James Smith - Stop trying to be too funky with your LSTs and focus on the basics

Transcript

uh next up we have James Smith from the etherum foundation and he's going to talk about stop trying to be too funky with your lsds so focus on the basics welcome everybody thanks for coming today it feels very official behind here I don't know why it's like a oh I should caveat uh these are just my opinions and nobody else's so disclaimer out of the way you can now lock the doors you trapped in here with me the case against lsds is quite spicy um but I want to delve into a subject today that I believe is widely ignored by lots of projects building in the space as well because what I'm going

to say I think is quite obvious and quite easy to understand but very hard to execute on what do I mean by that I think that I would phrase it is your attention being misdirected around your LSD strategy when there's lots of other things you could do to fight and are you playing the right fight so let's have a rethink newer staking PS can't match bigger liquidity's power if I was to put it I think I did some maths on the back of uh paper you're going to need around 750 million in liquidity incentives to compete with the big liquidity players and these big staking pools their

revenue is about 20 25 mli million a year nobody is going to invest in that much liquidity to get that business so it's it's a fight you can't have at the moment is my opinion there's a couple of major players dominating the market many new pools are focused on LSD setups I took these off of off of a quick search and I have to ask the question do your users really care about your strategy and I want to look at some of the data and some of the approaches I speak to a lot of staking PS a lot of node operators and one of the biggest things is that none of them are talking to any users out there none of them are trying to understand how they want to

interact with it and I think it's very easy for us to live in a bubble where we know if we don't go out and talk to people we don't understand what their needs are so what are user actually doing you've got 224 users buying less than $1,000 I don't know who's putting $1 into to Lio as a maybe that's just a test or something um but there's 19,000 of them um you've got 125,000 users staking between 1,000 and 32 and I appreciate the third one is a wide bracket of 32k to a million however that's three different conversations you're having that's not you can't talk the same somebody with $6

million and somebody with $60 it's a different conversation you need to have and as a staking poll I don't see anybody having different conversations I don't see anybody sticking out to their an audience and really representing them on exchanges the average deposit is $600 I think they 98% of stakes e belongs to 1% of people and everybody else is staking $600 this is just some examples of your staking pool setup deposit queue is full please try later we all know who that is um if we look at Ste usage everyone's talking about their liquid staking

strategy and I talked to Jordan Stak wise about this 65% of users do nothing with their Ste they get it and it sits in their wallet and everyone is obsessed about their liquid staking strategy seven out of 10 people don't do anything with a liquid staking token afterwards so you need to think that through of what you're building for um liquid staking tokens also can really confuse many people in this room have 8 hours a day to go and look at their liquid staking strategy many other people outside of this room do not have that time or luxury so thinking these things through I think is super important which user does your staking um offer speak to this is a just another

really good example of user segmentation Plankton Krill um who are you talking to what's the makeup here if you look at um active wallets you can see that staking is really sticky how much is that worth getting into your staking pool because once somebody puts it in there it's like moving bank accounts nobody leaves the bank account nobody leaves that staking pool um which is why I'll discuss vampire attacks and their potential success this is an example I just made up none of this is real I just but this is the type of thing I think you need to be obsessed about you need to be obsessed about answering this question and it's not an easy question to answer you need to be having a very

different fight are you listening to to users are you asking these type of questions where are you talking to them which channels do they live in because if you're on Twitter if you're on Reddit there's a different breed of user everywhere else and I H I talk to staking pools node operators a lot and I see a lot of people are not thinking of new channels to explore I've spoken to some really big media outlets and I say has anybody approached you about your staking offering not a single person has approached them at all and they have access to many users oh so where can you compete I've got some examples this this talk is to

design to give you some inspiration and creativity to think you need where where can you win if I think about it from a another perspective everybody classifies liquid Stak and tones in staked eth numbers so it's always the same players at the Top If you broke it down into number of nodes there would be a different list coming out as well so you can really have a different conversation but um K is a really good example they integrated with Ledger they have no liquid staking token they got 250,000 uh e deposited in their first seven weeks of being integrated with Ledger that was a smarter move than a liquid staking strategy um exchanges coinbase are charging 25% and you can maybe get away with 10% on chain and they had no LST and they

became the second why because they have the user access the right there frax Finance is a really good Niche example they had three different um liquid staking tokens which appealed to a certain makeup of of investor and they captured that market whether they'll grow past that it lets to be seen but they really appeal to a certain market and they they grew quickly you can compete with communities as well there's there's lots of strong communities in staking pools um but there's many other areas to go this is igen layer this is to give you an example if you have a new appealing feature there is definitely the audience and the money and the will there as well they were open for 2 hours and I think if they were classified as a staking pool they would be number five

which in 120 Minutes is not bad going vampire attacks have they been successful um yes I'm looking at you Diva um I think I'd use a German word yine yes and no they really good for PR really good for marketing purposes but have they actually been successful are they sticky are they people who are just chasing a yield and then they're going to pull it out we do not know these answers but if I look at airdrops sorry the slides got a bit messed up you have a 60 to 80% churn after four months on aird drops as well so it does create some hype it does create some marketing I don't know the cost of that to you um this is another question should your goal to be finding

new deposits or should you be trying to find users to switch are you're going to pay their gas fees it's a it's if the average person is paying $600 $ on a on an exchange how are you going to get them to come to to your staking for is what you need to think through that's it um if you have any questions about that but I really think you need to think more obsessively about that question of what fight are you having where are the users and where can you access [Applause] them [Applause] get change it to T if you like

well more questions so speaking of users who have their sing token and doing nothing with it why do they need to do something with it what like that's part of the strategy that maybe you're employing why well they don't necessarily need to do anything with it but your staking pool doesn't necessarily need a liquid staking token um Stak wise were giving me the example it's optional so you can actually save money so if you don't have a if you don't want it you don't have to take it and then cost you money so what's the point in having a liquid staking token if you just get it and sit in your wallet you might as well just solo stake or or not have one and then that frees up how many resources in a

team to go and explore other avenues you can go you can go down that's my idea behind it other questions do you see the adoption of layer one lsds on layer twos because there's number of questions there of whether there's AAL version of it or what assumptions are we using when we cross those bridges or is there even enough Demand on these layers to are you talking about on IG layer or moving to moving moving layer one moving layer one lsds to layer chos because you were mentioning gas fees for example could be like a kind of VAR to entry so do you see a lot of people migrating to layer

CH to get State gu and I think I think they could potentially at the moment you don't see a lot of it because there's some trust assumptions on Layer Two to actually move those across but if there's a good yield and good use case I think I think that could be I I almost certainly think it'll be something that will develop over time so I definitely see it being a something that will happen in the long term all right thanks guys uh we have a small break now and we'll see each other in 40 minutes