Liquid Staking Innovation in PoS Network Asset Management

Liquid staking is fundamentally changing the way assets are managed in PoS networks. Traditional staking often requires locking up cryptocurrencies to support blockchain operations, rendering these assets unusable during the staking period. However, liquid staking allows users to continue using these assets for trading, DeFi operations, or as collateral during the staking period by issuing liquid staking tokens that represent the staked assets, (LST).

A certain decentralized re-staking protocol further expands on this concept. Users can deposit LST into the smart contract of the protocol for re-staking, receiving the liquidity staking token (LRT). LRT not only includes the value of the staked tokens and staking rewards but also allows for additional rewards from the protocol's operations, providing users with greater flexibility and higher potential returns.

The total locked value of liquid staking ( TVL ) has surged from 30 million dollars to over 57 billion dollars in less than four years. The staking assets of a major liquid staking platform have reached approximately 35 billion dollars.

Despite rapid growth, there are still differences in the staking ratios across different networks. The staking ratio of a certain public chain exceeds 70%, significantly higher than another public chain's 27%. However, LST only accounts for 6% of the staking supply of the former, while the latter exceeds 40%.

This provides a huge market opportunity for emerging projects within a public chain ecosystem. By introducing innovative re-staking options and fostering a competitive environment, new projects can offer more flexibility to stakers, increase liquidity, and create additional yield opportunities. This not only aligns with the development trends of DeFi but also meets the demand for more efficient and diversified staking solutions, avoiding the dominance of a single protocol.

Innovative Liquidity Pool Simplifying LST Trading and Stake

An innovative liquidity pool launched by a certain project aims to simplify the trading and staking of LST on a specific public chain. This large flexible pool allows for seamless exchanges of various LST.

When users purchase LST with native tokens, the amount of LST received may be slightly less than expected. This is because LST appreciates over time as it accumulates stake rewards. For example, the price of a certain LST is higher than that of the native token because it has been collecting rewards since its launch, showing a return of approximately 11%.

The liquidity pool uses the staking pool data from the public chain to accurately price LST. This method ensures accurate pricing regardless of liquidity, as it utilizes reliable on-chain data.

Users can deposit LST into the pool to earn INF tokens as a reward. INF tokens not only earn staking rewards from all LST in the pool but also collect transaction fees, providing an additional source of income.

The pool also maintains balance by dynamically adjusting exchange fees, encouraging trades that help maintain a good mix of different LSTs, ensuring that both new and old tokens can grow and provide good returns.

The pool allocation strategy encourages the creation of new LSTs, reserving 20% of the pool for newly approved LSTs. Each new LST requires at least 1000 native tokens and is adjusted based on holding value and recent earnings. The remaining 80% is used for a mix of existing LSTs and trading returns, aimed at achieving diversified yields and high trading volume.

Validator LST provides a flexible and efficient staking method

Validator LST is the token that represents users' stakes with specific validators. These tokens appreciate in value as staking rewards accumulate, providing a flexible and efficient staking method.

Traditional staking requires creating a staking account and delegating to validators, and it takes a certain amount of time to unstake. In the liquid version, when users deposit native tokens into the validator LST pool, the system automatically creates and delegates a staking account, and users receive the validator LST representing the stake.

The advantages of validator LST include:

• Help validators differentiate themselves by issuing their own tokens and providing unique rewards.
• Allow stakers to participate in a wider range of DeFi activities to gain more reward opportunities.
• Reduce the demand for creating liquidity pools, enabling small validators to compete with large validators.
• Simplify the staking process, provide instant exchanges, and avoid the long waiting periods of traditional methods.

The reserve pool provides deep liquidity for LST

The reserve pool of a certain project provides deep liquidity for all LST on the public chain, addressing key challenges in the staking ecosystem.

Users typically have two ways to redeem LST:

1. Disable the stake account and wait 2-4 days to receive the native tokens.
2. Trade LST on DEX for immediate Liquidity

The reserve pool simplifies the redemption process, allowing users to instantly exchange LST for native tokens. The reserve pool then disables the staking account and retrieves the native tokens after a cooling period. It operates by accepting staked native tokens and returning native tokens, un-staking the native tokens at the end of each epoch to replenish the reserves.

The reserve pool also supports various DeFi protocols to accept any LST as collateral, enhancing the utility and adoption rate of LST.

More importantly, the reserve pool helps small validators compete more easily with large validators by providing a shared source of liquidity, promoting network decentralization. This democratizes staking, offering users more choices and higher returns.

