> For the complete documentation index, see [llms.txt](https://2hot-dao.gitbook.io/2hotdao-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://2hot-dao.gitbook.io/2hotdao-docs/2hot-protocol/staking.md).

# Staking

{% hint style="info" %}
2HOT Liquid Staking Derivatives LSDs will be able on 4 main chains, with an open source code, directly controlled by the 2HOT DAO governance system.\
Ethereum (as a main), Polygon, PolkaDot, Solana
{% endhint %}

## Liquid staking <a href="#liquid-staking" id="liquid-staking"></a>

### Problem statement

Traditionally, staking in Proof-of-Stake (PoS) protocol-based projects has been about locking one’s tokens in one project for a long time and expecting a fixed, predetermined staking reward in return. While it guarantees the return on staked tokens much like a bond, it also limits the opportunities of generating higher returns on those tokens from the DeFi ecosystem. If you’ve staked all of your crypto holdings, you can’t invest or trade in more profitable crypto pairs on exchanges.

### Solution

Liquid staking allows using the `[xTOKEN]` in other trading opportunities to let the user get the best of both worlds - a reward on your staked tokens, as well as the returns from new trading opportunities. Liquid staking introduces various fundamental benefits by:&#x20;

* Making the staking process simple - no need to worry about hardware setup and maintenance;
* Making it possible to get rewards on as small a deposit as users want (i.e, Ethereum requires a minimum 32 `ETH` staked);
* Providing the `[token]` a building block for other applications and protocols (e.g., as collateral in lending or other trading DeFi solutions). Liquid staking gives an opportunity to maximize the potential while having the best of both worlds;&#x20;
* Providing an alternative to exchange staking, solo staking, and other semi-custodial and decentralized protocols.

#### Comparison with other staking options <a href="#comparison-with-other-staking-options" id="comparison-with-other-staking-options"></a>

**Solo staking** is great, but it comes with some disadvantages. Setting up a validator node requires a pristine technical understanding, and brings with it a minimum deposit of 32 ETH in the Ethereum case, slashing and offline penalties can get very severe if the staking is managed improperly and finally the staked amount is locked up for a significant period.&#x20;

Solo staking is similar to other options of **SaaS staking** in that you are having your own validator keys. Nevertheless, with SaaS, you must trust a third-party (usually centralized), which may act maliciously, attack, or simply regulate. Going back to the Ethereum example, there remains a requirement for a minimum amount of 32 `ETH` staked.&#x20;

Alternatively, it may be possible to produce staking through **centralized exchanges**. Needless to say, crypto tokens and CeFi are not suited well together from a fundamental standpoint. It is also worth mentioning the economic aspect - by staking within some centralized entities, the user does not receive a corresponding token in return and, thus, loses the opportunity to perform any subsequent activity within DeFi or the same centralized entity, where tokens were staked. Yes, APR, when staking on centralized exchanges might be higher, but with a significant amount aggregated within the centralized entity comes a huge potential influence on the ecosystem that was fundamentally designed decentralized.&#x20;

**Through the use of a liquid staking solution such as 2HOT, users can eliminate these inconveniences and benefit from non-custodial staking backed by industry leaders. Liquid staking is unlocking the potential of PoS by giving users the ability to not only stake their tokens but have the liquidity to use those tokens in DeFi projects that way not only increases rewards for the individual but growing the staking participation in general.**

### 2HOT Protocol APR

```
// Network APR + LP xHOT APR = APR(native)+xHOT(hybrid)
xHOT tokens Buy Back + Burn = +(increase in overall [token] + xHOT

*Protocol fee depends on the Tier used by staker
```

## How to stake on 2HOT?

Here are the general steps to stake on 2HOT Protocol

1. **Choose the cryptocurrency** you want to stake: \
   2HOT currently supports staking for the **Ethereum network (ex. ETH, WETH, WBTC, USDT, USDC, etc.)** cryptocurrency you want to stake based on your preference and investment strategy.
2. **Connect your wallet to 2HOT:** \
   2Hot is a decentralized platform, which means that you need to connect your cryptocurrency wallet to start staking. You can connect your wallet using a web3 wallet like MetaMask, Trust Wallet, or Coinbase Wallet.
3. **Select the amount of cryptocurrency you want to stake:** \
   Once you have connected your wallet to 2HOT, you can select the amount of cryptocurrency you want to stake. 2HOT has a minimum staking amount, which varies depending on the cryptocurrency you are staking.
4. **Confirm the Multi-Sign req:**\
   After selecting the amount of cryptocurrency you want to stake, you will be prompted to confirm the `[Multi-Sign-SCLP1]` in your wallet. Review the details of the sign, including the gas fees, and confirm.
5. **Monitor your staking rewards:** \
   Once your cryptocurrency has been successfully staked on 2HOT, you can monitor your staking rewards using the 2HOT dashboard or your wallet interface. Your staking rewards will depend on the APR for the cryptocurrency you are staking and the amount of cryptocurrency you have staked.

{% hint style="info" %}
More details + explanations will come with the formed DAO.
{% endhint %}

## FEES

2HOT DAO collects a percentage of the staking rewards as a protocol fee. The exact fee size is defined by the DAO and can be changed in the future via DAO voting. To collect the fee, the protocol mints new xxxETH token shares and assigns them to the fee recipients.

```
shares2mint * newShareCost = (_totalRewards * feeBasis) / 10000
```

```
newShareCost = newTotalPooledEther / (prevTotalShares + shares2mint)
```

```
// Some code                        _totalRewards * feeBasis * prevTotalShares
shares2mint = --------------------------------------------------------------
                (newTotalPooledEther * 10000) - (feeBasis * _totalRewards)
```

### ERC20 Permit

xxxETH token implements the ERC20 Permit extension allowing approvals to be made via signatures, as defined in [EIP-2612](https://eips.ethereum.org/EIPS/eip-2612).

The `permit` method allows users to modify the allowance using a signed message, instead of through `msg.sender`. By not relying on `approve` method, you can build interfaces that will approve and use xxxETH in one tx.

ETH token itself does not support the ERC20 Permit extension and it's not possible to approve and wrap xxxETH in one tx at this time.


---

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