When you first read up on Plasm, you would most likely have chanced upon the term “Dapps Staking”. Dapps staking is one of the unique features of Plasm / Shiden that allows us to differentiate ourselves from our competitors.
However from my interactions with the community, it seems like this concept is not very well understood. I understand that it is also hard to imagine what dapps staking is supposed to be like since we’re neither live on Polkadot nor Kusama (as of 18th June 2021) so I am going to try my best to illustrate this to you.
In one picture, this is how dapps staking is supposed to work:
Every smart contract on Plasm / Shiden can be assigned an administrator known as operators. Instead of staking to validators, users can choose to nominate their PLM / SDN tokens to these operators. These users are also known as nominators.
At every block, half of your block rewards are used for dapps staking. This reward is further divided into a 4:1 ratio between operators and nominators i.e. 50% of the block reward goes to validators, 40% goes to operators and 10% goes to nominators.
40% of block rewards is a huge incentive for dapp developers to build on Plasm. In other blockchains like Ethereum, dapp developers need to apply for grant programs, issuance of tokens, fund raising etc. to earn some money but on Plasm, as long as your dapp has been nominated, you will receive some basic income. As your dapp grows in popularity, more members of the community will nominate to you and this means that you will receive a greater percentage of the block reward!
We must also not forget the nominators. 10% reward is quite substantial and can serve as an alternative to staking to validators or lending on other DeFi platforms. Let’s go through a numerical example to really understand this.
I am using PLM in this example but the same logic can be applied for SDN.
- Let’s assume that PLM has a price of $1. With a total supply of 70m PLM, this gives PLM a market cap of 70m.
- We have 10% inflation a year so that means after 1 year of running the blockchain (assuming no change in price), we would have created 7m USD worth of PLM tokens.
- Block rewards are split between validators, dapps and nominators at a 5:4:1 ratio which equates to 3.5m, 2.8m and 0.8m respectively.
If you are able to maintain on average 1% of all nomination, you will receive 28k USD at the end of 1 year. 28k might not sound like much but it is more than enough to cover your basic expenses. It’s our version of universal basic income for operators!
But here’s something even better… what if you could sell your operator position Guess what? You can! Imagine if you are an operator to a dapp that holds on average 10% of all nomination, that’s 280k USD of recurring profit annually (at PLM = $1)! Like a traditional business, you can sell this operator position away if you prefer an upfront payment as opposed to having it distributed over a period of time i.e. exiting a company.
I will leave the question of “what is the fair value for PLM” to you since I do not want to speculate on price but I hope that from this example, you can see why we believe in the potential of dapps staking and how by supporting dapp developers natively in our blockchain, we can incentivise more developers to build more amazing dapps for our community!
If you want to try out dapps staking locally, you can follow the instructions in this guide.