What is StakeDAO?
If DeFi has taught us anything it's that "lockup" is a relative term. Staking generally implies locking up your tokens for a fixed duration to secure the protocol. For the entire lockup duration, users get rewarded in the native protocol's tokens or receive a portion of the protocol fees. With the emergence of liquid staked tokens, lockups are no longer a deterrent for staking. Users can enjoy the yield from staking while having a tradeable token.
In the context of DeFi, staking applies to governance tokens. Basically, you stake your governance tokens to gain voting power and receive a staked version of your token that can be traded. For example, staking CRV gives you an equal number of veCRV tokens that can be used for voting in the protocol.
StakeDAO does the exact same thing – staking via StakeDAO gives you a liquid version of the locked token, which can be freely traded within DeFi markets. So where does StakeDAO derive its value from?
To explain StakeDAO, it's important to note that incentives dictate users' behavior. Users faced with two similar services often settle for the protocol that pays the higher yield, even if it's riskier. StakeDAO exists because it offers a higher yield on users' crypto.
StakeDAO also has a native token called SDT. It is a governance token that also serves as a yield booster on its platform. From the governance perspective, StakeDAO is fully managed by the SDT holders. They dictate the allocation of SDT incentives and vote on which crypto assets to add.
The price of SDT is tightly correlated to the number of tokens in circulation and the protocol usage. By staking SDT, the circulating supply shrinks. Therefore, the SDT community has to balance the inflow of new users with the SDT incentive allocation to balance the price of SDT.
Using StakeDAO doesn't require holding their native token – no KYC is required either. The only requirement is that you hold the DeFi governance token supported by StakeDAO.
To this day, StakeDAO hasn't experienced any hack. The StakeDAO treasury is secured by a multisig. As an extra precaution, Stake DAO has agreed with Frax, Angle, Curve and Convex to create an Emergency DAO, which will be able to close any vote that seems malicious and disregard the final result.
How does StakeDAO work?
StakeDAO is a non-custodial platform that helps you maximize staking across multiple DeFi protocols. Users can lock their tokens with StakeDAO and multiply their staking yields while being able to trade the underlying asset.
Since its launch in 2021, StakeDAO went through various changes. At some point, the protocol introduced derivatives trading strategies for its vaults among other features. As of 2023, StakeDAO appears to only have liquid staking tokens as its main offering.
Stake DAO Liquid Tokens
Currently, if a person or protocol wants to use their lockable tokens (CRV, FXS, etc.) for governance or for boosting yield, they are limited to the following options:
1) Lock on the native protocol, allowing them to benefit from a small yield and to vote and receive bribes, potentially delegate their boost, but losing liquidity over the asset.
2) Use a locker, benefit from boosted yield and yield farming, be able to exit with a limited penalty, but lose their governance power.
By forcing a choice between voting power or yield, these options impose restrictions on users. But what about being able to benefit from the best of both worlds? That’s where Stake DAO’s Liquid Lockers come into the picture.
Stake DAO Liquid Lockers allow DeFi users to unlock power from lockable tokens (e.g. ANGLE, FXS, CRV) without having to compromise on yield, voting power, or liquidity.
With Stake DAO Liquid Lockers, anyone that supplies assets receives the maximum yield boost while retaining full voting rights and benefits of their token's native protocol, as well as the ability to boost voting rights, on-sell them, and exit their position back to the underlying token.
How to make money on StakeDAO?
StakeDAO offers you a couple ways to make money on their protocol. The main method is to stake DeFi tokens via their platform. One of the advantages is that you unlock liquid staking tokens which can be traded within the DeFi ecosystem.
The protocol interface has been deliberately designed to be user-friendly. With just a couple clicks you can lock your tokens and earn passive income. The only requirement is that you hold tokens from their list of supported assets.
StakeDAO Staking
Staking on StakeDAO involves locking up your governance tokens from DeFi protocols to earn yield. The benefit of using StakeDAO over staking solo is that you unlock stTokens, a liquid version of the staked tokens.
Besides the regular APR posted on their platform, you can also stake your SDT tokens to boost your yield. SDT is the governance token of StakeDAO. By staking SDT you basically kill two birds with one stone: voting power is unlocked and you also get a boost on your staking APR.
