Previously, we covered the notion of Proof-of-Stake and mentioned that the global scale of staking is worth $217.94 billion, yet the market cap of tokens staked with liquid staking protocols only accounts for a very small proportion, with a penetration rate of merely 7.9%. However, the rate has grown rapidly. In light of the boom of multiple public chains and the disadvantages of staking under the conventional PoS mechanism, liquid staking is a promising market. In the last article, we introduced three liquid staking solutions for ETH 2.0: Lido, Rocket Pool, and Stakewise.
We know that there is a huge demand for the liquid staking of ETH 2.0. However, on flourishing public chains like Polkadot, Terra, Cosmos, Polygon, and Solana, nodes and validators, who are participants in the underlying layer of the public chains, also receive considerable block rewards and fees, which attracted many node operators and users. Today, we will focus on liquid staking solutions built on Polkadot, Cosmos, Solana, and Terra.
TVL: $804.42 million (about 839 million LUNA)
As of February 12, approximately 30,000+ independent wallets have minted LunaX on Stader’s liquid staking contract.
Chains supported: Terra (Solana/Fantom/Near/Hedera to be supported)
Stader is building a modular smart contract infrastructure for staking across PoS chains. Its modular smart/strategy contracts allow third parties to leverage their components and make custom solutions. The protocol has launched two staking products on Terra — simplified staking (Stake Pools) and liquid staking (LunaX). In addition, it has also introduced Stake+ for retail stakers and will soon release Degen Vaults, a Yearn-style platform for yield-farming strategies using LunaX.
Stader improves delegator UX/UI through custom products, tools, and interfaces for smart delegation, governance, and rewards management. It generates the best risk parity yield on staking rewards and liquidity on staked assets by providing access to cross-chain lending protocols, liquid staking derivatives, gamified staking pools, and future reward swaps.
Value capture: Stader charges a percentage of your rewards as the fee, which is the platform’s primary source of revenue. The fee ranges from 3%-10% of the reward depending on the type of the solution, and a part of the protocol fee will be paid to SD token stakers.
LunaX is a liquid staking token that enables instant unlocking of staked Luna & opens up possibilities across DeFi protocols. For users, the functions of the token are far beyond liquid staking: The LP revenue, consisting of LunaX-Luna, can automatically synthesize Luna and stablecoins (once converted into Luna); LunaX also allows holders to get Stader airdrops (based on a random snapshot every week) and offers them the opportunity to receive instant liquidity and higher returns.
LunaX is an auto-compounding accrual token that can be minted when users stake with Stader using the liquid staking pool. The rewards generated on the staked Luna (including stablecoins) would be restaked at regular intervals (starting from 24 hours).
As the rewards accrue, there is no increase in the LunaX supply, hence the price of LunaX goes up with respect to Luna. In the event of slashing, LunaX supply remains the same but the price goes down as the quantity of Luna staked will decrease.
2. pSTAKE (Cosmos)
TVL: $52.01 million; The number of stakers: 5,107
pSTAKE supports the native tokens of the Cosmos and Persistence, and more chains and assets will be supported in the future.
On pSTAKE, wrapped versions of mainstream PoS tokens are issued through a custom cross-chain bridge called pBridge that aims to tap into the growth of the Cosmos ecosystem while accessing the liquidity and composability of Ethereum. You can either hold these tokens in the ERC20 format to maintain the liquidity of your staked assets or use them to explore the benefits offered by other DeFi protocols.
Dual Token Design:
With pSTAKE, you can deposit ATOM via the pBridge component to mint and receive pATOM. These wrapped tokens are ERC-20 based 1:1 pegged pATOMs, representing unstaked tokens in the PoS network. You may use pATOMs in Ethereum’s vast DeFi ecosystem. In the future, pSTAKE will support more PoS tokens.
On the other hand, you could burn these pATOMs to mint and receive 1:1 pegged ERC-20 stkATOMs which represent staked tokens on the underlying supported PoS network. When you mint stkATOMs, an equivalent amount of ATOM deposited with pSTAKE is staked with the network (delegated to multiple highly reputed validators). stkTOKENs are always backed 100% by an equivalent number of staked tokens on the underlying PoS network. Holders of ATOMs can use pSTAKE to earn staking rewards while using stkATOMs to earn additional yield by supplying liquidity to DEXes on Ethereum.
