The Future of ETH Staking is Modular / Jordan Sutcliffe

Transcript

alrighty I'll give it a second to let people sit down alrighty so uh thanks everyone for joining me today uh the future of East taking is modular we're going to look at well if staking's been around for a good few years now uh so we're going to look at what the next generation of staking Protocols are going to look like specifically uh liquid staking um and we're now looking at the thank you slide which is not right oh you can see the entire presentation in Reverse okay let's try again

so uh yeah liquid second's been around now for a good number of years the the first set of protocols that launch were very much the first generation of liquid staking and we're now going to explore what the future General generations of these protocols look like uh specifically focusing on Lido's V2 and stakewise is V3 uh quickly about myself my name is Jordan Sutcliffe I'm the business development lead at stakewise uh for those who are not familiar with stakewise we were one of the original liquid staking providers we launched around the same time as Lido back in early 2021 um we're just not quite as big as them but we've been around for a good number of years now so I don't mean to install everyone's intelligence I'm sure everyone knows

what modular means but I kind of felt it necessary to Define it still um something that's modular consists of separate parts that when combined form a complete whole we see modularity all over the place in the real world computers are modular cars are built in a modular fashion uh those who are devs in the in the in the room will I'm sure you program in a modular fashion too and lots of Defy is already modular I would argue that maker yearn these Protocols are are modular but you've probably never thought about modularity when it comes to eat staking or liquid staking and the reason is is because they they don't really exist right now this is a rather boring slide but this is essentially a highly simpler simplified architecture of what a liquid staking protocol looks like

you have what I call the core infrastructure which is the Smart contracts and the node operators historically these staking protocols have been a single staking pool where all the assets get co-mingled together and then you have a bunch of node operators um staking their assets on their behalf and you know whether these these net operators are onboarded in a permissionless fashion or permissioned It ultimately doesn't matter the the architecture is very similar and ultimately very standardized we then have a token layer which sits on top all the assets that get deposited into this pool are tokenized and this what's this is what gives people the ability to access their state capital uh across across D5 so where can we make these this

architecture how can we make it modular well let's quickly start with the the token layer we've seen a transition to very much uh the the standard for liquid staking tokens and that is single reprising tokens there are lots of different tokenomics models out there so Lido originally originally launched a rebalancing token sdeath where every day the actual the the token price itself remains pegged one to one with eth but every day as a cruise staking rewards the the balance within your wallet increases um it's quite a nice ux but the problem is is that it's very difficult to integrate across D5 like developers hate the logic when it comes to these

rebalancing tokens um and it's the reason why Lido had to launch wrap State teeth the repricing token version for that token for for stake teeth and that is why you see rhaps their teeth on on uni swap balancer Etc because they do not want to want to handle that rebalancing nature tokens so this single repricing model is very much the the easiest way to get your token integrated across the ecosystem and because it's a single token there's arguably reduced complexity there it's very simple your token accrues in value as you earn staking yield on our side stakewise we launched a dual token model when we first when we first went live uh we split the East staking principle with the rewards into separate tokens

it worked well technically in the sense that it provided the highest API for our stakers but fundamentally it adds a barrier to entry because it's just extra complexity there so again moving to this kind of single token model which is what we're doing with stakewise V3 is the simplest way to offer a staking token I'd also argue them that the most tax efficient efficient's probably not the right word but if you have a rebalancing token where every day you receive staking rewards and you get more of the token deposited into your wallet is that a tax event I don't know I can't I can't answer that and so again it's very simple having you buy a buy token on day one you sell it at day 20 it's increased in price that's it's very defined in the tax setting and

again because it's a simple token you have you know you only need liquidity for one token it's it's it's simple and easy and the cheapest way remember that for liquid staking protocols the liquidity part is the most expensive part so the more you can simplify that the better what I'm getting at here is that that token layer is very standardized it doesn't mean you can't do funky things with it like what like frax is doing and stuff um that's a very expensive model to run and it has extra complexity but fundamentally the cheapest easiest way to run a liquid staking token is with a single repricing model so there's not much room for uh change there and not much room for Innovation I would argue so that leaves us with that core infrastructure level where we should be adding the modularity and and

