DJED Update — Jan 30th
As updated earlier, the chain-index sync was successfully completed and we’re getting closer to launch. Get ready!
Following our recent article, some of you had questions and concerns we wanted to transparently address.
Q: Why did you choose Wave as the Stake Pool Operator?
A: COTI has been closely working with Wave since 2019 and we are well familiar with their management and operational team. Wave has extensive experience with operating staking pools and it meant that we’ll be working with a reliable party.
Q: Please explain the high delegation reward fee
A: Djed V1.1.1 was originally built without the staking or delegation options. Meaning that there were 0% delegation rewards for SHEN holders. However, it was important for us to come up with a solution that will generate some rewards from day one. As we are limited to operating in just one pool, until multi-pool staking is developed, we need to make sure that no external ADA stakers will join the pool and take away from its capacity. Hence, it was decided that the staking fees should TEMPORARILY be 8% to deter unrelated activity. However, as we don’t want delegators to lose gains, it was also agreed that Wave will pledge an extra 11 million ADA. On top of that, following the community feedback, we are happy to announce that we have managed to reduce the pool operator fee to 5%!
The 5% fee plus the pledge will yield the same APY as a delegation pool with 2–3% operator fee without a pledge. That said, this mechanism is temporary and we are working on solutions that will enable a private pool for SHEN delegation. Thank you for your feedback.
Q: What are the future plans for delegation?
In a couple of weeks, a dedicated and private pool for Djed will be made available with much lower fees.
Djed v1.3 will support the multi-pool function, which will enable us not only to increase the capacity of the staking platform but to also introduce new pool operators.
Q: How is the 0.5% operation fee calculated?
A: The original business model of Djed included an operational fee of 0.5% on every mint/burn transaction. Due to technical limitations in DJED v1.1.1, it’s still impossible to set a variable operating fee, denominated in percentage as originally planned. Therefore as an interim solution, a fixed fee of 100 ADA was set, while the rest of the fees will be reduced from SHEN holders’ delegation rewards.
While setting up the fee structure, we had to consider various cases of liquidity deposits and scenarios on average deposit amount and frequency. Also, we took into consideration the fact that some users will stay on the platform for longer periods, while some would stay for a shorter period of time. As a result, we came up with charging 25% of the delegation rewards, in addition to the 100 ADA fixed fee, which, on average, should give us approximately 0.5% fee in total after 6 months.
Few examples (numbers are approximate):
If Alice chooses to mint SHEN for 10,000 ADA, she will pay a fixed fee of 100 ADA (1%) on entry, and another 54 ADA (0.54%) reduced from her delegation rewards in one year.
Bob chooses to deposit 100,000 ADA. He will pay a fixed fee of 100 ADA (0.1%) and another 760 ADA (0.76%) from his delegation rewards. The total fee will be 0.86% in one year.
Chris deposits 1,000,000 ADA in order to mint SHEN, he will pay an operational fee of 100 ADA (0.01%) and an additional 7,900 ADA from his first year delegation rewards. The total fee will be 0.80%. Alternatively, if Chris had chosen to deposit the same amount and redeem it back after a couple of days, he would have paid only 200 ADA as operational fee.
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Binance Feed: https://www.binance.com/en/feed/profile/485349084
CoinMarketCap Feed: https://coinmarketcap.com/community/profile/COTI
Technical whitepaper: https://coti.io/files/COTI-technical-whitepaper.pdf