Adaora Anders
4 min readFeb 13, 2022


Why Reward-Bearing Tokens Are The Future

DeFi applications continue to work towards the disruption of finance as we know it, and this is thanks in part to the DeFi-friendly environment of proof-of-stake (POS) chains. Though POS chains have proven to be viable alternatives to their proof-of-work (POW) counterpart, the former isn’t perfect either. Liquid staking solutions like StaFi improve their viability using different gimmicks including reward-bearing tokens.

What Is a Reward-Bearing Token?

Before we jump into how reward-bearing tokens are the future, it’s important to understand what they are.

Also called an rTtoken, this cryptocurrency serves as a representation of an underlying token that accrues reward until the asset is redeemed.

Interest-bearing tokens are often issued by DeFi protocols based on a service rendered. This could be borrowing, lending, or similar. In the case of StaFi, the rToken is issued to those staking their assets using the protocol’s staking contract.

The Purpose Of Reward-Bearing Tokens

More DeFi protocols now rely on interest-bearing tokens to reward users. For instance, a lender on a lending protocol is issued an interest-bearing token on making his asset available to borrowers on the platform. With the reward-bearing token, the lender earns rewards based on the applicable APY.

The reward-bearing token model allows DeFi protocols to achieve a truly decentralized financial hub that’s devoid of the scheming middlemen. Each interest-bearing token is created to solve specific problems.

StaFi’s reward-bearing token, rToken solves a bunch of problems facing POS chains. The main highlight of the staking derivative is the easy access to liquidity for stakers whenever the need arises.

StaFi’s rToken also reduces the entry point for staking on POS chains. The steep amount of assets required to stake on these chains is reduced greatly once you leverage the StaFi route.

Also, StaFi is preparing the rToken to become a passive income earner for holders. To achieve this, the protocol has teamed up with several DeFi protocols, providing ways to utilize the staking derivative on these platforms. So on getting the rToken, you’re not limited to the rewards generated on the underlying asset staked.

The purpose of a reward-bearing token depends on the issuing protocol. Where platforms like StaFi provide rTokens to counter liquidity challenges and other problems affecting POS chains, other protocols issue interest-bearing tokens for other reasons peculiar to their niche.

Why Reward-Bearing Tokens are the future

The battle with climate change has seen the appeal of the POW consensus (notorious for being detrimental to the environment) fade off, paving the way for POS chains to excel. That explains why chains like Ethereum are moving from layer 1 to layer 2 (beacon chain) which relies on the POS consensus.

As more blockchains opt for this consensus algorithm, staking gets more attractive. Yet, these chains put in different mechanisms to check volatility that could put the network under undue strain. These tend to create problems for the individual staker. Fortunately, liquid staking solution providers like Staking Finance protocol offer services geared at helping asset stakers surmount these challenges.

At the center of these solutions targeted at navigating the issues encountered on POS chains, there’s the reward-bearing token. In the case of the StaFi protocol, it’s the rToken. This synthetic staking derivative is the main ingredient that could turn the tide in the favor of POS chains. With how easy it is to quit staking on these chains — which is made possible by how quickly you can sell your rToken — POS chains will become more desirable.

Reward-bearing tokens are the future for so many reasons. They provide means for DeFi protocols to operate without the unscrupulous middlemen. You can lend, stake, borrow without the input of a third party. These interest-laden tokens make the DeFi space highly functional and competitive. Liquid staking solutions like StaFi rely on these reward-bearing tokens to make POS chains more efficient without limiting the individual staker.

There’s also the passive income angle, which is where the world is heading at the moment. More people are interested in having multiple income streams, and the reward-bearing tokens can provide a viable income stream. For instance, rToken holders earn rewards on their underlying asset from staking on a POS chain. Depending on the quantity of assets staked, this can be quite significant in the long run. The rToken isn’t the only reward-bearing token with this benefit. DeFi protocols like lending platforms issue interest-bearing tokens to lenders, making it possible for these users to earn income on assets lent on the protocol.

Reward-bearing tokens can be the future if they can become quite useful. The greater the use case of the interest-bearing token, the higher its chance of being highly valuable in the scheme of things. StaFi’s rtoken is one of the few with a growing use case thanks in part to the protocol’s elaborate partnership spread.


The future of reward-bearing tokens are certainly bright with the increasing desire to remove third parties from the equation. Should blockchain continue to grow in popularity due to its many unique benefits, reward-bearing tokens will get their time in the spotlight. Of course, not all interest-bearing tokens will survive, but the concept will live on for a long time.

You can learn more about StaFi Protocol by visiting the websites below:


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