The ETH 2.0 beacon chain has been officially launched, and ETH 2.0 staking is in full swing. At present, more than 900,000 ETHs have been staking.
Since ETH 2.0 Staking requires running nodes and has a strict penalty mechanism, it is difficult for ordinary users to participate independently. And most importantly, the ETH participating in staking is expected to be unable to be withdrawn within 2 years.
Based on the above obstacles, ETH 2.0 staking service providers came into being. At present, a large number of exchanges, professional service institutions, independent project parties, wallets, etc. in the industry have deeply participated in the ETH 2.0 staking service. These services have greatly improved the process of ETH 2.0 staking and also provided users with valuable services. .
To be specific, well-known exchanges such as Binance and Huobi, well-known wallets such as Bitpie, TokenPocket, HashQuark, Yuchi and other service platforms, and many overseas platforms provide ETH 2.0 Staking services. Coinbase is also expected to provide ETH 2.0 staking services in the first quarter of 21. There is no doubt that there are many channels for users to participate in ETH 2.0 staking. The operation is very convenient, but it is still necessary to carefully identify reliable participation channels.
Due to the development schedule of ETH 2.0, it is generally believed that ETH participating in staking cannot be withdrawn within 1-2 years, which means that it loses liquidity. In order to solve this problem, many service providers have provided liquidity solutions, allowing users to participate in Staking without any worries.
The specific plan generally is to issue ETH derivative tokens to users. Derivative tokens represent the redemption rights and income rights of Staking ETH. Derivative tokens generally have the characteristics of being tradable and circulated. For example, BETH issued by Binance and Huobi, vETH and aETH issued by Bifrost and Ankr.
In terms of releasing liquidity, Binance and Huobi will list BETH-related trading pairs, so that users’ derivative tokens can be realized, thereby indirectly releasing liquidity. Instead of vETH and aETH issued by non-exchanges, liquidity will be released through DEX, and of course it may be connected to centralized exchanges.
This article does not discuss which method users should use for staking, which is closely related to the user’s usage habits, but wants to talk about the derivatives of ETH 2.0 Staking.
1. Centralized derivatives
It is not surprising that exchanges such as Binance, Huobi, Coinbase have or will open ETH 2.0 staking services. Since users have natural trust in top exchanges and the number of users is huge, it is conceivable that exchanges will definitely gain a significant market share.
Binance has now launched the ETH 2.0 staking service, and users can deposit any amount of ETH for staking. The liquidity solution used by Binance is to issue a 1:1 derivative token BETH. The staking proceeds obtained by the user will be issued to the user’s account in the form of BETH, and BETH trading pairs will be opened after a period of time to release the liquidity of staking assets. Judging from the announcement issued by Huobi, it is also a similar mechanism.
Before ETH2.0 can be transferred, staking rewards cannot be moved. There will be a question of whether and how staking rewards are issued.
Binance and Huobi’s solutions are directly distributed to users, and this mechanism is in line with the characteristics of exchanges. The exchange issued to the user is only an accounting voucher. If the user converts into real ETH and then withdraws, the extra share will be paid by the exchange. This is not a problem for the exchange. After all, the real ETH2.0 generation The currency is there, and the exchange does not need to worry too much.
Therefore, BETH and ETH will always have a 1:1 mapping relationship. When ETH2.0 can be transferred, it will be able to redeem 2.0 ETH at a 1:1 ratio. Because of this strict 1:1 mapping, if the usage scenarios are not rich enough, BETH will have a discount.
Let us consider a question here. Since it is an ETH-related derivative, it represents the redemption right of ETH. Technically speaking, there is no difficulty in accessing DeFi. If it can be accessed, it will be an effective way for exchanges to expand their influence in the DeFi field. But will the DeFi agreement be accepted?
Although it is clear that exchanges want to allow their own assets to be accepted by DeFi, from the perspective of past development, BUSD, HBTC, etc. issued by Binance and Huobi have not been widely accepted in the DeFi ecosystem.
This is obviously related to the properties of DeFi. DeFi platforms and users place more emphasis on the decentralization of asset properties, and they have more or less distrust of centralized exchanges, which hinders the widespread acceptance of assets issued by exchanges in the DeFi world. Going back to the issue of ETH 2.0 derivatives, you may face similar results.
