Intro
Yield farming opportunities are a staple of all cryptocurrencies. Investors and everyone, in general, seek out different ways to grow the number of tokens in their portfolios. One of these ways is staking tokens on-chain, which is necessary for any Proof of Stake-based blockchain network. The first and the most dominant iteration so far is simply staking to secure the network. In recent years, more innovative complex staking versions of traditional staking, like liquid staking and Astar’s dApp staking, have been created.
InvArch’s IP staking adds another iteration to the list of staking methods. Until now, no project connected staking rewards with philanthropy in a way that stakers could profit from staking while also generating funding for their favorite projects. InvArch’s IP staking changes the bland mechanism of traditional staking into a philanthropic event for all participants. InvArch already announced that IP staking would be just the beginning, with IP Farming and IP Donations implemented later. Besides the official provided functions, this could be fruitful soil for unofficial dynamics and mechanisms to flourish.
What is IP Staking?
“Intellectual property (IP) refers to creations of the mind, such as inventions; literary and artistic works; designs; and symbols, names and images used in commerce.” Source: https://www.wipo.int/about-ip/en
IP staking allows projects with unique ideas to generate funding without the significant hurdle of raising funds as an emerging project. With IP staking, projects are not forced to give up token allocations to supporters. because the rewards for IP stakers are paid by the InvArch network, instead of the projects. This might come in handy if giving up token allocations is unsuitable for a project requiring funding
Up until this point, as a yield farmer, you only needed to decide on a project or token farm and commit. The most relevant information for your decision making was the amount of sustainable yield you expected. This causeless way of staking gets a new twist with the introduction of IP staking. When you IP stake, you choose an idea in need of funding and stake your funds with them. With your commitment, you will share the OCIF-staking (On Chain Innovation funding) rewards in a 40/60 split.
Instead of a cause-less numbers staking game, you can support projects with amazing ideas to help create real IP value. IP Staking will be the first step in the IP funding trifecta of IP Staking, IP Farming, and IP Donations. InvArch already announced that IP staking will be just the beginning and later on IP Farming and IP Donations are being implemented. These three IP funding mechanisms will foster the InvArch network as the place to be for entrepreneurship in crypto. After a big landscape of flourishing IP sets is onboarded, IP farming will elevate the IP yield game to another level with the ability to reward IP-specific project tokens instead of network tokens. [Read more about IP sets]
If we combine this with the idea of staking, it becomes clear how InvArch can become the innovation hub of not just Polkadot and Kusama but maybe the whole crypto sphere.
How valuable can IP Staking be for investors?
First and foremost, IP staking rewards and in turn token dilution are locked to 10% Inflation per year of the total supply. This guarantees that token holder dilution is kept in check while providing a great opportunity for early investors to gain significantly on their stack. The staking rewards will offset the 10% token inflation by a good margin. This can be seen as a prime opportunity to get exposure to the InvArch network in the midst of a bear market. Current price action does not accurately reflect the potential and innovation InvArch has accrued through developing new models such as IP staking.
As one of the first projects to do so, InvArch will introduce on-chain staking for unvested tokens with auto-compounding. Comparatively, this is a great change for token holders and an advantage over idling unvested tokens from other projects. The advantages of staking unvested tokens are obvious; A higher staked number of tokens will increase the security of the chain, which is an immensely important thing considering the recent takeovers on various other blockchains and DAOs throughout all crypto ecosystems. Another advantage is that unvested tokens will not be subject to inflation, as they will grow faster than the 10% yearly inflation the total $TNKR supply is subject to.
In the early months after launch, IP staking will be a valuable tool for investors. The following graphs show the expected yield for a theoretical one-year APR and APY, as well as a more realistic 3 months APY for different timeframes.
As shown in the graph, early investors can expect to add another 25% — 45% in the first 3 months of staking, when the staking rates stay in range with other comparable Parachain projects.
The early potential is evident when looking closely at the numbers of comparable Parachains. Currently, 9,62% of Turing’s circulating supply is staked on-chain. Another big bunch is yield farming in the MGX-TUR LP Farm, which works in favor of on-chain stakers, as they gain a higher APY due to this situation. If 9,62% of $TNKR owners stake their tokens on-chain it would result in a massive APY of 328%. In the 3 months interval, the graph covers this would result in a 43% increase for tokens staked on-chain, which is a fantastic opportunity in the current situation of the crypto market.
Zeitgeist staked supply is over 50% higher than Turing’s. This could stem from the fact that no LP farms were available for Zeitgeist at the time of writing this article. But even with such a significant amount of supply staked, the APY for on-chain stakers is still at a fantastic 145%. For the 3 months interval covered,would mean an increase of 25% of the staked tokens.
Even at staking rates of 25% and 35%, staking $TNKR would return a very solid yield of 75% APY and 49% APR, respectively. Remember that this is during the bear market phase, where accumulation is key. The risk for on-chain staking is minimized compared to LP farming, as you are not subject to impermanent loss and the token risk is reduced to one token. If you intend to hold the token, the risk can be considered nonexistent..
In four to six months, when the circulating supply grows and staking rewards come down, the expected APY per year can reach realistically low triple-digits, depending on the number of tokens staked. Interestingly, the staking benchmarks do not change a lot downwards, as all unvested tokens are available for staking from the beginning anyway.
In months seven to twelve, the projected APY is nothing to scoff at, as shown in the graphs below. A projected APY in the high double digits a year after inception is fantastic. At this point, other ways to create yield for stakers, like Tx fees from protocols building on the InvArch blockchain with the help of the NFT primitives InvArch will provide, could be implemented.
Summary
InvArch’s IP staking is an interesting new take on an old essential mechanism for Proof of Stake blockchains. With IP Staking, investors can decide which IP Set they want to support while making no compromises to their yield. As IP staking is the introduction to an even more exciting mechanism like IP Farming, which will become available at a later point. As little information is available right now, one can only imagine the opportunities which may arise with these solutions, but for now, investors already have the chance to get a feel for the philanthropic IP staking mechanism.
From an investor perspective, the forecasted APR/APY/APR3M look fantastic, even at high staking rates, that seem to be unattainable for other projects so far. Especially the near to medium future could be a great opportunity for investors. Besides having favorable staking parameters, Tinkernets price seems to have stabilized after the highly successful LBP and the following unlock of the initial crowdloan allocation.
With this in mind, accumulating $TNKR tokens during a market phase, where many investors take their money out of the market, can be extra profitable when the correct time horizon is set. Recent token price behavior has shown that many don’t have this foresight and choose short-term gratification instead, which could lead to frustration later on.
