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The World’s First Collateralized Proof of Stake and Masternode Platform

Stakepools.io is building the world's first collateralized proof of stake and masternode platform. All the details can be found in our whitepaper: stakepools.io/white-paper

We’re reaching out to the community for members who are interested and looking to get involved.

We’re looking for developers who want to help create a truly innovative and responsive platform as well as social media experts and community managers. \

We’re also looking for potential future users, those already members of staking pools, or those wishing to learn more about how it all works.

Please feel free to follow us on twitter @stakepools and join our Discord: https://discord.gg/JbGudBv to learn more!

More information can also be found on this bitcointalk post in Pools (Altcoins): https://bitcointalk.org/index.php?topic=4578629

Brief Overview

In the US legacy banking system we’re all familiar with, some banks may offer what is called a certificate of deposit. This certificate is a promise by the bank to provide a specific rate of return in exchange for a loan for a set period of time. These certificates are collateralized by the FDIC, or other banks, and they provide a much higher rate of return than your typical savings account.

The bank will, of course, invest the users assets, earning themselves an unknown rate of return, but only promising the user a known rate of return. This presents a very lucrative opportunity for the bank. Much like a savings account, you will earn interest for loaning the bank your money, unlike a savings account, you cannot withdraw these assets until the agreed upon deposit period is complete.

The idea, when modeled for a proof of stake pooling system, is on the right track but is still vastly different as it is not reliant on the pool investing other people’s assets in order to achieve a specified rate of return. Here’s a frame of reference:

First, in order for users to leverage a larger network weight, those users must deposit their coins into a pool’s staking wallet. Think of this as the user loaning their coins to the pool.

Second, many proof of stake systems apply a “coin age” or maturity date on the coins immediately upon arriving in a wallet, these periods can last from a few hours, to a few days. During this period, coins in a staking wallet are not eligible for any block rewards or the chance to validate transactions. Due to coin age limitations, users in a pool must relinquish their ability to withdraw their coins before they have had a chance to earn block rewards. Think of this as the loan’s term, or the amount of time you will loan the pool your coins.

Finally, the interest paid by the borrower (the pool) to the lender (the users) comes in the form of more frequent block rewards. The specified rate of return for the loan term is based on the combined staking effect of the user’s deposit compounding with everyone else’s in the pool over the length of the staking term.

Currently all proof of stake pools enforce coin age limitations on their members, disallowing users to withdraw their coins before becoming eligible for block rewards. This alone is not the biggest fault in the system, which is instead blamed on the faith required for these pools to operate in the first place.

We disagree with these constraints and believe that the system should operate on collateral and escrow, not faith and trust. In addition, life can come up fast and without warning; with respect to the cryptocurrency marketplace, that is an understatement. Therefore, users should be able to withdraw their coins at any time, regardless of coin age or staking periods.

How it Works

The Stake Token

Token Address: 0x8b4dc26ef1416d65442eb6948b90720424f3bdfd
Total Supply: 184,000,000 Decimals: 18 Symbol: STAKE

Stakepools.io will issue an ERC223 compatible token through a DAICO. The issuance of Stake tokens is both a means of collateral which back users’ deposits in the event of early withdrawal, as well as a means to participate in voting measures which impact the pool. In the beginning, the issuance of Stake will be handled by the pool. However, after a more broad distribution of Stake and a proven track record of platform usability, users may opt in to participate as a Stake Issuer in conjunction with the pool. Stake Issuers and the pool will share the pool’s fee in proportion to the Stake provided by the participating parties and after considering the pool’s operational costs.

Initially stakepools.io will retain 2% of all block & masternode rewards. We will never charge deposit or withdraw fees. Once we shift towards implementing the Stake Issuer mechanics, block rewards will be shared among those participants. This will act as an alternative means for Stake Issuers to earn an income as well as a widely diversified portfolio of the pool’s supported coins.

Note: Users will be responsible for paying any and all network transaction fees associated with their withdraw. These transaction fees are not paid to stakepools.io & we do not control the transaction fees set forth by any given network.

