Crowdstaking is a liquidity-focused & community-based alternative funding model with a vision to mitigate risk, align incentives, and bring control back to token holders.
CROWDFUNDING VS CROWDSTAKING
On current crowdfunding platforms like SeedInvest, individuals risk money by exchanging capital for upside in a startup. If the startup fails, the individual’s money is lost.
With crowdstaking, however, individuals retain 100% control of their money at all times. Instead of exchanging money, individuals lock (stake) digital tokens for a specific amount of time.
STAKING VS CROWDSTAKING
If you are familiar with blockchain technology, you may have heard the concept of staking. In this system, indiviuals receive a share of block rewards over a long period of time for locking (or staking) their tokens.
Instead, XIO uses a Layer 2 incentive structure where users earn immediate and upfront rewards for locking tokens into a smart contract called a Portal.
XIO Network Value
In XIO, your stake represents a vote of confidence in blockchain projects. Instead of receiving a share of block rewards for helping secure the network like validators in PoS, participants of XIO (Citizens) receive a share of the Network’s stake rewards.
If Citizens of the XIO Network stake their tokens into low-value projects that fail, the issuance rate (minting) will be higher than the value generated by the projects (stake rewards) and the token will lose value.
If Citizens of the XIO Network stake their tokens into high-value projects that succeed, the issuance rate (minting) will be lower than the value generated by the projects (stake rewards) and the token will gain value.
With a completely automated process, here are the four phases that take place on the back-end of the XIO protocol.
STEP ONE: LOCK
The first step of the crowdstaking process is for a Citizen to identify a high-potential blockchain project they want to support and lock tokens into the XIO portal (smart contract). The more the tokens (stake quantity) + the longer the time (stake duration) = the higher the confidence (stake vote).
STEP TWO: MINT
When the XIO smart contract receives these locked tokens, it mints new XIO tokens based on the current interest rate. For example: User locks 10,000 XIO into the Tezos Portal for 100 days at the 25% interest rate. This means 685 new XIO tokens would be minted.
STEP THREE: SWAP
After the new XIO Tokens are minted, the 685 XIO are swapped for Tezos Tokens (XTZ) on Uniswap at the current conversion rate. For example: If XIO tokens are $0.02 and XTZ are $2.00, 685 XIO would be swapped for 6.85 XTZ.
STEP FOUR: REWARD
After the swap, 6.85 XTZ tokens are sent to the Staker as a reward. In future iterations of XIO, a portion of all rewards will be retained by the Makers for coordinating the transfer. For example, if the Maker Reward Rate was 10%, they would retain 0.685 XTZ and the remaining (6.165 XTZ) would be sent to the Staker.
At the end of 100 days, the Staker can unlock their original XIO tokens and use them again. In future iterations of XIO, if a Staker would like to unlock their tokens earlier than the original lock duration, they can pay an early-unlock fee by burning XIO tokens based on the current interest rate.
The Future is at Stake
In 2017 and 2018, over $10,000,000,000 was invested through the form of Initial Coin Offerings. This explosion and subsequent collapse showed the undeniable potential but overwhelming inefficiencies of decentralized crowdfunding.
XIO aligns the incentives of startups and supporters by putting power back into the hands of token holders. If supporters lose trust in the startup, they can simply unstake their assets with zero-loss of their principle balance.
The crowdstaking generates a powerful opportunity for new crypto startups to increase liquidity, build community, and test the validity/sustainability of a project.