6 min readLiquid Staking

How pZIL Works

A deep dive into pZIL, the liquid staking token that represents your staked ZIL and allows you to earn rewards while maintaining liquidity.

By PlunderSwap Team

How pZIL Works

pZIL is PlunderSwap's liquid staking token that represents your staked ZIL while providing full liquidity. Let's explore how it works under the hood.

The pZIL Mechanism

Value Accrual Model

pZIL is a non-rebasing liquid staking token that represents your staked ZIL. As rewards accumulate, the value of each pZIL increases, but your balance stays the same. This is called a non-rebasing model, where price increases instead of token quantity.

  • 1 pZIL always represents more than 1 ZIL
  • The exchange rate increases over time as rewards accumulate
  • Your pZIL balance stays the same, but its value grows

Exchange Rate Formula

pZIL Value = (Total Staked ZIL + Accumulated Rewards) / Total pZIL Supply

Example:

  • Day 1: 1 pZIL = 1.0 ZIL
  • Day 30: 1 pZIL = 1.025 ZIL (2.5% rewards)
  • Day 365: 1 pZIL = 1.35 ZIL (35% APY)

The Staking Process

Step 1: Deposit ZIL

When you stake ZIL:

  1. Your ZIL is sent to the staking contract
  2. The contract delegates to validators
  3. You receive pZIL based on current exchange rate

Step 2: Hold and Earn

While holding pZIL:

  • Validators earn rewards with your staked ZIL
  • Rewards are automatically compounded
  • The pZIL exchange rate increases

Step 3: Unstake

When you want to unstake:

  1. Burn your pZIL tokens
  2. Receive ZIL based on current exchange rate
  3. Get your original stake + accumulated rewards

Technical Architecture

Smart Contract Components

1. Staking Pool Contract

  • Manages all staked ZIL
  • Delegates to multiple validators
  • Handles reward distribution

2. pZIL Token Contract

  • ERC-20 compatible token
  • Tracks ownership and transfers
  • Maintains exchange rate

3. Oracle System

  • Updates exchange rates
  • Monitors validator performance
  • Ensures accurate pricing

Security Features

  • Multi-signature governance: Critical functions require multiple approvals
  • Time locks: Changes have mandatory waiting periods
  • Emergency pause: Can halt operations if issues detected
  • Audited code: Professional security audits completed

Use Cases for pZIL

1. DeFi Collateral

Use pZIL as collateral in lending protocols:

  • Borrow against your staked position
  • Maintain staking rewards while accessing liquidity
  • No need to unstake

2. Liquidity Provision

Provide liquidity with pZIL:

  • Pair with ZIL or stablecoins in DEXs
  • Earn trading fees on top of staking rewards
  • Contribute to ecosystem liquidity

3. Trading

Trade pZIL freely:

  • No unbonding period
  • Instant liquidity
  • Market-determined pricing

Benefits Over Traditional Staking

Immediate Liquidity

  • Traditional: 14-21 day unbonding period
  • pZIL: Instant through DEX trading

Composability

  • Traditional: Locked tokens can't be used
  • pZIL: Use across DeFi protocols

Simplified Rewards

  • Traditional: Manual claiming and restaking
  • pZIL: Automatic compounding

Risk Considerations

Smart Contract Risk

While audited, smart contracts can have vulnerabilities:

  • Thoroughly tested code
  • Bug bounty program
  • Insurance options available

Validator Risk

Poor validator performance affects rewards:

  • Careful validator selection
  • Diversified delegation
  • Performance monitoring

Price Deviation

pZIL might trade below intrinsic value:

  • Usually temporary
  • Arbitrage opportunities
  • Market efficiency improves over time

The Math Behind pZIL

APY Calculation

Annual Percentage Yield depends on:

  • Network staking rate
  • Validator performance
  • Protocol fees

Example calculation:

Base Staking APY: 40%
Protocol Fee: 10%
Net APY: 36%
Daily Rate: 0.0986%

Compound Effect

Daily compounding amplifies returns:

  • Year 1: 1 ZIL → 1.36 ZIL
  • Year 2: 1.36 ZIL → 1.85 ZIL
  • Year 3: 1.85 ZIL → 2.52 ZIL

Integration with PlunderSwap

Staking Interface

  • Simple one-click staking
  • Real-time exchange rate display
  • Transparent fee structure

Analytics Dashboard

  • Track your pZIL value
  • Monitor APY trends
  • View historical performance

Migration Tools

  • Convert legacy staked ZIL to pZIL
  • Bridge between chains
  • Maintain reward continuity

Future Developments

Planned Features

  1. Liquid staking derivatives: Build on top of pZIL
  2. Cross-chain expansion: pZIL on other chains
  3. Enhanced utility: More DeFi integrations
  4. Governance token: Participate in protocol decisions

Ecosystem Growth

  • Partner protocol integrations
  • Liquidity incentives
  • Developer grants
  • Community initiatives

Getting Started with pZIL

  1. Connect your EVM wallet: MetaMask, WalletConnect, Rabby, etc.
  2. Stake ZIL: Visit our staking page
  3. Receive pZIL: Automatically sent to your wallet
  4. Use or Hold: Utilize in DeFi or hold for rewards

Conclusion

pZIL revolutionizes ZIL staking by providing liquidity without sacrificing rewards. Its elegant design, security features, and growing utility make it an essential component of the Zilliqa ecosystem.

Ready to start earning with pZIL? Head to our staking platform and join the liquid staking revolution!