2. Decentralized derivatives
In terms of integrating into the DeFi ecosystem, decentralized derivatives based on smart contracts are undoubtedly more acceptable. Currently the main players in this field are Bifrost, Stkr and Stafi.
At present, Bifrost and Stkr’s ETH2.0 staking services have been launched, and smart contracts have been audited, and they are currently promoting the integration of ETH derivatives into the DeFi ecosystem. Stafi has released ETH 2.0 staking service related documents, but it has not officially launched the service yet.
From the principle point of view, there are many similarities between staking service platforms based on smart contracts, and the core lies in how to achieve the security of user funds without trust.
At present, there are not many players on this track. The ones that have launched services and are well-known are Bifrost and Stkr. Rocket Pool, which has been cultivating ETH 2.0 staking business for a long time, has temporarily stopped the launch of the network because of the current status of ETH 2.0. This will be introduced below. The modes are respectively introduced below.
Bifrost
Bifrost is a cross-chain network that provides liquidity for staking. It has been granted a grant from the Web3 Foundation and is also a member of the Substrate Builders Program and Web3 Bootcamp.
As a professional staking liquidity solution provider, you can’t miss ETH 2.0, the largest staking market. Bifrost announced the launch of the audited ETH 2.0 staking service at the end of November, and at the same time started coin mining.
In the ETH 2.0 staking service based on smart contracts, there are three parties involved, namely, staking users, nodes, and contract managers. Bifrost’s nodes are built in cooperation with professional node service providers, and this is also the solution chosen by many exchanges and wallets.
The core of this model is how to ensure asset security in a decentralized way. Specifically, Bifrost will be divided into four phases to achieve full decentralization of vETH. It is currently in the second phase. Since the main network of Bifrost has not yet been launched, Bifrost will co-initiate multi-signature institutions (5 institutions). Sign operation, using BLS threshold signature technology to perform secure multi-party calculations online and deposit the user’s ETH into the deposit contract.
Each deposit certificate is jointly kept by multiple parties instead of being controlled by a single institution, thus achieving partial decentralization. When the Bifrost mainnet goes live, vETH will become a dual-protocol coexisting asset of ERC20 and Substrate Base, and is supported by ETH 2.0 After the smart contract is deployed, it will be interconnected with the Bifrost main network to realize the complete decentralization of vETH, which will be completed in the fourth stage of vETH development.
In terms of specific participation methods , wallets such as imToken and TokenPocket on the mobile phone have already implemented support. You can also go to the official website to participate directly, which is more convenient. As shown in the figure below on the wallet side, Stkr and Bifrost’s vETH minting are both in the same section.
It is worth mentioning that, in order to expand the project ecology, Bitfrost provided a total of 1.25% of BNC tokens to incentivize vETH minters. The rewards lasted until the end of December. However, it is necessary to explain that after Bifrost has completed the seed round of financing, other rounds of fundraising have not been conducted, and the tokens cannot be traded yet. This will also be an opportunity to obtain low-cost chips.
Source: https://vtoken.io/drop
Regarding the scenario of derivative tokens, according to official news, vETH will be listed on Uniswap, Loopring, DODO and other DEXs in the near future.
Stkr
Stkr is the ETH Staking service platform developed by Ankr. Ankr is a professional node service provider. Through Ankr, various public chain nodes can be easily built. Currently, it supports more than 50 public chains. Ankr relies on its node building capabilities to establish the Stkr platform to connect staking demanders and node suppliers.
Users on the Stkr platform can either participate in staking or choose to become node providers. There are no technical requirements to become a node provider. You only need to pay a deposit of 2 ETH to become a node. The operation and maintenance behind it are completed by the platform. Becoming a node provider can charge a certain service fee, but also pay server and other node fees.
Source: https://stkr.io
In terms of security, Stkr also uses threshold signature technology based on multi-signature, and will perform multi-signature together with the institution to ensure asset security. Multi-signature threshold signatures are theoretically more secure than most DeFi, and most DeFi teams still retain super authority.
Staking on Stkr will generate aETH. At present, aETH and vETH have not yet launched DEX, but it is expected that the launch time will not be too far.
The listing of aETH and vETH on DEX is the first step for the integration of ETH derivatives into DeFi. After that, ETH derivatives will increasingly appear in various DeFi. As the number of staking increases, its influence will also increase.
