Staking PSP
Stake your PSP tokens to add weight to the PSP rewards of a specific market maker and earn some PSP of your own.
If you hold PSP, you can get further involved with ParaSwap to help improve the efficiency and decentralization of the service, while earning PSP rewards at the same time.
ParaSwap implements a staking model inspired by the market maker rebates model used by many order book-based exchanges as well as proof-of-stake blockchains, where stakers vote on validators to maximize the shared block rewards.
PSP holders can stake on a market maker pool to add weight to their PSP rewards and earn PSP of their own!
By staking on a ParaSwapPool, a staker add weights to the PSP rewards of the given market maker. The user also receives an auto compounding PSP APY that depends on the market maker's performance.
This page provides the information needed to understand the PSP staking model and inform the pool-picking decision.

What are the ParaSwapPools?

ParaSwap aggregates the liquidity available on the main decentralized exchanges to provide the best pricing possible. But that's only the first part of the equation! On top of this, ParaSwap also aggregates the liquidity provided by various private market makers.
On top of the better pricing, it helps to provide, this has additional benefits as it enables ParaSwap to provide MEV-resistant and 0 slippage swaps.
The numerous optimizations ParaSwap implements to achieve the best rates are presented here:
Each ParaSwapPool corresponds to a given market maker.
Understanding the ParaSwapPools model is essential to making an informed staking decision. Indeed, the staking model at ParaSwap is here to help solve a hard problem: the incentivization of our market makers. In this model, it's up to the PSP staker to decide which market maker should get more PSP rewards, by staking their PSP on the desired pool.

How to stake PSP?

Both the PSP token and the staking contracts currently exist only on the Ethereum mainnet.
Staking is done directly on the ParaSwap website, through the Staking tab. On this page, you will find the list of the available ParaSwapPools, each representing a given market maker.
The list of the available ParaSwapPool to stake PSP on the ParaSwap website
Staking is subject to a lockup period currently set at two days. Rewards start accruing as soon as you are staking and are auto-compounded at the end of each epoch.
โ›ฝ To reduce the effective gas costs to the lowest possible, the staking contract uses the permit function, enabling the gasless allowance of the PSP token.
Staking deposits on a ParaSwapPool are recognized (initially 1:1) with a deposit token, for instance, `sPSP_PP1` for the ParaSwapPool1. The `sPSP_PPX` tokens are standard ERC-20: they can be transferred (allowing staking with a hot wallet and transferring the `sPSP_PPX` tokens afterward to a cold wallet.
The yield of each staking pool is reflected in the evolution of the sPSP_PP1/PSP exchange rate.

Unstaking PSP tokens

To unstake PSP tokens, the flow is similar to staking with one additional step due to the lock-up period.
  1. 1.
    First, the staker needs to "Request Withdrawl" for the given amount: that's a first transaction to sign.
  2. 2.
    Then, once the lockup period expired (currently 2 days), the user can submit the actual withdrawal transaction at any time.
PSP rewards stop accruing as soon as the Request Withdrawal transaction is submitted.
Once a Request Withdrawal is initiated, the staker stops earning PSP yields. At the end of the lock-up period, the staker can proceed with the withdrawal transaction to get his PSP back. It's also possible to Re-Enter to cancel the withdrawal process.

Additional information regarding staking

  • Rewards are auto-compounded at the end of each epoch, which means that a passive staking strategy is possible if the staker is comfortable with his/her choice of market maker.
  • To prevent any gaming of the lock-up system, PSP rewards stop accruing as soon as a withdrawal request is received.
  • The current lockup period is two days to enable more flexibility in the beginning. The governance will be able to adjust this parameter.
  • Staking on a given ParaSwapPool is recognized with tokens granted on a 1:1 basis and specific to each pool. For instance here's sPSP1, for the ParaSwapPool1. It will make it easy to recognize and include staked PSP tokens in governance votes.
  • FOR MARKET MAKERS ONLY: the PSP tokens earned are subject to a minimal lockup of 6 months.

How to choose which ParaSwapPool to stake?

The choice can be driven by two types of factors: quantitative (data displayed in-app) & qualitative (what kind of liquidity is actually provided / which tokens).
We're currently working with community members and reaching out to the market makers to provide more context to help inform the staking decisions.
Check the market maker page for additional information to help inform your decisions:

Understanding ParaSwap's Staking Model

The ParaSwap staking model is novel and can be hard to apprehend at first. Don't panic, here's an ELI5 explainer.
When a user stakes on a ParaSwapPool, at the end of the day, it's like if he was:
  1. 1.
    signaling interest in the market maker
  2. 2.
    AND betting on his performance at the same time.

How is the user "signaling interest for the MM"?

Staking on a given ParaSwapPool is like telling the system:
I think this market maker is relevant and should get a bigger share of the PSP pie delivered at the end of each epoch.
The more users stake on a given ParaSwapPool, the more the PSP earnings of the associated market maker increase.

Why is the staker "betting" on a MM?

At the same time, while a user stake on a given ParaSwapPool, he's also placing a bet on the market maker. Indeed, the user PSP yield depends on the actual performance of the market maker he/she's betting on: at the end of an epoch, PSP rewards on a given pool are split between the market maker and the stakers.
The more competitive the liquidity provided by the MM is, the more PSP rewards the staker will get.

What's the point of this dance?

The goal of this design is to harness the collective intelligence of the crowd of PSP stakers. ParaSwap is faced with a challenge it cannot solve in a satisfying manner using math:
How to best allocate the PSP budget amongst the market makers?
The best answer to this question is obtained by analyzing the quantitative data, but also evaluating the qualitative dimensions of the liquidity provided. It requires a human touch. Solving this question is at the end of the day the PSP stakers' job โ€” and we're convinced they will ultimately provide a more relevant solution than any math-based approach could have.
This content exists for informational purposes only. It does not constitute investment advice.

Staking FAQ

What's an epoch? Why is it needed?
An epoch is a time convention necessary for the mechanism to function. PSP budgets are allocated on an epoch basis. An epoch currently lasts 14 days.
When will I see my yield?
As soon as PSP tokens are staked, they are earning. The yield is reflected in the evolution of the sPSP token exchange rate with PSP, updating at the end of every epoch. It means the yield is automatically compounding without any user action needed. After each epoch, the PSP reward automatically compounds in the balance and continues staking in the next epoch.
Where does the staking APY come from?
A PSP budget is allocated for ParaSwapPool incentives at each epoch. The staking decisions of the PSP stakers influence its distribution amongst the various pools. The market maker' performance is also a factor. The PSP rewards are split between the market makers and their respective stakers.
Can I switch pools without going through the withdrawal process?
Currently, there is no specific mechanism dedicated to switching pools. A user needs to request a withdrawal, wait for the lockup period, withdraw and then restake on the new pool to change their staking pool.
What if I "bet" on the wrong market maker?
When you stake, you're both signaling and taking a "bet" on a market maker. There is no "wrong" answer when it comes to your choice, you cannot lose tokens by staking. However, if you're savvy and knowledgeable about the system, you can potentially achieve much better APYs than the average.
Are there additional risks to consider while staking PSP tokens?
Staking involves interacting with an additional set of smart contracts (compared to just holding PSP), which means additional technical risks. The necessary process was made to minimize these risks, such as audits. Thanks to the Safety Module, two layers of insurances are currently protecting the PSP staking contracts:
Last modified 1d ago