Stargate Finance is an interoperable liquidity protocol that moves assets between blockchains and decentralized finance (DeFi) protocols without intermediaries. Interoperability is an essential component of the modern Web3 landscape. Several prominent decentralized exchanges (DEXs) support multiple blockchains and layer-2 networks. However, cross-chain token swaps often require multiple transactions. Also, some wrapping services and token bridges rely on centralized custodians that can put funds at risk and create single points of failure.
In this article, we’ll dive deep into the Stargate Finance crypto ecosystem. We’ll explore the various features it offers, the STG token, and how the platform makes cross-chain DeFi efficient, accessible, and secure.
What is Stargate Finance?
Stargate Finance is a composable, cross-chain liquidity protocol that unifies liquidity pools among decentralized finance (DeFi) protocols without friction. The platform removes many of the complexities associated with cross-chain DeFi, making it easy for users to transfer and swap assets between blockchains, layer-2 networks, and decentralized applications (dapps) with instant finality. Stargate Finance features a cross-chain decentralized exchange (DEX), liquidity pools, and farms. Users can provide liquidity to the Stargate protocol and earn a portion of transaction fees from token transfers. Plus, they can maximize their earnings via yield farming.
Liquidity providers earn stablecoin rewards for their contribution to the platform. However, users can also earn the native STG token by farming liquidity provider (LP) tokens. Furthermore, users can earn veSTG by staking the STG token. Holders of the veSTG token can vote on governance proposals to make changes to the network. The longer users stake STG, the more vSTG they earn.
Stargate Finance aims to lower the barrier to entry for cross-chain DeFi and simplify cross-chain token swaps into single transactions by allowing users to swap assets natively between blockchains. Other DEXs, aggregators, and DeFi protocols can harness Stargate’s liquidity and use the platform to compose single-transaction cross-chain token transfers. Not only does this make it easier for users to swap assets, but it also helps to bolster the liquidity of the DeFi ecosystem, minimize slippage, and make dapps more reliable.
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Stargate Finance Background
Stargate Finance was established in March 2022 by LayerZero Labs, the company behind the LayerZero omnichain protocol. LayerZero underpins many of Stargate’s interoperability features. It serves as a configurable on-chain endpoint for optimizing cross-chain communications. Moreover, Stargate Finance was designed to make cross-chain DeFi more accessible and secure. Though the project is in the early stages of its development, the Stargate community is thriving.
The STG Token
The STG token is the native cryptocurrency of the Stargate crypto network. It is essential in decentralized governance, staking, liquidity provision, and farming rewards. At the time of writing, the STG token is trading at $0.59 with a market cap of $82.5 million. It has a circulating supply of 138.6 million from a total supply of 1 billion, according to CoinGecko.
The STG token launched in March 2022. Team members and early investors received an allocation of 17.5% of the supply, which is locked for up to 24 months. A further 15% allocation went toward the project launch. Over 30% of the initial distribution is reserved for community rewards. Moreover, an allocation of 15.95% is reserved for bonding curves, while 3.66% goes to initial emissions and bonding curves.
STG Token Transfers
The Transfer feature of the Stargate crypto platform allows users to swap native assets between blockchain networks. For example, a trader who wants to swap USDT on BNB Chain for USDT on Ethereum would usually need to sign multiple transactions and use some kind of bridging or wrapping service. However, the Stargate DEX reduces the number of steps required to execute cross-chain token swaps.
To use Stargate’s cross-chain DEX, head to the Stargate app and navigate to the “Transfer” tab. You’ll need to connect your wallet and select the tokens in question before deciding which network should send assets and which should receive them. After inputting the total amount of tokens you wish to swap, select “Approve” to execute the trade.
Furthermore, Transfer allows users to swap STG tokens between blockchains without paying protocol transfer fees. Instead, users only pay gas fees. Non-STG token swaps incur a 0.06% fee. However, users can specify native gas amounts from the source network of their token swaps by selecting “Advanced Settings” in the Transfer section of the app.
Additionally, non-STG token transfers incur a pool rebalancing fee to allow each pool to achieve an equilibrium. Pools have target balances that determine the ratio of tokens they should hold. Every time a user swaps a token using a pool, the pool becomes unbalanced. To address this, the Stargate DEX uses a rebalancing fee model to prevent the continued depletion of asset reserves.
Liquidity Pools
Stargate Finance provides access to token-chain liquidity pools. These pools provide liquidity to the Stargate DEX and enable users to earn rewards by becoming liquidity providers (LPs). To add liquidity to a Stargate pool, connect your crypto wallet to Stargate and navigate to the “Pool” section of the app. From here, you can select from various liquidity pools that support the ERC-20 token standard.