A few days ago, Curve has voted to use Stkr to provide users with ETH 2.0 staking services. Subsequent DeFi agreements may become standard to provide users with ETH Staking services through access to platforms such as Bifrost and Stkr, and we look forward to this day.
Like Bifrost, Stkr has also launched many wallets, and the desktop can also participate through the official website. At the beginning of the platform’s launch, Stkr conducted a short minting incentive, which has now ended.
Rocket Pool
Originally, the ETH derivatives track is inseparable from Rocket Pool. Rocket Pool is a project designed for ETH Staking and has already launched multiple rounds of testnets.
However, Rocket Pool recently announced that Rocket Pool will not be online until the ETH 2.0 withdrawal function is launched.
The original text is as follows:
While Phase 0 marks the start of ETH staking, Rocket Pool will be choosing to launch following the implementation of smart contract withdrawals, to adhere to the non-custodial, trustless nature of the staking solution we set out to build over two years back. This is expected in Q1 of 2021 and we’ll hope to launch along side it.
Rocket Pool’s plan is to start after ETH 2.0 opens smart contract withdrawals to realize a non-custodial service plan, and said it is expected to be realized in the first quarter of 21.
Why does Rocket Pool think that withdrawals will be possible in the first quarter of 21? Because the Ethereum community has recently proposed a simple way to launch the withdrawal function in advance, if the proposal is passed, it may speed up the withdrawal of ETH2.0.
There is still uncertainty about the launch of the Rocket Pool network, because it is still unknown whether the proposal will eventually pass. If the proposal is passed successfully, it will have a significant impact on all parties involved in ETH 2.0 Staking, and it deserves the attention of all service providers and staking users.
3. Distribution of rewards on decentralized platforms
Regarding the distribution method of Staking rewards on the decentralized platform, some friends may not understand it. I will talk about it separately here, for the convenience of taking Bifrost as an example.
Bifrost does not use the similar distribution method of exchanges, but directly injects rewards into vETH. With the accumulation of staking rewards, the price of vETH will continue to increase, and the amount of vETH that can be minted per ETH will decrease. That is, vETH and ETH are not a 1:1 anchoring relationship, but with the continuous injection of staking rewards, vETH The amount of ETH that can be exchanged/redeemed is constantly increasing.
This method is a general way to release the liquidity of staking assets through a decentralized way. Bifrost, Stafi and Acala all use this method in this field. Specific to ETH Staking, Stkr’s aETH also uses this method.
Because if the 1:1 anchoring method is used, the distribution of rewards will be a big problem. For example, if a staking reward is obtained, it will be issued to users, and addresses holding vETH will be rewarded in proportion.
If your vETH is being used as collateral on the lending platform, when the reward is issued, does the contract address also receive the reward? If the reward is also received, how to distribute it? Will this disrupt the design of the platform and create additional risks?
Therefore, injecting rewards directly into vETH during exchange is a common way for decentralized platforms, which will eliminate obstacles such as vETH into the DeFi ecosystem.
Four, summary
ETH derivatives solutions currently have centralized and decentralized solutions. Centralized exchanges have advantages in terms of user base, but decentralized platforms have more advantages in terms of DeFi acceptance.
The important point of assets is the usage scenarios, and the rich usage scenarios will promote the development of the platform. In terms of expanding usage scenarios, it is easier for a decentralized platform to combine DeFi to create new gameplay.
Ge Ge personally thinks that decentralized solutions will occupy a place in the market. Otherwise, how did DeFi develop?
Reference
https://bifrost.finance/drop
https://mp.weixin.qq.com/s/uIuCpYZLmshavX1CvIvAsg
https://medium.com/rocket-pool/rocket-pool-eth2-our-vision-e367d366d01e
https://ethresear.ch/t/simple-eth1-withdrawals-beacon-chain-centric/8256
https://mp.weixin.qq.com/s/wSJT5nAID5M2zvEIxDuaaA
https://mp.weixin.qq.com/s/wSJT5nAID5M2zvEIxDuaaA
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Disclaimer: This article is the author’s independent point of view, does not represent the position of the Blockchain Research Society (public account), and does not constitute any investment opinions or suggestions.
