Staking $THRM
Stakers are first-loss capital. How they earn the spread, how they can lose principal, and the cooldown.
Staking $THRM means underwriting the pool. When you stake, your THRM joins the backstop: first-loss capital that covers the pool if the base fee it pays exceeds the rates users locked for long enough to exhaust its reserve surplus. In exchange, you earn the spread and a share of every premium.
Read this page in full before staking. Staked capital may be lost in full.
What stakers earn#
Stakers earn from two sources, distributed pro rata by stake and accrued in ETH.
The spread. Every burned therm was sold at a locked rate and costs the pool the base fee at the moment it is burned. The difference is the spread:
spread per therm = locked rate − (base fee at burn × 100,000) (gwei)
In calm periods, when the base fee sits near its floor and locked rates were priced off a trailing average that includes past volatility, the spread is positive and accrues to stakers. During a spike it turns negative, and those losses accrue to stakers too.
The premium. 30% of the 3% premium on every pass goes to stakers, whatever the base fee is doing.
Accrued spread can be claimed whenever your accrued balance is positive, and is settled automatically when you withdraw. If your accrued balance is negative, it is taken from your principal when you withdraw.
How stakers lose money#
Losses flow through a fixed waterfall. When cumulative negative spread exceeds the pool's reserve surplus — the ETH it holds beyond the value of outstanding therms at their locked rates — the protocol sells staked THRM for ETH to cover the shortfall. Every staker's principal is reduced by the same percentage.
That sale happens into the market. If many stakers are being liquidated at once, the THRM price will fall as it is sold, and more THRM must be sold to raise the same ETH. Realised losses in a severe event will be worse than a calculation at the pre-event price suggests.
A loss scenario, walked through#
The numbers below are illustrative, chosen to be plausible for a pool in its first months. They are not projections.
| Starting position | Value |
|---|---|
| Pool ETH | 640 ETH |
| Therms outstanding | 16,000,000 |
| Weighted average locked rate | 19,800 gwei/therm |
| Value of outstanding therms at locked rates | 316.8 ETH |
| Reserve surplus | 323.2 ETH |
| Staked THRM | 30,000,000 |
| Backstop value at $0.18 THRM, $3,000 ETH | 1,800 ETH |
| Your stake | 100,000 THRM |
Scenario A: the base fee holds at 1.0 gwei, ten times its floor, for six hours. Activity rises during the spike and holders burn 1.5 million therms an hour.
| Step | Calculation | Result |
|---|---|---|
| Therms burned | 1,500,000 × 6 h | 9,000,000 |
| Cost per therm | 1.0 gwei × 100,000 | 100,000 gwei |
| Loss per therm | 100,000 − 19,800 | 80,200 gwei |
| Total loss | 9,000,000 × 80,200 gwei | 721.8 ETH |
| Absorbed by surplus | 323.2 ETH | |
| Shortfall to backstop | 721.8 − 323.2 | 398.6 ETH |
| Backstop loss | 398.6 ÷ 1,800 | 22.1% |
| Your loss | 22.1% of 100,000 THRM | 22,144 THRM |
Scenario B: the base fee holds at 2.3 gwei, twenty-three times its floor, for twenty-four hours. At that burn rate the entire outstanding supply is consumed within the day.
| Step | Calculation | Result |
|---|---|---|
| Therms burned | capped at supply | 16,000,000 |
| Loss per therm | 230,000 − 19,800 | 210,200 gwei |
| Total loss | 16,000,000 × 210,200 gwei | 3,363.2 ETH |
| Shortfall after surplus | 3,363.2 − 323.2 | 3,040 ETH |
| Backstop loss | exceeds 1,800 ETH | 100% |
| Your loss | 100,000 THRM — everything |
In Scenario B the backstop is wiped out and 1,240 ETH of obligations remain unfunded, at which point sponsorship pauses. Twenty-three times the floor has happened. Sustaining it for a full day is extreme, but it is not impossible, and you should assume it can happen.
The demo computes both scenarios live against the simulated pool for whatever amount you stake.
Unstaking and the cooldown#
Unstaking is a two-step process with a seven-day cooldown.
- Request. You choose an amount to unstake. The cooldown starts.
- Withdraw. After seven days, you withdraw your THRM plus any positive accrued spread, or minus any negative accrued spread.
During the cooldown your stake remains in the backstop, fully exposed to losses and still earning. You cannot cancel a request partway through without restarting the clock.
The cooldown exists so the backstop is still there when it is needed. Spikes are visible on-chain as they begin. Without a cooldown, stakers could watch the base fee, withdraw at the first sign of trouble, and leave the pool uncovered at exactly the moment it needs capital. Seven days is long enough that most spikes resolve entirely within a single cooldown window, so leaving cannot be timed.
Who should stake#
Stake only if you understand that you are selling protection against gas spikes, that your expected return is positive only if Therm's pricing is right on average, and that a single bad day can remove your entire position. Do not stake funds you cannot afford to lose in full.