Stader ETHx explained: multi-pool liquid staking with a 4 ETH node bond
Thread1,063 words
Explains the liquid staking market and its concentration problems, then how Stader's ETHx addresses them with permissionless, permissioned and DVT pools and a 4 ETH bond for home stakers.
Key claims
Top 3 entities control over 50% of staked ETH
Lido and Rocket Pool together hold 31% of ETH staking deposits
ETHx home stakers need only 4 ETH as bond to run a node
0/ in early July, @staderlabs is set to change the #LSD game by launching $ETHx mainnet & introducing a novel multi-pool architecture that will allow home stakers to run a node with only 4 $ETH while #DVT ensures resiliance 💸💧
MEGA-🧵 on why $ETHx is BIG for #LSDfi (0/41)👇
1/ this thread will cover @staderlabs and the upcoming $ETHx mainnet. The information provided here is based on the @staderlabs documentation, as well as various twitter threads and blog posts by @staderlabs
for an overview of the thread's content, check the next tweet 👇
2/
🏦 Ethereum Staking
💧 Liquid Staking
⚠️ Issues on LSD Market
🧪 Intro to Stader & $ETHx
🏗 $ETHx - Multi-Pool Architecture
🌐 $ETHx - Distributed Validator Technology
💸 $ETHx - Yield & DeFi Integrations
📊 $ETHx - LSD Comparison
🔮 $ETHx - Roadmap
📚 $ETHx - Litepaper
3/ 🏦 Ethereum Staking
since withdrawals have been enabled, marking the successful conclusion of Ethereum's transition to PoS, the interest in staking $ETH and running #Ethereum validators has been on the rise
4/ after a steep rise, the activation queue peaked on the 9th of June with 96k validators in the pending queue
5/ the growing staking demand is also reflected in the amount of $ETH staked, which has risen to almost 20m $ETH across 626k validators, which amounts to approximately USD 38bn in value at stake by the time of writing
6/ however, #ETHstaking is a highly centralized market with just a few players, where the top 3 entities control >50% of all $ETH staked
the two largest liquid staking providers ( @LidoFinance & #rocketpool) in aggregate account for 31% of the $ETH staking deposits
7/ 💧 Liquid Staking
but let's take a step back and have a quick look again at what liquid staking & liquid staking derivatives (#LSDs) actually are
8/ liquid staking is a concept in blockchain technology that allows token holders to stake their tokens (participate in the network's consensus and receive rewards) while maintaining liquidity of their assets
9/ in traditional staking, tokens are 'locked up' for a period of time. But with liquid staking, you receive a 'liquid' token representation of the staked asset which can be freely traded, transferred, or used in #DeFi applications, improving the liquidity of staked assets
10/ liquid staking derivatives are the 'liquid' tokens received in return for staked tokens. They represent the ownership of the staked tokens and the rights to the staking rewards
11/ these derivatives can be utilized in other parts of the #DeFi ecosystem, thereby unlocking additional yield opportunities
12/ liquid staking and its derivatives bring together the benefits of staking (network participation and rewards) and liquidity (flexibility and utility). It's a development that further boosts the potential of #DeFi
13/ but like the staking market in general, the liquid staking market is highly centralized, as the top liquid staking protocol has ~90% market share and only works with permissioned node operators
14/ ⚠️ Issues on LSD Market
the #LSD market faces five core issues that next-generation LSD protocols like @staderlabs try to overcome
⚠️ Market Concentration
⚠️ Lack of Permissionlessness
⚠️ High Barriers of Entry
⚠️ Low Rewards
⚠️ DeFi Integrations
15/ ⚠️ Problem #1 - Market Concentration
as we've seen before, both the overall $ETH staking market, as well as the #LSD market are highly centralized as the staked $ETH is highly concentrated around a few players
16/ ⚠️ Problem #2 - Lack of Permissionlessness
to make things worse, the biggest platforms don't allow permissionless node operators (whitelisted only)
17/ ⚠️ Problem #3 - High Barriers of Entry
additionally, you need a rather high amount of $ETH to be a home staker, which prices out a lot of people that would potentially want to run a node as well
18/ ⚠️ Problem #4 - Low Rewards
users also get comparatively low rewards for just staking their $ETH with other nodes
19/ ⚠️ Problem #5 - DeFi Integrations
finally, many #LSDs are yet to achieve meaningful DeFi acceptance and partnerships in the #DeFi space
20/ 🧪 Intro to Stader & $ETHx
so what is @staderlabs?
@staderlabs is a multi-chain liquid staking platform present across 6 blockchains (Hedera, Polygon, BNB, Fantom, Near & Terra) with $120Mn+ TVL and 70k+ unique wallets
with $xETH, @staderlabs is now coming to #Ethereum!
21/ but what is $ETHx ? 🤔
well, basically, $ETHx is the solution to the five problems outlined above. $ETHx has been meticulously designed to address these key challenges
22/ but how? 🤔
$ETHx introduces a home staking boost. Home stakers will be the backbone of $ETHx. What is the true GAME-CHANGER here though, is that they will only need 4 $ETH as the bonding requirement to run a node
23/ @staderlabs has conducted thorough evaluation of the bond requirement and concluded that the 4 $ETH bond requirement covers all key tail risk to user funds.
⚠️ From poor node operator performance
⚠️ To prolonged inactivity leak
⚠️ Being slashed & more!
24/ so $ETHx addresses the lack of permissionlessness in the market (also see tweet 28), reduces the barriers of entry and will decrease market centralization
25/ 🏗 $ETHx - Multi-Pool Architecture
$ETHx is built specifically to enable scalability & resilience. Therefore, $ETHx will be based on a multi-pool architecture
26/ this will include a permissioned pool that supplements the home staker pool and helps keep pace with user demand and a #DVT pool in the future that will help distribute the validator duties among the nodes and help improve node operator resilience
27/ 🏦 Permissionless Stake Pool
this is the pool of home stakers that will be the backbone of $ETHx. They will operate permissionlessly and without any whitelisting
additionally, the reduced bonding requirements to 4 $ETH is likely to incentivize more home stakers to join
28/ 🏦 Permissioned Stake Pool
in conjunction with the permissionless pool, $ETHx will have curated, community-approved list of permissioned operators.
they will complement permissionless nodes capacity and help $ETHx to keep up with user demand
29/ 🏦 DVT Stake Pool
#DVT will distribute the validator duties among multiple nodes by leveraging threshold #cryptography
its high fault tolerance will reduce slashing odds
30/ 🌐 $ETHx - Distributed Validator Technology
Distributed Validator Technology helps to decentralize the validation process in blockchain networks
basically, it allows multiple nodes to team up as a single validator, improving #Ethereum security, reliability & transparency
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