ETHx
1. How does ETHx work?
ETHx allows users to benefit from Ethereum staking while maintaining liquidity for their assets. Here's a simple explanation of how it works:
a. Deposit and Token Issuance: When a user deposits ETH into the ETHx staking contracts, the protocol issues an equivalent number of ETHx tokens back to the user. These tokens act as a liquid representation of the user's staked ETH, allowing them to maintain control over their assets without sacrificing potential staking rewards.
b. Multi-Pool Architecture: Once deposited, the user's ETH is managed by the Stader staking manager, which leverages a multi-pool architecture. The staked Ethereum is split between multiple pools, including Permissionless and Permissioned node operator pools. This setup not only ensures scalability and decentralization but also optimizes the return potential for the staked assets.
c. Node Network and Reward Generation: The ETH from the pools is then allocated to the ETHx Node Network, a decentralized group of Ethereum nodes that interact with the protocol's staking contracts. These nodes perform critical validation tasks for the Ethereum Beacon Chain. The tasks performed by these nodes generates staking rewards.
d. Accrued Rewards and Value Growth: As the nodes generate rewards, these are accumulated and lead to an increase in the exchange rate of ETHx relative to ETH. This growth mechanism ensures that ETHx tokens increase in value over time, reflecting the staking rewards earned from the ETH staked.
So, in essence, ETHx provides a flexible, scalable, and profitable solution for Ethereum staking, allowing users to earn rewards and participate in the DeFi ecosystem without locking up their assets.
2. How do I earn rewards with ETHx?
ETHx allows you to earn staking rewards on your ETH holdings. Here's an example to illustrate the process: Let's say a user stakes 100 ETH and receives 100 ETHx, initially at a 1:1 exchange rate. The staking APR is 5%. Over the course of a year, the value of the user's ETHx holdings increases as the exchange rate grows due to the 5% APR staking rewards. By the end of the year, the user's 100 ETH has grown to 105 ETH. This demonstrates how ETHx enables stakers to continuously earn rewards, effectively growing their Ethereum holdings over time.
3. How do validators earn rewards?
Validators earn rewards by participating in the Ethereum 2.0 Proof of Stake consensus. They propose and attest to blocks, helping secure the network, and earn ETH as rewards for their effort. These rewards are accumulated and increase the value of ETHx tokens.
4. What are the potential returns with ETHx?
The rewards with ETHx are not fixed and largely depend on the rewards released on both the beacon and consensus layers, as set by the Ethereum Foundation. Currently, the APR is approximately 3.5%. However, this rate is subject to change. For real-time APY, we encourage users to check our dApp. We continually strive to optimize these returns for the benefit of our users. To estimate your potential earnings, please use our rewards calculator.
5. How can I track my earned rewards?
Your staking rewards are inherently factored into the increasing value of your ETHx tokens.
Let's consider an example where you initially staked 10 ETH and received 10 ETHx in return. Over time, as rewards accumulate, the ETHx/ETH exchange rate may increase, for instance, to 1.02. This means each of your ETHx tokens is now valued at 1.02 ETH, resulting in a total holding value of 10 ETHx * 1.02 = 10.2 ETH.
In the above scenario, the increase of 0.2 ETH represents your staking rewards. You can continually track these rewards by monitoring the changing ETHx/ETH exchange rate and the quantity of your ETHx holdings.
6. What fees are associated with staking?
A total of 10% is deducted from the rewards generated through staking. Of this, 5% is allocated as a protocol fee, contributing to the ongoing development and enhancement of the platform's infrastructure. The remaining 5% is provided to the node operators as the node operator commission. This fee structure allows for the continual delivery of innovative staking and DeFi solutions.
7. What can I do with ETHx in DeFi?
ETHx tokens not only provide staking rewards but also give access to the DeFi ecosystem. This gives your staked Ethereum additional utility while you continue to earn staking rewards. You can utilize ETHx for:
Yield farming
Lending
Borrowing
Contributing to liquidity pools
8. What are the potential risks involved with ETHx?
Using ETHx involves certain inherent risks, as with any form of digital asset investment. Here are some of the main risks that users should be aware of:
Smart Contract Security Risk: Like all DeFi protocols, Stader's ETHx protocol is governed by smart contracts, which could potentially contain vulnerabilities or bugs. To minimize this risk, Stader ensures that its smart contracts are open-sourced, rigorously audited, and covered by an extensive bug bounty program.
Beacon Chain - Technical Risk: The Ethereum 2.0 Beacon Chain is still a technology under active development. While a large number of developers and researchers are working to ensure its stability and security, there's no guarantee that it's entirely free of errors. Vulnerabilities inherent to the Beacon Chain could potentially affect the staking process and the value of ETHx.
Slashing Risk: Validators in the Ethereum 2.0 network can face penalties, including the potential loss of all staked funds, if they fail to fulfil their duties. Stader mitigates this risk by staking across multiple reputable node operators with diverse setups.
While Stader goes to great lengths to ensure the security of your staked assets, it's essential for users to be aware of these risks and make informed decisions when staking their assets
Last updated