Liquid Staking

The Terraport Liquid Staking Protocol provides users the opportunity to earn staking rewards on their staked $LUNC without needing to lock their tokens.

Users can deposit $LUNC into the Terraport smart contracts and receive (mint) $bLUNC tokens as a liquid, tokenized representation of their staked assets. The smart contract then stakes the $LUNC with whitelisted node operators (Validators).

Unlike traditional staked $LUNC, $bLUNC tokens offer liquidity, allowing them to be freely transferred or used in DeFi applications. These tokens are **constant balance tokens** (not rebasable), meaning the balance remains stable, and rewards are claimed separately.

Features

• Liquidity Without Lockup: $bLUNC tokens can be traded on Terraport pair $bLUNC/$LUNC or transferred at any time, providing flexibility compared to directly staked $LUNC.

• Validators: The protocol stakes with operators who have signed up via Terraport, ensuring a decentralized and transparent process.

Mint/Burn Mechanism

• Mint: Users can mint new $bLUNC by depositing $LUNC then can use the farm to receive the staking rewards released by the protocol

• Burn: Users can burn $bLUNC to receive their $LUNC back. This operation eliminates protocol delegation (unstaking) and requires an unlock period of 24 days.

Reward Mechanism

The rewards from staking are converted to $LUNC and distributed to a separate rewards contract. Users holding $bLUNC can claim these rewards directly, rather than receiving them as an automatic rebalance.

Conversion

The Terraport protocol supports easy conversion between different liquid staking tokens, such as $bLUNC, with a single transaction. A peg recovery fee may apply if the token value deviates from its target peg.

Fees

Peg Recovery Fee: A 0.5% fee is applied when minting or burning $bLUNC if its exchange rate falls below 1, to help gradually restore the peg.

Stake Distribution

The protocol aims to distribute stake evenly across all validators. When a delegation is made, the number of validators that receive delegations and the amount allocated to each depends on the current stake distribution.

Process:

1. Calculate Target Stake: The desired stake per validator is determined as follows:

1. Distribute Delegations: The validators are sorted in ascending order by their current stake. Starting with the validator holding the least stake, the protocol allocates additional stake up to the target amount.

2. Delegation Amount Calculation: For each validator, the stake added is calculated as:

1. Repeat Until Complete: This process continues, allocating stake to validators in sequence, until the full delegation amount has been distributed.

This method ensures that delegations are spread evenly, reducing centralization risk by prioritizing validators with lower stake.

Security

All Terraport Liquid Staking for Terra smart contracts have been audited by Certik.