Is there a way we could use our validators for more than just staking? Like providing liquidity to new projects on @TokenJenny or providing liquidity for flash loans on @Aave. Not only would this create pathways for unelected validators to earn income. This would also incentivize larger validators to use their funds in more ways, opening space for smaller validators to help secure the network.
First of all Welcome smokingjoe!
I don’t think this is possible:
A Validator is a computer program that is designed to sign blocks and secure the network by ‘locking’ tokens to validate transactions. So you cannot use the ONEs that are staked for something like LP mining.
However, you could do something crazy like this:
If you are a validator (and a coding god), you could potentionally create a synthetic asset, that mirrors your stake as a different token. E.G. ‘smokiONEs’. Then you would need to create a personalized dAPP that mints those tokens when delegating and requires those tokens to be burned to undelegate. Then you could use those tokens to provide liquidity on viper with those tokens.
I strongly encourage not to do such a thing:
Delegators would not own their tokens anymore. They would be owned by a single smart contract.
Also this would introduce impermanant loss to your delegators. People could use those token to arbitrage staked tokens. You would introduce loss to a otherwise stable income method. And when your contracts contain bugs, those will be exploited.
Some Validators already add some kind of additional incentive to gain more delegators by doing giveaways or providing free tokens that have some use case now or at a later point. E.g. FuzzFi or GameTokenTech.
I was just following an update on another Network and they use some of the rewards for on-chain liquidity:
- Create a Constant Product Market Maker contract for ONE / 1ETH, or another pair (may a stablecoin)
- Change the protocol to 5% of the ONE created in each block is credited to that Constant Product Market Maker contract balance
I Don’t see the benefit in this. If I get my share of the 5% I can provide liquidity on my own. In the pools I believe fit best.
Furthermore 2.5% is constantly sold for eth to provide liquidity, which probably would have a negative price impact.
Maybe I don’t understand it correctly.
Can you share, which chain introduced that concept? Sounds interesting, would like to read into it.
What about using this as a pathway to build up unelected validators? We could use Bancor to provide single side liquidity with No impermanent loss. This would strengthen the network long term and give us an eta for when we reach full decentralization and 1 second finality.
Idk exactly what the benefits or goals are but that sounds like a nice way to reroll profits and create some stability. Sounds dope.
Yes sure, it’s was on Tezos: