Liquid Staking (Fantom)

A staking mechanism by the Fantom blockchain that allows you to earn yield by staking tokens for a longer duration.

What Is Liquid Staking (Fantom)?

The liquid staking platform will allow Fantom (FTM) token holders to participate in the proof-of-stake consensus on the Fantom network and earn rewards. This mechanism utilizes the Proof of Liquid Staking (PoLS) algorithm.

PoLS is a variation of Proof of Stake (PoS) that allows for a single validator to stake tokens on behalf of multiple delegators. This means that a single staked account can act as a proxy for multiple accounts.

The primary benefit of PoLS is that it enables users with small balances to participate in staking. Delegators can choose from a list of validators and select which one they wish to stake with, providing much more flexibility than traditional PoS algorithms.
Validators can delegate their Fantom token balance to another entity (like a Staking Service Provider) and still receive a portion of the staking revenue share. This is similar to how a miner delegates hash power to a mining pool, which pays the miner in proportion to their hash rate contributed.

Liquid staking implies that even if you are not running a node yourself, you can still benefit from delegating your FTM tokens and receiving rewards for it.

The mechanism works like this:

Delegators lock their FTM tokens on an Ethereum smart contract.

In doing so, they provide liquidity (FTM) for the network and are compensated for that with Liquidity Rewards (L-Reward). The L-Reward is paid in proportion to their contribution toward network liquidity.

Validator pools stake these liquid tokens and collect Staking Rewards (S-Reward). The S-Reward is determined by consensus rules and dependent on total stake size and validator performance. The S-Reward is paid in proportion to their contribution toward network security.

Fantom is the world’s first DAG-based smart contract platform. It has been able to solve scalability issues by making its network asynchronous in nature. In a typical blockchain network, each node must wait for the previous transaction to be completed before it can start the next one. This approach restricts the number of transactions per second.
Liquid staking is the process of taking your staked FTM tokens and moving them to an address that’s not your own. In Fantom, the process of liquid staking is a special one, and it’s possible because of the Lachesis consensus algorithm. The steps include in this process are:

You stake FTM in your wallet. You take those tokens and move them to another wallet, or exchange them for other assets. If you want to unstake your FTM (and you’ve waited at least 28 days), you can.

Because Lachesis doesn’t rely on validators and instead uses a set of randomly selected active nodes, there’s no need for a validator to hold the asset that’s being staked in order for it to be validating.

This means that when staking FTM on Fantom, you’re not just receiving rewards for holding your tokens in someplace – you’re contributing to the network by making sure that there are enough active nodes contributing to consensus.