Summary
This post proposes an update to the PSTAKE token utility with a staking/locking functionality that generates a yield for users who lock up PSTAKE with BTC and/or other Bitcoin DeFi (BTCfi) ecosystem tokens. The core idea of this proposal is “Stake PSTAKE, Earn BTC”.
After initial feedback from the community, an Onchain proposal will be posted on the pSTAKE Snapshot for governance voting.
This post is co-authored by Arcanum Capital and pSTAKE Finance contributors.
Background
Recently, pSTAKE Finance has refocused its positioning and target market/audience to Bitcoin yields. With the possibility of native Bitcoin yields from BTC staking only becoming a reality earlier this year, ‘BTCfi’ is one of the most compelling narratives in crypto today.
Since its announcement to build for Bitcoin in May 2024, pSTAKE has:
- Launched its Bitcoin Liquid Staking testnet
- Launched pSTAKE v1 on mainnet
- Carried out a successful rebrand
- Launched Bitcoin Staking with pSTAKE on Binance
- Been covered by Binance Research as one of the leading BTCfi Ecosystem projects
- Introduced YBTC, its yield-optimized Bitcoin LST (liquid staking token)
- Partnered with Babylon, Bybit, BNB Chain, UniSat, Leather, and more
- Garnered the highest mindshare in the BTCfi ecosystem according to Kaito
- Crossed $10M in Bitcoin TVL
The above milestones are a testament to the decision of pivoting to BTCfi and the distribution/marketing efforts undertaken.
On the token front, $PSTAKE has also entered various new ecosystems in order to build more visibility and further expand distribution roots.
- PSTAKE on UniSwap on Ethereum
- PSTAKE on Aerodrome on Base
- PSTAKE on Cetus on Sui
- PSTAKE on Velodrome on Optimism
- PSTAKE on Fenix and Thruster on Blast
This has diversified PSTAKE token holders, trading opportunities, liquidity, and distribution.
Why improve the $PSTAKE token utility now?
The utility of the PSTAKE token is still incentivization and governance. Limited utility might be ideal for a new token that has not had its discovery or unlocks. For an established, reputed project like pSTAKE, adding a strong and compelling token utility can unlock the next phase of parabolic growth.
For multiple reasons (highlighted below), now may be the optimal time to update the PSTAKE token’s utility:
-
Recent macro changes in the world indicate a Golden Era for DeFi is upon us. In this DeFi Renaissance, BTC is entering DeFi (BTCfi) for the first time ever. This should lead to record-breaking capital and liquidity flowing in.
-
Bitcoin is already at all-time-high, and a significant proportion of market participants might look at Bitcoin DeFi as its beta next, as opposed to Alt-L1s.
-
pSTAKE’s recent refocus to Bitcoin has yielded great results from the point of early product market fit, and also marketing/distribution with high mindshare.
-
$PSTAKE continues to be the only Bitcoin LST token tradable in the market today, and pSTAKE should to continue to capitalise on this first-mover advantage.
-
Adding a strong utility to the token can help $PSTAKE become a true beta to Bitcoin and Babylon, increase its awareness with value accrual, grow holders, users, and liquidity, and also aid in Centralized Exchange listings where it is not yet listed
Proposal
The points meta is overdone with negative feedback around user expectation and transparency at its highest. Protocols with live and tradable tokens that take the best of points’ gamification and tie it directly to the token will likely come out on top.
The core idea behind this proposed PSTAKE staking/locking is to make PSTAKE the leading yield-generating and alignment token for the entire BTCfi ecosystem.
The crux of PSTAKE Staking can be made analogous to the role of BNB in the Binance Ecosystem.
- Stake BNB on Binance for certain time period
- Get active yield through Binance Launchpool token farming and value accrual through token burning
Similar to the above BNB example, it is proposed that the PSTAKE token have a staking/locking mechanism for certain time periods (epoch/season) to get active yield through BTC and tokens of other BTCfi ecosystem projects.
Mechanism Overview
To participate in PSTAKE Staking, users must deposit PSTAKE into the staking module. All staking and unstaking actions are conducted on the Ethereum L1/L2 and can be executed anytime.
The staking rewards will be distributed over consecutive seasons, each lasting two weeks.
Upon staking, participants start generating rewards immediately (in the form of pSats representation), regardless of when you enter during the season. However, if you unstake during a season, you forfeit all rewards.
A snapshot (potentially multiple) will be taken randomly during the season. Users must remain staked during all the snapshots to earn rewards for that specific season.
Users will not be required to unstake after one season ends and another begins.
It is important to note that each season will have a staking cap, dictating the maximum amount of PSTAKE that can be staked. The Staking Cap will be announced before each season starts, and users will need to be quick to participate in that particular season.
Rewards Overview
All rewards will be paid in a BTC derivative (e.g., cbBTC, wBTC, YBTC, etc.) at the end of each season.
Users are required to claim their rewards within a specific time window (currently set at three days) after each season ends to claim BTC yield.
Users accumulate pSats, a representation of their actual BTC rewards, while staking. pStas will be automatically converted into the BTC derivative reward token.
The distribution of pSats during the staking period is allocated in two separate pools as follows:
- 80% of pSats will be allocated to all users staking PSTAKE
- 20% of pSats will be allocated to users staking PSTAKE AND holding at least 0.05 YBTC
As a result, users that have deposited BTC into pSTAKE (min 0.05 BTC) will receive a higher allocation of pSats and, therefore, BTC yields.
The following table demonstrates allocations for users:
| Has PSTAKE (not staked) | Has PSTAKE (staked) | Holds YBTC (>=0.05) | Rewards |
|---|---|---|---|
| Yes | Yes | Yes | 100% Reward Pool |
| No | Yes | Yes | 100% Reward Pool |
| Yes | Yes | No | 80% Reward Pool |
| No | Yes | No | 80% Reward Pool |
| Yes | No | No | No Rewards |
| Yes | No | Yes | No Rewards |
| No | No | Yes | No Rewards |
| No | No | No | No Rewards |
It is proposed that the initial BTC yields come from protocol treasury to bootstrap the PSTAKE staking use case. The sustainability of PSTAKE staking rewards will be borne by protocol revenue generated through Bitcoin Staking yields and potentially other projects’ incentivization of PSTAKE stakers.
Conclusion
Considering the market position, current sentiments, BTCfi’s nascency and mindshare, the recent milestones of pSTAKE, TVL growth and the strong need for a compelling PSTAKE token utility, this is the right time to kick start this major update for the PSTAKE token.
PSTAKE staking’s business model would be first of its kind in the industry, especially for BTCfi.
This can attract BTC holders, BTCfi participants, the general market, and even protocols, for more visibility and unique PSTAKE token utility at the same time.
Participate
Everyone is invited to share their feedback and thoughts on the proposed delegation strategy, specifically on:
- What do you think of the proposed “Stake PSTAKE, Earn BTC” token utility?
- Do you have any suggestions on the details of Mechanism and Rewards?
- Do you have any other mechanisms/token utility ideas that you would like to highlight?
- As a PSTAKE Token holder, would you actively participate in PSTAKE Staking?
After community discussion, a proposal will be put on the PSTAKE Snapshot for voting, and the PSTAKE Staking mechanism will be implemented accordingly.