Avoiding Losses In DeFi Staking – Part 1: Tracking Deposits And Rewards

In the ever-evolving realm of decentralized finance (DeFi), the spotlight often falls on yield generation. This concept offers cryptocurrency holders the chance to earn returns on their idle assets. Within DeFi, numerous projects and platforms employ various methods for yield generation, with Staking and Vault/Strategy contracts being among the most prominent.

Today, we’ll explore a common pitfall that frequently affects Staking projects, potentially leading to users losing their staked tokens. We’ll also discuss how to prevent this from happening.

Usually, these projects incentivize users by rewarding them with specific tokens, typically created by the project team. These tokens must be supplied to the Staking contract to be distributed as rewards. However, a critical issue arises when the asset that is being staked is the same asset being issued as reward.

In such cases, it is crucial to track the tokens provided for rewards separately from those staked by users. If the contract does not maintain separate balances, there is a risk of users eventually withdrawing other users’ staked tokens if there are insufficient reward tokens available.

Consider the following scenario: A project offers a staking platform where users both stake and receive rewards in the form of the same asset. The reward rate for this contract is 1 token for each staked token per day. (*Please note that this extreme reward rate serves solely as a demonstration for this example).

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