Why do we need staking?

PoS is a consensus mechanism of Ethereum network which requires ETH holders to stake their ETH(at least 32 ETH) to become validators to participate in the network and validate transactions. Validators are incentivized to act honestly and will lose rewards if act badly - known as "slashing".

What is liquid staking?

This is a service that enables users to deposit their ETH into a staking pool and receive a liquid staking token(LST) to receive a staking reward without the amount of 32 ETH requirement. LST allows users to earn staking rewards while also having liquidity for their staked assets. It also can be redeemed to their underlying ETH value after a waiting period.

What problems we are facing with the current LSTs?

  • Limited usage - LSTs currently are unable to see any meaningful downstream adoption. Most of the LST holders only hold to earn some rewards, or even put it into a single/pair pool to get the LP token and earn a passive reward.

  • Long tail market - Even though there are many emerging LSD protocols, β€œlate” entrants have an increasingly challenging time gaining traction and adoption through meaningful integrations and partnerships.

  • Unstable price peg - LSTs that are not hard pegged with ETH usually are reliant on individuals deliberately taking advantage of the natural discount upon one of the assets, so it’s hard to maintain the peg with ETH.

What is Tapio?

Tapio Finance is a synthetic asset protocol that aims to serve as the "middle layer" for liquidity between liquid staking protocols and downstream applications within DeFi. We will launch our product - tapETH to utilize the ETH ecosystem, and it's wrapped counterpart, wtapETH.

What is tapETH?

tapETH is a rebasing LP token designed to standardize LST liquidity into a single asset for increased utility, yield, and capital efficiency. You can hold it just like other LSTs to earn rewards, and also can put it in other DeFi Legos to explore opportunities.

What is the cost of integrating with tapETH?

Currently, there is no fee for minting tapETH, but there is a fee for redeeming tapETH. Besides, it will have transaction fees for Ethereum Blockchain usage. The cost can be adjusted by the governance when it goes live.

How does tapETH work?

  • tapETH can be minted by depositing LSTs and native ETH into individual liquidity pools (such as stETH-ETH, rETH-ETH, etc), which also back it and serve as its collateralization. As a result, each of the individual pools is siloed and while making a portion of the overall tapETH pool, are fundamentally separate which means that the underlying assets are not directly exposed to one another when one of the LST depegs.

  • The dynamic collateralization mechanism in our system ensures that the total value of assets in the pool always sufficiently backs the total supply of tapETH in circulation. It will apply a discount for the oversupplied asset and a premium for the undersupplied asset in the individual pool automatically. In this way, it can be stable to maintain the peg with ETH value.

  • tapETH can unify different reward mechanisms of LSTs. You just need one click to claim rewards generated from different LSTs in the form of tapETH.

  • tapETH can be wrapped to receive wtapETH so that it can be used within DeFi natively. Users and builders can just adopt it directly to explore.

Where do tapETH yields come from?

  • Staking Rewards: The rewards are generated by the underlying LSTs(ie. stETH/rETH) within the tapETH pools. It will be paid out as tapETH.

  • Swap Fees: tapETH's pools enable low slippage swaps between not only LSTs and ETH, but also between LSTs - without having to route through multiple pools on various DEX's. Therefore, the swap fees generated will be collected and paid out as tapETH.

  • Redemption Fees: When users convert tapETH back into ETH, or any combination of LSTs, there will be a fee. And the redemption fees generated will be collected and paid out as tapETH.

  • Other Fees: tapETH can also collect a number of fees in the future, for example, unwrap fees, teleport fees, revenue sharing of directing TVL towards other protocols, etc.

Is there any risk?

  • The LST components in tapETH pool can depeg. Therefore, we can choose the components rigorously at the beginning. When the governance function is live, the community can vote for the components and security measures.

  • Smart contract risk. The protocol code is open source and has been audited. If there are new changes in the future, we will continue to audit the code. Additionally, there is an ongoing bug bounty campaign live and running.

What is $TAPIO

TAPIO is the native token of Tapio Finance and will be used for protocol governance. TAPIO is used to vote and decide on fees, gauges to allocate incentives, etc. Currently not live.

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