Three minutes to understand Liquidstake: a simpler Ethereum 2.0 pledge liquidity solution


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The Liquidstake pledge liquidity scheme is “simple and rude”: Users submit any amount of ETH to Liquidstake, and can obtain USDC by lending, and Liquidstake will delegate the unified management of these ETH to cooperative nodes.

Original title: “LiquidStake: A Simpler Solution for ETH2 Stake Mining Liquidity”
Written by: ChinaDeFi

At present, 101,536 ETH have been deposited in the pledge contract of ETH2.0. Based on the potentially huge ETH2.0 pledge market in the future, several highly recognized solutions have been proposed: Liquidstake, StaFi Protocol, Rocket Pool, and Ankr .

In response to the lack of liquidity of the pledged ETH, compared to our updated “StaFi: How does ETH2.0 pledge mining solve the liquidity problem?” The StaFi Protocol detailed in , the Liquidstake solution introduced today is more “simple and rude”: Users submit any amount of ETH they want to participate in pledge to Liquidstake, and they can obtain USDC by lending, and Liquidstake will manage these ETHs in a unified manner Entrusted to cooperative high-quality validator node partners. Liquidstake does not issue its own native token like StaFi Protocol, but it seems that it can solve the problem effectively.


What’s happening: ETH2.0

It is expected that by the end of 2020, Ethereum 2.0 Phase 0 will be launched.

Eth2.0 is an upgrade to ETH1.0, which will improve functionality, scalability and security. It will be launched in phases, the first of which will be phase 0 at the end of 2020. Phase 0 will implement the most basic part of Eth2-POS pledge proof of equity (PoS).

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PoS is a consensus mechanism that will manage the daily maintenance and security of Eth2’s core. The current Ethereum blocks operate based on a proof-of-work (PoW) common mechanism, which requires miners to spend electricity to maintain the operation of the blockchain. Although PoW has proven to be safe and stable since the birth of Ethereum, the community has been planning to eventually migrate to PoS. PoW allows Ethereum to support a large number of innovative activities, but it is hindered by many shortcomings, such as accessibility, centralization and scalability. Over time, as network activity increases, the need to resolve these deficiencies becomes more and more urgent.

Starting with PoS, Eth2 is expected to solve many such problems. The PoS consensus algorithm replaces PoW miners and electricity with validators and pledge rights. The validator runs the node software to approve transactions and maintain the public mainnet. The validator locks and pledges ETH on the Eth2 chain. The pledged ETH is used to incentivize these validators to keep the node software online, maintain uptime, and ultimately ensure the decentralization and security of the mainnet. When validators stay online and perform their duties of recording and maintaining the latest blocks, they will receive ETH rewards. If the validator goes offline or tries to change the data record without fulfilling its duties, its ETH reward will be reduced, and even its pledged ETH will be reduced as a fine. Together, these incentives ensure that the Eth2 network maintains accurate historical transaction records and prevent unexpected downtime or deliberate malicious attacks.

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Obtaining ETH rewards is the main purpose of people participating in staking ETH and running validator nodes on Eth2. However, staking ETH on ETH2.0 to obtain returns will encounter liquidity problems.

Problem: liquidity

When stage 0 is online, you can start to stake ETH and get rewards. The validator will send its ETH to the deposit contract address of ETH2, after which the funds are locked. The time for withdrawing the pledged ETH is currently unclear, and it is expected to be at least 18 months. The purpose is to ensure that the pledged ETH on the Eth2 chain reaches 524,000 as soon as possible for successful launch. However, correspondingly, the locked ETH loses its liquidity, and during this period, the pledger cannot sell or pledge the ETH held by it.

For many Ethereum stakeholders, staking on Eth2 for rewards is a powerful motivation to become a validator. However, staking ETH also means losing the right to use the DeFi protocol, CEX and DEX and other crypto ecosystems. This is a considerable trade-off, and many people may worry about losing the liquidity of ETH.

Solution: LiquidStake is a solution for ETH staking liquidity. LiquidStake allows Eth2 pledgers to obtain USDC loans by using their ETH as collateral. LiquidStake was created to help ETH stakeholders participate in Eth2 more confidently by providing liquidity. The goal is to provide a non-technical, compliant and secure platform to mortgage ETH without losing liquidity, thereby helping individuals and institutions to benefit from Ethereum and Eth2.

LiquidStake pools client funds and delegates them to the most trusted and well-known funding providers in the ecosystem, including Bison Trails and ConsenSys. We closely monitor the validator pool to ensure that each validator holds 32 ETH in order to ensure the highest reward rate. We can provide USDC loans based on ETH held by customers as collateral. These loans can be received when ETH is pledged or some time after.

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There is no minimum requirement or threshold for the pledge amount; the client’s pledge amount can be less than 32 ETH, or not an integer multiple of 32. It will reduce the risk of any single validator failure by decentralizing the customer’s ETH to the validator nodes of multiple approved partners. LiquidStake reduces the complexity of the staking technology and provides a portal to view the reward status and node behavior on the Eth2 network and update it regularly.

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