innovating and this is exactly where we see Lido and ourselves changing our protocols so looking at Lido first Lido V2 so historically Lido was a single permission staking pool that still exists on on the far left that sits under St eth adding node operators to that was quite a cumbersome process um and so what they introduced with V2 is what they call the staking router and this is a way that streamlines the onboarding of new node operators in what they Inc well clusters of known operators in what they call modules and so next to the permission set you can have what effectively a fully permissionless node operator set which

they're calling the community module where anybody can come in and become a node operator again while still sitting under the St eth umbrella you could also have like a DVT uh cluster so DVT is distributed validated technology uh historically it's been one validator is Run by One node operator DVT distributes that validator across multiple node operators so you'll have maybe three four uh node operators running a single validator lots of benefits that that come a part of that but what I'm trying to get at here is that you can essentially plug and play any type of configuration no configuration under this single liquid staking token umbrella for the case of Lido the Dow needs to

approve these new modules and the dial will also specify how big or how much stake they're able to um to take on um and in the case of like permissionless and modules like the community module they will be bonding in place um you know essentially node operators will have to post collateral to protect against malicious attacks um but as a Staker you still get the simple one click staking it's Lido that handles all the delegation across the different modules for a user you simply to still swap from eth to sdeath on our side whilst the I appreciate the architecture looks incredibly similar to the previous slides and the way these protocols work are actually very

different um on our side again historically we are um what we this Legacy pool here is our current staking pool the permissioned node operator set but what we're going to allow is for anybody to come and launch a staking pool um in parallel with this this original pool so it could be a solo Staker it could be a group of node operators commercial node operators Etc it could still have this DVT technology I spoke about previously but essentially the opportunities are endless of whatever these staking configurations can look like all whilst under a single liquid staking token um for us the the volts layer or the staking pools layer is essentially a white label Liquors taking service

anybody can come in create their staking pool offer staking as a service and their users will be able to stake and get access to OS eth these we're potentially giving anybody the building blocks to create their own solution and this volts layer is fully automated they handle if delegations of any size they handle the pooling of assets the validation um the creation of validators they handle the uh the fees for the vaults and they're highly customized you can basically set up this to configure these volts however you want to um and so on on V3 specifically we do not have any Clash of requirements whereas Lido does we do not we're essentially creating a completely free and open Marketplace for anybody to

create their own staking solution and we're essentially going to let Market forces decide how much collateral is required within the system we as a protocol can't say you're on a you're an anonymous solo sticker you need to post x amount of collateral we'll let the market handle that the important part though is that you still need some over collateralization on Lido's side they always mint Ste one to one with eth and so there's no baked in protection there on the sde token on our side we have this OS eth layer um which is over collateralized what this means is that if you stake into one of these volts or staking pools um let's say I stake 10 ether into with the solo Staker I will continue earning

the 10 ether's worth of staking rewards but I'll only be able to Mint let's say nine OS eth um so you get a slight drop in capital efficiency on what is liquid but fundamentally um this but this is a really important part of the protocol because if we allowed everybody to Mint osc one to one with steak deposits then essentially this entire ecosystem which by the design is modular and isolated becomes interconnected and so that over collateralization is a really important part um and for stakers you still have that simple one-click stake option which is super important um you can go from ether into OS eth because it's over collateralized it has been built slash in protection um it accrues the yield from what will

be a highly Diversified set of node operators and so it's a very high quality LST token to hold um but we also offer a slightly more advanced staking option which is where you enter the Statewide Marketplace you can see all of these staking pools and you can cherry pick which node operators you want to stake with maybe you want to stake with Solo stakers or those running DVT or those running in certain jurisdictions and locations you can essentially come in specify who Stakes your capital um steak with them and then still access osc for the liquid staking token so this modularity also adds extra functionality we're going to allow solo stakers to liquid to Mint a liquid staking token

against their own node so historically um there was you know these homesteakers have to make a choice do they want to liquid stake or do they want to stake at a home we're removing that decision you can do both uh the way this would look like is a solo sticker can come to stakewise create their own staking pool where they are the node operator they maintain full controller that's taking pool full control of their node but because they they deposit through that staking pool within the stakewise ecosystem they can access OS eth and we're really hoping this is going to be a mechanism to attract and help decentralize the ecosystem and to attract more people to solo stake and take from home the other side of this mod this modular architecture is that for regulated