Issuing Stake Tokens

Users will be able to specify their own desired staking periods, which will correlate to a rate of return in accordance with the weight of the pool, and the estimates provided by other user’s specified staking periods. Staking periods may be between: (minCoinAge + 1 day) up to 12 months. This means that if a particular coin has a coin age of 8 hours, the minimum required staking period will be 1 day and 8 hours. However, at any time a pool member can withdraw all, or some, of their deposit as Stake tokens. When a user wishes to withdraw from the pool before their staking period is over, the platform will issue the user Stake relative to the value of their withdraw + any earned block rewards during that period.

The platform will implement a decentralized data feed when quoting it’s acceptable value for the users’ deposit, and it will include a 7% markup of the agreed upon spot price of Stake. This “fee” is in place to deter users from withdrawing their coins before they have reached their coin age, or before their agreed upon staking period is complete.

Redeeming Stake Tokens

Much like how the United States FDIC insures certificates of deposit, the pool and the Stake Issuers will contribute a portion of their earned fee towards funding a series of redeemable Ethereum smart contracts. These contracts will be available to all users who wish to exchange their Stake for Ether without any third party intervention, and with the assurance auditable code provides. A percentage of all the Stake sent to the contracts will be burned, up to 84,000,000 Stake. The contracts will always quote the accurate price of STAKE/ETH, and the contracts will contain a variable amount of Ether in it at any given time.

The redeemable Ethereum smart contracts will not possess adequate liquidity for the acceptance and consequent exchange of all circulating Stake tokens for Ether at one time, and certainly won't need to. Instead, due to the fees associated with early withdrawal, most users will simply fulfill their staking period & withdraw their coins from the pool with no associated fees.

The reasons a user would sell their Stake on the exchange is if the smart contract lacked liquidity, or because they could get a better price somewhere else. Similarly, the only market participants willing to buy Stake on any supporting exchanges are those offering less than what the smart contract is offering, because they can afford to wait for the contract to become liquid again. This means that there will always be adequate liquidity across exchanges for Stake because speculators will always be willing to purchase Stake for less than what the contract is offering.

Put simply, users can always withdraw their equity from the pool while also creating a natural demand in the market, which in turn provides liquidity to Stake holders and Issuers.

Example: User A has deposited "X COIN" valued at $100. User A's $100 "X COIN" deposit is staking according to the user's agreed upon staking period; but the user wishes to withdraw the value of their "X COIN" anyway. Of course the user cannot withdraw their $100 of "X COIN," but they can withdraw Stake. When the user withdraws their $100 worth of Stake, they will incur a 7% fee in accordance to the quoted price of Stake by the smart contract.

The smart contract is quoting the value of Stake at 0.00027984 ETH, & the price of ETH at $500. Under normal conditions, User A's $100 could buy them .2 ETH, or 714 Stake. Instead however, after the fee, the contract will quote the price of Stake at 0.000300828 ETH. Upon withdrawing from the pool, User A's $100 deposit will only receive 664 STAKE, worth .18581376 ETH or $92.90 USD. The user may now redeem their Stake tokens for .18581376 ETH through the smart contract in a decentralized and insured manner, or through a trusted third party exchange of their choosing.

The Pool & Stake Issuers

As outlined above, the pool will be the only Stake Issuer until after the pool has sufficiently distributed Stake throughout the community. Then we will begin to offer the opportunity to become a Stake Issuer in conjunction with the pool. The proposed minimum to becoming a Stake Issuer starts at 50,000 Stake. Of course, that does not mean that members cannot pool together to become a unified Stake Issuer.

The role of the Stake Issuers is to act as pseudo independent bankers which put up Stake as collateral and assume custody of defaulted equity in the pool in exchange for that collateral. It is a high priority of the Stake Issuers to only assume custody of assets in accordance with their individual risk profiles, and each Stake Issuer will be different. Some Stake Issuers (like the pool) may accept all the platforms’ supported assets, and will assume custody accordingly. Others may opt to only accept defaults for one asset, or defaults of a particular size. Some Stake Issuers will be able to accept very large defaults, and others may only claim smaller, fewer defaults over time. Some Stake Issuers may even pool together in order to accept these larger defaults as one unified Issuer, each assuming a portion of the associated risk and asset custody.

