To stake or to mint, that is the question!
Should I stake FTM? Or should I mint fUSD instead?
The short answer is: it depends.
Let’s see how both staking and minting are important for Fantom.
What’s the difference between staking and minting?
Staking = network security
FTM secures the Fantom mainnet via Proof-of-Stake. The higher the amount of FTM staked, the higher the security of the network.
Minting = liquidity for Fantom Finance
fUSD is the gateway to Fantom Finance. You’ll be able to use it on fMint and fLend both for trading and to provide liquidity to the liquidity pool on fLend.
As you can see, both staking and minting are essential for the ecosystem in their way.
Let’s review their characteristics.
- Higher APY: ~4-12%, depending on the lockup length and the amount of FTM staked, vs 6% average for minting fUSD (The APY on minting is calculated on the minted fUSD, not on the FTM supplied to fMint. The APY can be higher if the minted amount is low).
- Passive income: Unlike minting, you don’t need to keep an eye on it as there’s no risk of missing rewards or potential liquidations.
- Unbonding period: Staking is always subject to a 7-day unbonding period for security reasons.
- Staking rewards: You earn and can compound the rewards every epoch, or withdraw them right away. However if you unstake before your lockup period ends, you’ll pay a penalty.
- Increases TVL: TVL (total value locked) is an important metric in DeFi. The higher it is, the higher the liquidity in DeFi. The higher the liquidity, the more usable a DeFi platform is. The more usable it is, the more attractive it becomes, creating a positive feedback loop.
- Borrow against your FTM: You don’t have to sell your FTM to use part of its value. While you can’t experience it yet, this will be the most crucial characteristic for minting fUSD once fSwap and fLend are out.
- Active income: Generate active income with fUSD while keeping exposure to FTM. Unlike staking, though, you’ll have to monitor your C-Ratio to make sure you’re still earning rewards, and you don’t get liquidated. Liquidations aren’t in place at the moment to favor the early supporters and make it easy to learn about the benefits and risks but will be introduced in the future. We’ll communicate it very well in advance.
- Unlocked funds: with minting, you can always get back your locked FTM by repaying the fUSD debt.
- Learn and get rewarded for it: Get rewarded for familiarizing with Fantom Finance, and you’ll be at ease when fLend and fSwap launch.
Most users will likely use part of their FTM for staking and part for minting, as both have unique advantages.
Can minting be detrimental to security?
The system is designed to reward stakers more than minters to keep the right balance between usability and security. Minting rewards are lower than staking rewards, and since the launch of Fantom Finance, we haven’t seen significant undelegations. Instead, we saw many token holders use their idle assets, which is a very positive development.