Abstract

This paper presents a novel dynamic staking ecosystem for Pocket Network (POKT), designed to address the limitations of traditional static staking models. The proposed system introduces variable staking and unstaking fees, a DAO-controlled bot for liquidity provision, and mechanisms to align incentives between stakers, users, and service providers. The model aims to enhance network utility, increase liquidity, and create a self-sustaining ecosystem that bridges speculative and utility-driven aspects of the network. We explore the potential impacts on market dynamics, arbitrage opportunities, and long-term network growth.

Introduction

In the rapidly evolving world of decentralized finance (DeFi) and blockchain technology, staking mechanisms are pivotal for ensuring network security and incentivizing token holders. However, traditional static staking models often fail to create genuine utility beyond securing the network and struggle to drive adoption of the network's core services. This paper presents a dynamic staking model proposed for Pocket Network (POKT), designed to address these limitations and foster a more vibrant, self-sustaining ecosystem.

Limitations of Traditional Staking Models

Traditional staking models typically rely on static staking mechanisms where token holders lock up their tokens in exchange for a fixed return. These models often depend heavily on inflationary rewards and struggle to incentivize network participation beyond the security aspect.

Objectives of the Proposed Dynamic Staking Model

The proposed dynamic staking model aims to create a more engaging and self-sustaining ecosystem by introducing variable fees, innovative reward mechanisms, and aligning incentives between stakers, users, and service providers.

The Dynamic Staking Model

Staking Fee Mechanism

5% Fee on All Staking Transactions: Every time a user stakes POKT, a 5% fee is applied and distributed among existing stakers.
DAO-Controlled Bot for Fee-less Staking: A DAO-controlled bot offers pre-staked POKT (stPOKT) for USDC, allowing users to bypass the staking fee and providing the DAO with the means to help dictate buy pressure volume. This means the DAO can natively generate USDC for it’s treasury to fund initiatives, grants, etc.

Variable Unstaking Fee

Range of 3% to 7% Based on a variable network metic, like RPC Request Volume: The unstaking fee varies dynamically between 3% and 7%, determined by the volume of RPC requests in the previous block. The unstaking fee creates a fluctuating value between POKT and stPOKT, meaning
Block-by-Block Fee Adjustments: Since each bock the This creates continuous arbitrage opportunities and strategic behavior among stakers.

Rebate Rewards for Gateways and Sources

50% Return of RPC Relay Costs in Non-Transferable stPOKT to Gateways and Sources: Users receive half of their RPC relay costs back in the form of non-transferable stPOKT, reducing their effective costs and incentivizing network participation. If a Gateway or Source wants to make their Rebate reward liquid, they have to unstake which creates gains for other stakers through the Unstaking fee.

Analysis of Model Components