With the launch of Gravity DEX and Osmosis, pSTAKE users will be also able to leverage the IBC (Inter-Blockchain Communication) protocol and use stkATOMs issued on the Persistence Core chain to supply liquidity on these DEXes within the Cosmos ecosystem.
The Persistence team, the developers of pSTAKE, were one of the early adopters of PoS. Persistence continues to expand its participation in the PoS space via its validator arm AUDIT.one. Launched in 2020, AUDIT.one currently supports over 20 networks.
3. StaFi (Polkadot, Cosmos)
TVL: $51.56 million
Chains supported: Ethereum/Polkadot/Cosmos/Solana/Polygon/Kusama
The bottom layer of StaFi is mainly based on a blockchain system established by Substrate (a blockchain architecture developed by Parity, and the whole architecture integrates many development modules, including consensus module, P2P module, Staking module, etc.). Meanwhile, the contract layer support creating a variety of staking contracts, such as staking contracts for XTZ, Atom and Dot, respectively.
rToken is a redeemable token for the staked assets issued by StaFi protocol, and native tokens are staked through StaFi’s Staking Contracts. Your rTokens will be sent to your designated wallet address once they are minted. The supply of rToken (Qr) is determined by the number of native tokens staked by users (Qs) and the exchange rate of rToken (Cr), therefore:
Right now, tokens that can be staked with StaFi and turned into rToken can be roughly divided into four categories
- rETH: the rToken for ETH 2.0 staking after it goes live.
- rTokens for Polkadot: rFIS, rDOT, rKSM and rTokens for other Substrate based projects.
- rToken for the Cosmos ecosystem: rATOM, rKAVA, etc.
- Others, such as rXTZ, rEOS, etc.
4. Marinade (Solana)
TVL: $644.27 million (approximately 733 million SOL)
Number of validators: 451
Marinade.finance is a non-custodial, liquid staking protocol built on Solana. With this protocol, your SOL tokens are staked through automated staking strategies and spread among more than 450 validators, excluding the so-called “security group” (top 19 validators). You can stake your SOL tokens with Marinade using automated staking strategies and receive “marinated SOL” tokens (mSOL) that you can use in decentralized finance (DeFi). At the moment, mSOL can be used to earn farming rewards in mainstream DEXes and DeFi protocols within the Solana ecosystem, including Saber, Raydium, Solend, Mercurial, Serum, Port, Orca, Parrot, etc.
The price of mSOL goes up relative to SOL during each epoch with rewards being accrued into the underlying staked SOL. You can withdraw your SOL at any time by unstaking and waiting for the unlock period or immediately with a small fee.
Here is how the price of mSOL is calculated: The mSOL price = total_staked / tokens_minted
What this means is that as long as the protocol distributes staking rewards for SOL staked with it, the price of mSOL will keep rising relative to SOL during each epoch. If you hold an mSOL token for one year, its value to SOL will increase by 6.19% (APY disclosed by Marinade).
Governance token MNDE
35% — DAO Distribution. Used as token holders see fit via proposals, initially used for yield farming programs.
35% — DAO Treasury. This is a treasury reserve to be used for operations, grant programs, and strategic partnerships.
30% — Team. This is an allocation for current and future contributors. The distribution has not started yet and the funds are currently controlled by Marinade’s multisig.
It should be noted that Marinade is not backed by token sales, private investment, or VC funds.
To sum up, as public chains and their ecosystems continue to expand, public-chain-enabled liquid staking solutions will have to cover the multi-chain ecosystem, in addition to staking services designed for one public chain. Such projects will compete with staking projects on other public chains and even those on ETH 2.0. In the future, the market of liquid staking solutions will likely be dominated by one superpower and many great powers.
Apart from the inherent advantages of the assets staked, the projects will also need to compete with one another in terms of the security technology of node staking and the operating capacity of nodes across multiple chains. As users, satisfying user experiences, simpler staking operations, and lower learning costs will be some of our considerations for picking a liquid staking solution.