productivity. Additionally, composability adds to the utility of existing protocols. Through the interconnection of various protocols, new functionalities and capabilities can emerge. This synergistic effect creates a powerful network effect, enhancing the overall ecosystem and opening up new possibilities for innovation and growth. Ultimately, it fuels the growth and development of the DeFi ecosystem, providing users with unparalleled flexibility, utility, and opportunities for financial interactions.

StaikaFi Protocol capitalizes on composability by allowing users to deposit LSTs from PoS networks like Polygon and Ethereum as collateral to borrow the SUSD stablecoin, aiming to maximize returns for users. Liquid Staking has revolutionized crypto investing and serves as a crucial bridge between traditional finance and digital assets. LSTs offer increased liquidity, price stability, and facilitate added composability for PoS networks, resulting in a multiplier effect on the sector’s total-value-locked (TVL). This allows other DeFi protocols to generate additional yield on top of PoS rewards, accessible exclusively through Liquid Staking. Essentially, Liquid Staking enables stakers to receive base layer staking rewards—the primary source of yield in the crypto space, while utilizing LSTs in other DeFi protocols. As a result, LST holders can engage in lending, borrowing, and yield farming, expanding their earning strategies while continuing to earn staking rewards.

The StaikaFi Protocol embraces the utilization of collateralized reward-bearing assets, with a particular focus on LSTs as the primary collateral, to generate and maintain the stability of the SUSD stablecoin. Similar to MakerDAO’s lending protocol, users have the ability to borrow against their reward-bearing LST collateral, enabling them to compound their yields while continuing to earn from their LST holdings. Moreover, the protocol actively leverages the power of DeFi composability, resulting in the redistribution of SUSD yield and the distribution of revenues to participants of the DRR, lenders, and liquidity providers. This creates a synergistic effect within the ecosystem, amplifying the benefits for liquid staking protocols and maximizing the overall utility of LST tokens.

Moreover, StaikaFi Protocol’s modularity allows for future expansion to support various other reward-bearing tokens as collateral, including LST LPs. Additionally, the protocol may extend collateral options to include other stablecoins and PoS tokens, providing users with a broader range of possibilities. By embracing composability and integrating diverse collateral options, StaikaFi Protocol aims to provide users with a comprehensive and flexible platform to optimize their crypto assets and engage in various DeFi strategies.