An ERC-20 staking pool is a type of decentralized finance (DeFi) application that allows users to lock up their tokens (usually a particular ERC-20 token) in exchange for rewards. The pool is managed by a smart contract that automatically distributes rewards to users based on the amount of tokens they have staked.
Smart contract: The core of the staking pool is a smart contract deployed on the Ethereum network. This smart contract defines the rules of the staking pool, including the rewards distribution mechanism, the minimum stake amount, and the duration of the staking period.
User interface: The staking pool typically includes a user interface that allows users to interact with the smart contract. This user interface can be a web application, a mobile app, or a command-line interface (CLI).
Token contract: The staking pool interacts with the token contract of the ERC-20 token that is being staked. This contract defines the rules of the token, including how it can be transferred and how it can be staked.
Wallets: Users need a wallet that supports the ERC-20 token in order to participate in the staking pool. The wallet can be a hardware wallet, a software wallet, or a custodial wallet.
Staking process: The staking process begins when a user decides to lock up a certain amount of tokens in the staking pool. This is done by sending a transaction to the smart contract that includes the amount of tokens to be staked and the duration of the staking period.
Rewards distribution: The smart contract automatically distributes rewards to users based on the amount of tokens they have staked and the duration of the staking period. The rewards are usually paid out in the form of the ERC-20 token being staked.
Withdrawal process: At the end of the staking period, users can withdraw their staked tokens and their rewards by sending a transaction to the smart contract. The smart contract will then release the staked tokens and the rewards back to the user's wallet.