Stake Issuers are bound by the same constraints of any proof of stake system; they must relinquish their ability to withdraw the Stake they have committed to collateral.This is to ensure there is enough liquid Stake to cover all incoming users and their deposits upon entering the pool in accordance with the terms set forth by the Stake Issuer(s).

Being a Stake Issuer can be risky. In addition to taking custody of defaulted assets, a Stake Issuer must also be willing to purchase Stake at the rate in which the smart contracts redeem it, not including burned or User Protection Fund tokens. Assuming custody of defaulted assets begs the question: why did they default in the first place? Outside the bounds of regularly needed funds in the event of an emergency, the majority of defaulted deposits will generally be due to the depreciation of the underlying asset. If this is the case, and these assets need to be taken into custody by the Stake Issuers, these Issuers are now exposed to the risks the original pool user wished to forfeit. Therefore, in order to provide incentive for issuing Stake as collateral, subsequently assuming custody of defaulted assets, and repurchasing of Stake via smart contract, the platform is committed to sharing it’s earned block reward fees in accordance with the Staker Issuers’ risk profiles.

Token Specifics

Ecosystem

A percentage of all of the Stake tokens sent to the redeemable ethereum smart contract will be burned, up to 84,000,000 Stake. In addition, a percentage of the Stake collected by the smart contract will be used to fund the User Protection Fund which will act as a remediator in the event of a security breach.

The Stake token will also act as a community organization tool in that it will be used to vote on which coins the pool should support. More importantly, members of a particular pool will be given the option to vote on improvement proposals pushed forth by their respective blockchain in accordance with their consensus rules.

Users of stakepools.io may be able to use their Stake to purchase services offered directly from the pool. We may also begin to offer alternative services to owners of Stake tokens at our discretion. These may include:

The opportunity to earn a portion of the pool’s block reward fees by opting into becoming a Stake Issuer in conjunction with the pool.

Access to price reporting pools which would generate an income for its members during price discovery rounds.

Derivatives or other financial vehicles for qualified users. Ex. A fund which only stakes the top 5 coins weighted by market cap. Or a fund which is only exposed to staking ETH and DASH masternodes.

Use as Collateral

The issuance of Stake tokens is used as a means of collateral and compensation which back users’ deposits. Knowing this and with the assumption that some users will default on their deposits, the Stake Issuers will be responsible for assuming custody of this abandoned equity in the pool. The pool accepts the associated risk of user default and is therefore willing to accept the forfeited coins in exchange for Stake. However, this leaves some Stake Issuers in a tricky situation, where they may now be overly exposed to a particular asset.

For this reason it is incredibly important to the pool and Stake Issuers that we only support coins with a proven track record and an immensely liquid market. It is imperative that we only consider supporting coins with a strong community backing, large market cap, liquidity, and realistic inflationary expectations. We will not be listing every staking and masternode coin promising unrealistic returns. Instead, we will only be listing those coins which have satisfied our level of scrutiny, or have a particularly passionate user base present in our community.

Token Distribution

The Current State of ICO’s

Many are familiar with the Initial Coin Offering, or ICO. Coin offerings are used as a means of distributing interest and participation in a particular project, while raising the needed funds in order to develop said project. In theory the idea of a crowd funded operation is incredibly attractive to potential startups and project developers alike, however; there are many shortcomings present in the current ICO funding model. For one, the contributors of the project’s coin offering have little to no say in how the project will be developed, on what time scale, and with which sets of variables not included in the white paper. For these contributors, faith in the team and the project’s objectives are the only thing they have in relation to the actual deployment of products and the accountability of the team. Additionally, the teams which successfully complete their coin offerings are, generally, overfunded and underwhelmed with community interest following the ICO. Unfortunately for some teams, this kind of non-accountable funding scheme leads to dishonesty and lack of effort after the initial funding period is over.

The DAICO

A Decentralized Autonomous Initial Coin Offering, or DAICO, is a newly proposed ICO funding idea which borrows concepts from a Decentralized Autonomous Organization, or DAO. The idea was presented by Vitalik Buterin in a January 2018 post on the ethresear.ch public forum. The world's first successful DAICO was completed by The Abyss LTD later that year and helped to set the framework and the example for other prospective projects. The DAICO implements the standard available models for a coin offering, contributors who send Ether receive the project’s tokens; however, two new functions are implemented which give the power back to the contributors.

