Need a Liquidity Mining and Staking solution — should a project Build or Buy?
Liquidity mining and staking is a core DeFi innovation, integrating this as a solution can be difficult, particularly with constraints around time, cost and risk. Should a project build the solution themselves, or should they outsource to a trusted provider?
Decentralized finance is an industry in which new opportunities and innovations are constantly being presented to users. One of the key innovations to sprout from this development has been the ability for individuals, builders, and projects to use staking and liquidity mining campaigns.
These campaigns are drivers for projects to reward community members and sustainably manage liquidity. Users that stake their tokens are rewarded for their confidence in the project with an incentive in the native token. If a project is deciding to take advantage of this type of liquidity management, then it is important for them to determine whether they should develop the solutions themselves or they should choose an out-of-the-box solution like AllianceBlock’s DeFi Terminal.
For projects with limited resources, amassing an experienced team, receiving quality advice, and knowing what technical infrastructure is needed to make their dream become a reality is a tough task. Before embarking on this journey projects should be honest about their business requirements — is staking and liquidity mining necessary for the project, do I need liquidity mining campaigns on multiple chains and exchanges, and what are my constraints with time, resources, and costs? Pre-empting these types of questions can make the next stage of the decision process move smoothly. It is at this point that the final question arrives — do I build or buy?
Building a staking or liquidity mining platform
The following are the key components you should consider when building a staking or liquidity mining platform.
Development and challenges
There are many considerations to make before building a liquidity mining or staking platform. For example, you will need to examine your infrastructure and then choose a specific technology stack, decide which blockchain to build on, what language the code is written in, and many other blockchain-specific considerations — do you need to generate data sets and reports, which wallets are supported, will there be auto-compounding, etc…?
Some of these questions can only be answered by experienced professionals. So before building a staking and liquidity mining platform for your project, does your team have the ability to answer and action some of these questions, and if not, are you able to outsource this to a professional?
User experience is key
The UI/UX decisions of a project are important as you want a seamless way for your users to navigate and participate in your liquidity mining and staking campaigns. Your front-end interface needs to reflect accurate information about your services and enable easy participation for your users. If there are errors in this part, like an incorrect APY (average percentage yield) rate, then the user won’t be able to confidently participate in your platform. Challenges can also arise with the underlying infrastructure, for example staking platforms are reliant on stable RPC (Remote Procedure Call) nodes, having an issue with this could mean your users will lose their ability to access their funds. These challenges mean your users could lose trust in your services, an immediate red flag for any project.
Smart Contracts
Smart contracts are a key component for all blockchain transactions as they specify the terms and conditions for the platform or service. For liquidity mining and staking, they represent the code that self-executes and releases your tokens in the pools. The code in these contracts needs to be secure, compliant, and correct, any error in this could leave your project, pools, and users vulnerable to hackers. Your smart contracts can’t have any errors or loopholes as this poses a significant risk and threat.
The process of getting a smart contract ready for production is costly. It requires skilled developers with an extensive understanding of specific blockchain languages, which are often non-conventional and requires specific knowledge, and audits are necessary to ensure the utmost security and trust in the contract's ability to execute as written. Audits are often expensive and may undergo multiple cycles of refinement or changes.
Blockchain Concierges — a simpler solution
There has been a spate of blockchain concierges that holds a project’s hand through the transition into Web3 and implementation of liquidity mining and staking solutions. These services are not free but they do take the burden out of blockchain-specific tasks — do you have a strong development team but lack smart contract experience? Do you need your project to interact with a bridge? Do you need to raise more funds? Do you need to create a utility token?
These concierge services are able to help you complete difficult tasks and enable you to realize your Web3 vision. They are unique, house all the services you need, and help coordinate interactions to ensure the process is efficient for your project. In choosing an out-of-the-box solution, teams are able to be cost-effective, have concrete time-to-market goals, benefit from code security and audits, and have clear space to focus on their product roadmaps.
With these elements in mind, what should a project choose?
Developing liquidity mining and staking solutions in-house can be complex and expensive, and the risk-to-reward calculation for a business that is unfamiliar with the process can be very high. However, if your project model includes this process in your roadmap then a DIY option could be viable, or alternatively, you can partner with a project that has the ability to deliver this solution.
Partnering with an experienced project can be a more economical, efficient, and sustainable solution to build your liquidity mining and staking campaigns. There are many providers in the market that have built scalable solutions that projects can attach and build on existing technologies. These projects offer useful advantages compared to a DIY solution — the UI/UX is generally appealing and simple to integrate into projects, and most also offer their own aggregators which can assist projects in reaching a wider target group.
In choosing a provider it is important to consider the decentralization offered. In a trustless domain, owning your own staking contracts is important, so keep in mind this key differentiator when investigating providers.
These out-of-the-box solutions are constantly undergoing developments and innovations that make them a viable option for startups looking to integrate liquidity mining and staking into their projects. The process may seem expensive at first, but if a project chooses to build the solution from scratch, the long-run issues of time-to-market, costs and risks involved could add up more than they would in an out-of-the-box solution.
The Defi Terminal — the gold standard for liquidity mining and staking solutions
AllianceBlock’s DeFi Terminal has unique features that enable simple implementation and integrations of liquidity mining or staking. The project itself gets access to its own customizable platform and is able to deploy liquidity mining and staking campaigns with security-focused features such as multi-signature authentication, this type of deployment enable projects to keep full control over their contracts.
Development overhead is reduced significantly as AllianceBlock’s integration uses a no-code solution, this is secure and stress-tested, letting projects focus their time and resources on product development and speedier implementation. Additionally, AllianceBlock offers an SDK to integrate the campaigns directly within the project’s applications.
The solutions are interoperable across a variety of networks and decentralized exchanges, and regardless of where a project deploys, secure and audited smart contracts are employed. AllianceBlock envisions an ecosystem where projects can grow and thrive, building this technology in a secure decentralized way fulfills this vision.
It may seem like a daunting task to choose to amplify your project’s vision, and even more of a task to practically initiate it. Liquidity mining and staking are innovative ways for projects to manage liquidity. There are many ways to do this effectively however concierge services offer a simple solution that helps coordinate these interactions and ensure the process is done efficiently. You can choose to implement this solution yourself, but potential issues surrounding time, cost, and risk can make this difficult to implement.
AllianceBlock has developed a solution that aims to make this process as seamless as possible, one that is customizable, low-cost with no-code or through the SDK, interoperable, and completely decentralized. Although the decision on whether or not to build your own staking or liquidity mining solution may seem difficult, understanding the benefits and challenges of the varying options and implementing an appropriate action in your business model can make the decision an easier one.
Check out the DeFi Terminal website here. If you are a project with a token and are interested in using our liquidity mining and staking solution, let’s get on a call here.
About AllianceBlock
AllianceBlock is building seamless gateways between TradFi and DeFi. We develop an end-to-end infrastructure leveraging decentralized technology to empower individuals, startups and businesses to build decentralized, secure and compliant solutions that accelerates their vision.
We aim to be the industry standard for DeFi development and TradFi adoption through our interoperable and composable suite of solutions and compliant products.
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