Liquidity providers earn LP tokens that represent their share of pooled assets. These LP tokens entitled holders to a share of transfer fees from the Stargate DEX proportional to their share of the assets in a pool. Liquidity pool rewards are paid in stablecoins. Also, LP tokens are redeemable at any time, so users can exit liquidity pools whenever they like. At the time of writing, the Stargate crypto ecosystem has a total value locked (TVL) of $380 million.
Farming
The Farm section of the Stargate Finance app allows users to farm LP tokens from Pools to earn additional crypto rewards. Users who hold LP tokens can farm them to earn STG tokens. To participate in farming, connect your wallet to Stargate and navigate to the “Farms” section of the app. Next, select a farm that corresponds to the LP tokens you hold. Farming exposes users to additional risks. However, savvy investors can maximize their rewards by using LP tokens in this way.
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STG Token Staking
Stargate Finance uses a decentralized governance model that allows community members to vote on proposals to make changes to the platform. Community members who stake their STG tokens receive a balance of vote-escrowed STG (vsSTG), the governance token of the Stargate crypto network.
To participate in Stargate governance, navigate to the “Stake” section of the app and connect your wallet. You’ll be able to select from various staking pools. After selecting a staking pool, choose how many STG tokens you want to stake and the lock-up period. Longer lock-up periods payout higher rewards. At the time of writing, 18.5% of the total STG supply is locked in escrow for protocol governance, with an average lock time of 358 days.
Why is Interoperability Important for Web3?
Many analysts agree that cross-chain communication is essential for the mass adoption of Web3 and blockchain technology. Not long ago, blockchains were typically siloed networks, incapable of cross-chain communication. However, interoperability between blockchains provides several benefits. For example, developers can collaborate and share information across a larger community. Not only does this expedite innovation, but it also helps to minimize tribalism and connect different Web3 communities.
Furthermore, interoperability between blockchain networks is supercharging the DeFi landscape. Instead of choosing a DEX based on the network it supports, users now have access to a broad range of cross-chain dapps and DeFi protocols. All exchanges and lending platforms need deep liquidity to prevent price slippage and increase stability. In the past, DeFi platforms were restricted because they could only harness the liquidity of the blockchain on which they were built. However, the advent of cross-chain DeFi allows value to move freely between chains to create better user experiences.
Why Use Stargate Finance?
One of the critical features of the Stargate crypto platform is that it facilitates single-transaction token swaps on most major blockchains. For example, when swapping an Ethereum-native asset like DAI for a Polygon-native asset like AAVE, users would typically need to sign multiple transactions and pay the corresponding fees. However, the Stargate crypto bridge makes this process seamless without using token wrapping services. Also, Stargate aggregates liquidity from the top DeFi protocols on all blockchains. Instead of frequently jumping between protocols and changing networks, users gain access to deep liquidity from every blockchain via a single interface.
The Stargate crypto bridge provides instant finality without relying on bonds for replenishing asset reserves, providing a trustless alternative to many popular token bridges. Also, the platform uses a unified liquidity algorithm to allow liquidity on multiple blockchains to be used uniformly to guarantee instant transaction finality for cross-chain swaps and promote capital efficiency by reducing the number of pools that need to be created for each swap.
Stargate Crypto Bridge: Solving the Blockchain Bridging Trilemma
The blockchain trilemma refers to the challenges of scaling an app or network without compromising on security or decentralization. The same issue applies to taken bridges and interoperable blockchain protocols. Most token bridges require wrapping services. However, the Stargate crypto bridge forgoes these services in favor of an algorithmic rebalancing system. Resultantly, cross-chain swaps on Stargate are decentralized, as they can be performed natively. Nonetheless, the platform supports token wrapping without sacrificing composability.
Furthermore, the Stargate bridge optimizes liquidity so transactions cannot be reversed. The platform avoids the pitfalls of fractured liquidity that are present in many prominent bridges. Fractured liquidity requires the upkeep of multiple liquidity pools for each blockchain, which can cause rebalancing problems. On the other hand, Stargate’s unified liquidity pools streamline the bridging process and allow users to deposit and withdraw assets from multiple chains. Moreover, Stargate uses a lock+mint and burn+redeem model to mint assets on destination blockchains with instant finality and prevent transactions from being reverted.
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What is Stargate Finance and the STG Token? Summary
Stargate Finance is a highly-composable, interoperable liquidity protocol that allows users to move assets between networks in a single transaction. The Stargate crypto network creates deeper liquidity for the DeFi ecosystem by allowing value to flow freely between blockchains. Furthermore, Stargate guarantees instant transaction finality and provides a decentralized alternative to many of the popular token wrapping and bridging services.
By avoiding token wrapping, Stargate reduces the number of transactions required for cross-chain token transfers, which helps users reduce gas fee costs. Also, Stargate’s token bridge is fully decentralized, so it doesn’t have the single failure points that are commonplace among token bridges and interoperable Web3 technology providers.
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