The first function is known as the developer’s “tap.” Contributors to the DAICO will vote on a release of raised funds at a monthly rate they deem reasonable for the development of the project. The developers only reserve the right to decrease the tap. Only the contributors to the DAICO will be able to vote for an increase of the developer tap. The percentage that the monthly tap may be increased per voting measure is capped to prevent abuse of the system. In addition, there can only be one voting measure per month.

The second function states that if contributors feel that specific goals are not met, or the team deviates from the plans set forth in this document, they will have the opportunity to vote on a self-destruct procedure which will shut down any release of funds to the team, and return all remaining funds to the contributors, dissolving the DAICO. The self-destruct voting measures may be summoned once every quarter for 2 years.
Being a Stake token holder does not entitle you to participation in the DAICO voting measures. Only the whitelisted addresses associated with the contributors during the DAICO will be eligible for voting, this eliminates any possibility of an exchange, private sale contributor, or developer held tokens having a vote. In accordance with the structure of the DAICO, participants will only be able to contribute Ether (ETH) in exchange for Stake tokens.

The exact structure of the DAICO has not been agreed upon at this juncture, however there will be a limit on how much each user will be able to contribute during the DAICO. This is to maintain a fair and equitable opportunity for all those wishing to participate, as well as to prevent one or few entities controlling the majority of the DAICO voting weight and circulating supply.

Token Allocation

39% will be allocated for the initial use of the platform, this includes the issuance of Stake tokens when a user wishes to withdraw early from the pool. After a more broad distribution of Stake, we will implement a Stake Issuer system allowing Stake holders to participate.

34% will be distributed via the DAICO crowdsale.

14% will be distributed during private seed funding rounds.

9% will be vested by the developers according to the team’s vesting plan.

2% will be allocated for community bounties.

1.5% will be distributed to advisors and impactful contributors.

.5% will immediately start the User Protection Fund.

Stake vested & reserved for the platform & User Protection Fund: 89,240,000 STAKE (48.5%)

Stake given to the community, advisers & for sale: 94,760,000 STAKE (51.5%)

Team vesting plan:

Application of Private Seed Funds

The funds raised during the private seed rounds will be used for further team scouting & development of the stakepools.io ecosystem, including laying the security foundations for our wallets & masternodes in accordance with the CryptoCurrency Security Standard (CCSS) requirements. In addition to getting these secure systems online effectively, private seed funds will be allocated towards smart contract development, security audits, and the DAICO marketing campaign. This is both to ensure the exposure of our services as well as provide for a much larger distribution of Stake tokens. The marketing campaign includes all associated costs including but not limited to social media presence, legal council, marketing materials, and regulatory compliance leading into the DAICO.

We plan to make the DAICO available to jurisdictions in the US as well as the EU & China. There is a heavy regulatory framework in place in order to make this happen and requires cooperation with many regulatory entities.

Application of DAICO Funds

35% of the funds will be used to develop the platform. This includes development and server upkeep for the masternodes and wallet infrastructure, team management, training, security, audits, regulatory compliance and continuous updates.

25% of the funds will be used for masternode collateral in order to have these services running and available at launch. The pool will cover all collateral requirements for running a masternode before offering it to our users.

20% of the funds will be allocated for the funding of the redeemable ethereum smart contracts which accepts Stake tokens for Ether.

10% of the funds will be used for marketing campaigns and promotion of the stakepools.io platform. This will attract new users to the platform and help our pool grow to support a more diverse array of coins.

10% of the funds will be kept as a hedge against volatility due to the associated risks of maintaining masternode collateral.

Notice: There are many factors involved which will determine the application of raised funds. Some of these may be beyond our control such as regulatory pressure and market volatility. The plans proposed in this document are in accordance to a path we feel comfortable with, however these may alter due to any existing or emerging conditions.

Thank You

Thank you for reading this introduction to stakepools.io. The website is under development, but please feel free to follow us on twitter @stakepools and join our Discord: https://discord.gg/JbGudBv to learn more!

More information can also be found on this bitcointalk post in Pools (Altcoins): https://bitcointalk.org/index.php?topic=4578629

White Paper: stakepools.io/white-paper

Discord: https://discord.gg/JbGudBv
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