- Staking offers token holders a way to earn an extra yield on their holdings in a simple and secure way.
- The SOMA token offers investors globally and in the U.S. the opportunity to stake the first legally issued and compliantly structured digital security.
- Staking pools on SOMA.finance allow holders to stake their tokens to earn extra SOMA alongside dividends and yield farming opportunities.
Ethereum’s transition from proof-of-work (PoW) to proof-of-stake (PoS) marked a monumental shift in the landscape of the cryptocurrency industry for a variety of reasons.
Not only did it generate a large amount of buzz within the ecosystem and attract the attention of institutional investors as a passive income investment, but it also solidified the PoS model as the optimal model for smart contract platforms and blockchains in general as the world moves towards a more environmentally friendly mode of operation.
For these and other reasons, SOMA.finance has elected to operate with a proof-of-stake model, which adds another layer of functionality to the SOMA token along with an additional way for holders to earn an extra yield from their investment as the global financial system progresses towards a blockchain-enabled future.
In the world of distributed ledger technology (DLT), there are a variety of ways that a decentralized network can validate transactions and maintain an agreed-upon ledger. These methods are called “consensus mechanisms,” and the two most popular currently are PoW and PoS.
Bitcoin, the largest and most well-known digital asset, operates using a PoW mechanism that requires a global network of “miners” that contribute computing power towards the network as they attempt to solve the Bitcoin hashing algorithm and mint a new block.
The minting of a new block on a blockchain records the transaction history as a permanent record and is also the mechanism by which new tokens are created.
As mentioned in the intro, Ethereum – and a large portion of the other smart contract platforms – operates using PoS.
Proof of Stake requires validators to “stake” or lock up their tokens in a smart contract in order to participate in the transaction validation process and mint new blocks. When compared to PoW, proof of stake significantly reduces the amount of energy needed for the network to operate.
For the majority of PoS networks, token holders simply lock their tokens up (delegate) with validators who participate in the validation process and give the rewards to the token holders, minus a commission. It’s a relatively simple, straightforward, one-dimensional process, and little action is required on the part of delegators.
The yield offered by projects varies based on factors such as token supply, emission schedules, adoption, and the number of transactions, and more established projects tend to offer lower yields than newer projects that are trying to attract attention.
When it comes to traditional finance, the closest thing to staking would be putting money into a high-yield savings account. When you deposit funds in a savings account, the bank takes that money and typically lends it out to others.
While lending money is not the same as locking tokens with a network validator, both come with the risk of losing funds for the reward of increasing the size of your holdings.
SOMA Token Staking
Among the many benefits offered by holding the SOMA token, staking is one of the primary features as it symbolizes SOMA.finance’s dedication to incorporating features of decentralized finance (DeFi) and traditional finance (TradFi) into one platform that represents ‘Finance for the Future.’
Through the SOMA.finance platform, users can stake their SOMA tokens in a staking pool alongside other platform users as a simple and secure way to earn additional rewards on their holdings.
And thanks to SOMA.finance’s partnership with Tritaurian Capital, the SOMA token is the first legally issued and compliantly structured digital security that is available for purchase by US and global retail investors.
While the Dividends that are built into the SOMA token offer holders a way to earn a part of the proceeds generated by various activities on the SOMA.finance platform, the staking pools offer users a way to increase the size of their SOMA stack, which further increases yield opportunities.
As staked SOMA earn rewards in the form of additional SOMA tokens, those new tokens not only create the ability to earn a higher amount of staking rewards – as long as the new tokens are also added to the staking pool – but they also increase the dividend received as every token receives an equal share of the platform’s profits.
With the SOMA token offering multiple ways to earn a yield – including staking, dividends, yield farming opportunities and corporate ownership – alongside being a legally issued digital asset available to global retail investors, it truly represents a bridge between DeFi and TradFi and offers a unique opportunity for participants in both worlds.