In order to convert your governance token via StakeDAO, follow these steps:
1. Open the StakeDAO app
2. Navigate to the "Stake" tab at the top of the window
3. Select the asset you want to convert
4. Input the amount of tokens and approve the smart contract
5. Click "Mint & Stake"
6. Congrats! You've staked your governance tokens and minted stTokens
The governance token will be locked for staking on the underlying protocol while the liquid version of the token can be freely traded. As if the initial APR wasn't enough, now you can go ahead and provide liquidity with the liquid version of your staked token.
But wait, let's not forget about staking SDT. By locking your SDT you can boost your staking APR for the native protocol tokens.
If you want to stake SDT on StakeDAO, follow these steps:
1. Open the StakeDAO app
2. Navigate to the "Lock" tab at the top of the window
3. Input the number of SDT tokens and the lockup duration
4. Approve the transaction
5. Click "Lock"
6. Profit!
You have now locked SDT and minted an equal number of veSDT tokens. With the veSDT tokens you can vote in the protocol changes or delegate them to other voters. The delegation mechanism is non-custodial, which means the veSDT tokens will always remain in your possession.
Keep in mind that the longer you stake your SDT tokens the more veSDT you will receive over time. Your veSDT holdings will linearly decrease as you approach your chosen lock expiry, at which point your SDT will be unlocked.
You have now taken full advantage of what StakeDAO has to offer! As the protocol expands, more governance tokens will be added by the community. You can initiate a proposal yourself or support existing proposals.
Price Prediction for StakeDAO — Can it hit $1000?
Buying and hodling SDT — the native token of StakeDAO— is one way of potentially making money on StakeDAO.
By looking at its current price, it’s natural to think about the chance of SDT hitting $1000 per token. This can happen sooner, or way in the future, and is determined by a couple of ever changing factors.
Let’s examine the potential growth of the SDT token by analyzing its tokenomics. SDT’s current market cap sits comfortably at ${MARKET_CAP}. With {CIRCULATING_SUPPLY} SDT tokens being in circulation today, that means a price of {PRICE} per SDT.
How did we come to that calculation? It’s quite easy, the price of an SDT token is equal to its current market cap divided by the number of tokens in circulation. Dividing ${MARKET_CAP} by {CIRCULATING_SUPPLY} gives us a result of {PRICE} for each SDT coin.
By changing the order in the simple formula above we can use it to calculate other things as well. This helps us a lot because we can deduce the market cap of SDT at different token prices. Then, we can use the result to compare it to the current state of the network and see what would be required for SDT to hit that price.
At a price of $1000 per token, that means the current market cap of SDT would equal ${{CIRCULATING_SUPPLY} * 1000}. Remember that we arrived at this number by multiplying the amount of circulating tokens by $1000.
Now let’s shift our attention to the fully diluted market cap.
Some blockchains may have their tokenomics built in a way that only a small percentage of tokens are circulating at the beginning. This can be misleading because we don’t have the full picture and only take into account the current number of coins released in the market.
The fully diluted market cap represents the total value of a coin if all tokens were in circulation. SDT’s whole supply of tokens is {MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} SDT which means that no more coins above that number will ever be created.
These tokens are not created at the discretion of a specific entity. They are created automatically by the network to reward different actors that keep it secure.
How does this impact the price of SDT? Taking into account the current price of an SDT token, that would result in a fully diluted market cap of ${MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY * PRICE}. SDT coins that have been burned are not taken into consideration because they have been permanently removed from circulation.
Whether it seems gigantic or not, the number we came to above only takes into account the current price of an SDT token. Doing the same calculation but with a price of $1000 gives us a result of ${{MAX_SUPPLY - TOTAL_SUPPLY + CIRCULATING_SUPPLY} * 1000} for the SDT protocol fully diluted market cap.
These are all crucial details to know when calculating if SDT can reach the price of $1000 per token. If the diluted market capitalization is way too high, the token has little room left to grow. Blockchains in general have no cap on the value they can reach, whether that number seems possible it’s totally up to you.
The future of SDT depends solely on its growth as a network used by tens and hundreds of millions of users.
If you’re looking to add some SDT to your portfolio, the most trusted places to get some are Binance and Coinbase.