Capital it's a great way to segregate this Capital so for example let's say you're a centralized exchange and you want to protect or put all of the assets from your us retail clients into a single staking pool and then you have all the other Assets in a different pool you can do that you can you can effectively segregate the capital within your solution however you want um and so this is this is becoming a very popular uh model with both retail and institutional regulated staking so what does this mean well the Plug and Play nature of modularity allows for the fast expansion of adding node operators it is a great way to help diversify the node operator set and

decentralize uh the networks and I'd also argue it's a great place to like experiment as well because each of the each of these modules or vaults are completely isolated you can test new technology and worst case scenario if it blows up it's very much isolated to that single um that single module so and because of that nature it just reduced the risk across the whole network itself the other thing as well and I really hope this modularity can help improve the health of the ecosystem um I've got a bit of a pet peeve that everybody wants to launch their own liquid staking token right now it is the sexy thing to do and and to be quite like blunt it's an easy way to raise

capital the problem is is that a lot of these liquid staking protocols that are coming to market the majority or a lot of their Capital that they've raised is harrent is going to have to go towards funding the liquidity for that liquid staking token what's truly important though is that we prioritize the funding and development of that core infrastructure at the end of the day like our goal is to make sure we can distribute eth across as many node operators as possible in a safer manner as possible and that comes from that core infrastructure and so by having a modular protocol where anybody can come in and plug into a liquid single liquid staking token they can focus all the all the capital they've raised into actually helping the

health of the ecosystem and distributing ether in a safer manner as possible and DVT is a great example of of that so to kind of wrap it up here not only does this this modular architecture improve on the previous um or the current architectures by improving decentralization by adding more node operators it also can help Focus um investment on the core infrastructure level it also adds extra functionality as I mentioned before the liquid solo staking the staking of regulated Capital it really is a win-win in moving from those historic um single pool protocols into this modular design and that's everything

five minutes right I can take any questions on stage I'll also be around afterwards um to uh I'll Stick Around afterwards for any other questions thank you [Applause] thank you uh can you please compare uh your protocol to rocketpool sure yeah so uh lots of differences compared to rocketpool the first thing rocketball again is still a single staking pool it just distributes to the multiple sets of node operators on our side rather than having one single pool we can have multiple so you

get that segregated isolated staking pools for the node operators um rocketpool does not offer those node operators a liquid staking token the the eth that node operators post on rocketball is effectively just collateral it's insurance for the entire protocol um on our side we have no collateral requirements um and so not only can you come to to a statement platform like stakewise and offer staking as a service in a more Capital efficient manner we will also allow these node operators to actually mint a liquid staking token against those nodes and so this is something which is becoming very popular it looks to be very popular this platform is not yet live it's going live in about a

month um um so yeah that that minting a licorice taking token is is really key um it has a lot of utility it allows it allows solo stickers to actually access D5 essentially uh what's your current take on the modularity of eigen layer [Music] um yeah um quick answer is it's an interesting system I we're certainly taking a look at it on our side we're just approaching with very much of caution um we have the ability to integrate eigen layer in multiple levels within within stakewise um and we're likely just going to down going to go down the route where we

allow people who have OS youth to restake that and play around um in that sense having a much more core integration um whilst it's still a new technology is is kind of probably going a bit a step too far for us um but for sure it's an interesting there's lots of people interested in restaking it's a very hot topic right now um just approaching approaching with caution basically thank you for the of the panel how do you how do you plan to provide value to Holders of stakewise governance token through all these features that you're going to be launching yeah great question so currently the Statewide

governance token or swise is just a just a governance token that's all it is what we're planning to do though with stakewise V3 is to add extra utility for that token what we will allow people to do is to stake or in a permissionless fashion anyone can stake this wise into a staking pool to provide insurance as like a junior trench for that staking pool in return They will receive a percentage distribution of the protocol fees to that um why so we're we're adding swies essentially as a collateral asset within the protocol both for node operators but also for anybody to harness and receive the protocol fees that's great um and when are you expected to be launching this all right so our final round of

audits is going live in the next week or two and it's truly dependent on how long that takes um fingers crossed we're looking uh it's hard it's hard to say audits can take four weeks six weeks um so yeah okay we're out of time but thank you very much guys [Music] foreign [Music]