Staking & Reward Pools
Team Finance allows any project to create their own staking or reward pool. Projects create staking or reward pools to incentivise early adopters that use their protocol or service to lock up their tokens for an extended period of time.
By locking their tokens away and staking, users are rewarded with additional amounts of the project’s token. This is akin to receiving passive income and is best compared to a bank term deposit.
The project benefits from staking because it reduces the total number of tokens in circulation. This leads to less supply which can lead to price appreciation.
Well known crypto projects like Axie Infinity, Alpaca Finance and Decentraland all use staking pools.
There is no one-size fits all approach. However, on average we’ve seen that projects dedicate anywhere from 5-20% for rewards and ecosystem incentives.
The two are used interchangeably but essentially mean the same thing. The term staking originally referred to layer 1 blockchain projects that use Proof of Stake as their consensus mechanism. With time however, staking has become synonymous with rewards. The easiest way to think about staking for most projects is like a bank term deposit.