Router achieves seamless exchange between LSTs

The router tool of a certain project makes the exchange of different LSTs on the public chain simple.

The staking account is a locked native token account, delegated to validators. When staking native tokens or depositing LST, a staking account managed by the pool is created. Previously, the liquidity of LST was limited to specific pools, and shallow pools made it difficult for LST to be quickly converted into native tokens, reducing its effectiveness in DeFi.

The router achieves seamless exchanges between any LST by moving stake accounts across pools. This process unifies the liquidity of all LSTs. The project charges a fixed fee of 0.01% for each LST to native token exchange conducted through the router.

Essentially, this router unlocks the full potential of liquid staking on public chains by enabling efficient exchanges between LSTs, enhancing liquidity and usability in the DeFi ecosystem.

Comparison of a Certain Project with Mainstream Platforms

A mainstream platform has become the dominant force in the Ethereum staking ecosystem. Currently, 27% of ETH is staked, with nearly 30% deposited into this platform, amounting to about $35.5 billion in TVL, far exceeding the second-largest staking protocol. The platform's TVL accounts for more than half of the total staking value of Ethereum, representing nearly one-third of the total TVL across all on-chain DeFi.

The platform's liquid staking tokens have become a key element of the Ethereum ecosystem, known as the "dollar of staked assets." Its high liquidity has attracted a large number of users, enhancing its dominance. However, this concentration of power has also raised concerns. The platform controls about 30% of staked Ethereum, which could significantly impact the network and affect its decentralization.

In contrast, a certain project has adopted a different strategy on the public chain. They recognize that LSTs are essentially interchangeable, merely a packaging of staking accounts. This insight has shifted their strategy towards fostering a multi-LST environment rather than direct competition.

The project's philosophy is cooperation rather than competition, aiming to create infrastructure that supports various LSTs. By focusing on expanding the overall stake market instead of dominating it, the project hopes to achieve greater success.

The success of mainstream platforms on Ethereum is built upon their dominant position and the widespread adoption of their tokens. While this model is effective, it also brings about centralization risks. In contrast, a certain project aims to establish a more decentralized and collaborative ecosystem on public chains. By supporting multiple LSTs and promoting collaboration, the project hopes to create a healthier and more inclusive staking environment, and is expected to surpass Ethereum's staking landscape in terms of innovation and participation.

Comparison of a certain project with another public chain's native protocol

Another public chain's native protocol gained significant attention in 2023 through airdrops. Subsequently, it used governance tokens to incentivize liquidity and integration with other major protocols, thus dominating the LST market of the public chain.

The main features of the protocol include:

• Its LST has the highest APY, TVL, and trading volume in a certain liquidity vault.
• Collaboration with top protocols enhances the ecosystem presence.
• Expand influence to other chains through a cross-chain bridge, increasing the utility of LST.
• Excelling in maximizing extractable value through innovative clients and blockchain engines.

Although the growth of this protocol is similar to that of mainstream platforms on Ethereum, it also raises concerns that this dominance may pose risks to the health of the ecosystem.

In contrast, a certain project focuses on providing robust infrastructure support to ensure the stability and security of the ecosystem. Its key features include:

• Multiple LST liquidity pools aggregate liquidity from various trading pairs, enhancing liquidity and reducing slippage risk.
• The reserve pool and router facilitate instant unstaking services and efficient LST token swaps, supporting liquidity and stability.

Potential Advantages of a Certain Project

1. The unique reserve and router approach provides users with a capital-efficient way to redeem and exchange LST, enhancing liquidity and attractiveness.
2. The reserve pool has over 200,000 native tokens ( with approximately 30 million USD ) in liquidity, ensuring that LST holders can redeem instantly and reduce slippage.
3. By lowering the threshold for creating LST, small validators can issue their own tokens, promoting decentralization and increasing competition among validators in the network.
4. TVL has increased to over $700 million, becoming the fourth largest protocol on public chains, indicating strong market acceptance and trust.

Challenges Faced by a Certain Project

1. Facing fierce competition from established players who have already dominated the LST market.
2. The success of the project is closely related to the growth and stability of the public chain ecosystem, which has experienced fluctuations and infrastructure challenges.
3. Although the public chain is currently not implementing any reductions, the introduction of such measures in the future may pose risks to validators and stakers, impacting the attractiveness of staking and liquid staking.
4. Although the unique mechanism is innovative, it may face challenges in user understanding and adoption compared to simpler staking solutions.
5. Facing regulatory scrutiny and potential legislative changes, which may impact its operations and the broader liquid staking environment.