Transcription
In this video, we're going to be introducing the Vouch liquid staking derivative platform on Pulse Chain. Before we can dive into the liquid staking component, let's understand how staking works on Pulse Chain.
At the moment, we have a number of people and computers that are working as validators to process transactions on the network. Here, they're shown in orange. And for someone to be a validator, there's essentially three things they need. They need the technical skills to be able to run the validator software and and the hardware. They actually need the hardware. And then they need a stake in Pulse Chain that's 32 million Pulse. And if they have those three things, then they can be authorized as a validator on the network. And in return for putting up that stake and committing their time and energy and resources to being a validator, they get given network rewards. They get given fees on the network as well from when people are processing transactions and paying their priority fees.
So that brings us to to the next part of the system, and that is the actual users. So shown in white with the little Rabby symbol there, they've got their Rabby wallet connected to Pulse Chain and they're sending in transactions, which are then processed by the validators in the orange and sent to the blockchain. That's how it works at the moment. And in this instance, if you're a user, you're not getting, and you're just holding Pulse in your wallet, you're not actually getting any benefit from the yield that the network actually produces. So that's where the liquid staking derivative comes in. It gives you a chance to be able to be one of those participants. But let's see how it works in essence, and then we'll dive into a little bit more of the detail.
So we still have our validators in orange, and they still need to put up a stake. So they, in this case, need to deposit 12 million Pulse, so less than being a validator on their own right, but still enough skin in the game so that they've they've got to do the right thing by the network. In addition, users can deposit Pulse into the Vouch smart contracts. And these smart contracts manage all the the smarts and the intelligence around staking and reward distribution. In this instance, we've shown someone depositing one Pulse and in return, they're getting their liquid staking derivative token, One V Pulse. So they put one Pulse in, get one V Pulse out. Effectively, what it means is that One V Pulse is a representation or a derivative of the value of the Pulse. So it sits in your wallet, it's liquid, you can do whatever you like with it, much the same as you would with Pulse.
Now, when the the stake from the validators and the pulled funds from all the users reach an amount of 32 million Pulse in the Vouch system, then that validator can be activated. When the validator is activated, you can see the rewards are then passed back into the Vouch smart contracts. So let's have a look at how that actually works and how the the distribution of those rewards is reflected for the various participants. So we mentioned the rewards are going back into the the Vouch smart contracts. The validating operator, he still gets his share of the rewards. He's put up a stake, he's doing the work, so he gets his share of the rewards paid out in Pulse. However, the users that have deposited their Pulse into the Vouch smart contract, they don't get a a direct feed of Pulse coming out to them. Instead, what happens is all the Pulse accrues in the pool. So all the rewards and everything is getting sent back to the Vouch contract and sitting in a pool of funds there in the form of Pulse. And that value is then transferred to the users using this mechanism.
So you can see on the the far right, we've got the Pulse pool ratio. When it initially started, the user put in one Pulse and got one V Pulse back out of the system, so they had a one:one ratio. But over time, rewards have been accruing in the Vouch pool such that the ratio has changed. So if that user was to redeem their V Pulse, so essentially unstake their their Pulse, they'd send back their V Pulse and they would get in this instance, over time, they would get 1.1 Pulse back. If they left it in there longer, 1.2. If they left it in there even longer, 1.3. So over time, the Pulse in the Pulse pool on the Vouch contracts is growing, such that as soon as someone wants to redeem their derivative token, they can pull that out. And it's like they've been staking and being a validator, they they're getting a virtual share of the rewards all the time. And they can actually crystallize those rewards by sending their their V Pulse back into the contract and extracting the actual Pulse.
Now, what's really unique about this, the user could leave their Pulse sitting in those contracts, keep getting the yield by the way of the value of V Pulse going up. But then use that V Pulse much like they would any other token on the network. So put it in liquidity pools and get rewards and fees for doing that. Pick up extra yield on other protocols where you're you're being a liquidity provider and getting given their incentive token. So it means that you get the best of both worlds. You get the the flexibility of having like having Pulse in your wallet, but you're actually being a participant in the network and getting your share of the rewards from the network. So it means you're not actually getting diluted by the inflation that is inherent in these sorts of systems. So it's a really big win.
Yeah, that's all I really wanted to cover in this video. I just wanted to give you a brief overview of what Vouch is and how liquid staking works in general. So we look forward to seeing you in and around our Telegram group and finding out a little bit more about what's going on in the world of Vouch.