LiquidStake: A Simpler Liquidity Solution for ETH2 Staking Mining

Editor's Note: This article comes fromDecentralized financial community (ID: China_DeFi), reprinted by Odaily with authorization.

Editor's Note: This article comes from

Decentralized financial community (ID: China_DeFi)Decentralized financial community (ID: China_DeFi)Currently, 101,536 ETHs have been deposited into the ETH2.0 pledge contract. Based on the ETH2.0 pledge market that may be huge in the future, several highly recognized schemes have been proposed: Liquidstake, StaFi Protocol, Rocket Pool, and Ankr.

Regarding the lack of liquidity of ETH in pledge, compared to yesterday's update

"StaFi: How does ETH2.0 staking mining solve the liquidity problem? "

The StaFi Protocol introduced in detail 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 can obtain USDC in the form of loans, and Liquidstake will entrust these ETHs with unified management To cooperative high-quality validator node partners. Liquidstake does not issue its own native tokens like StaFi Protocol, but it seems to be an effective solution to the problem.

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Happening: ETH2.0

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

PoS is a consensus mechanism that will manage the core day-to-day maintenance and security of Eth2. Current Ethereum blocks operate on a proof-of-work (PoW) consensus mechanism that requires miners to spend electricity to keep the blockchain running. Although PoW has proven secure and stable since the inception of Ethereum, the community has been planning an eventual migration 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 address these flaws becomes more pressing.

Starting with PoS, Eth2 promises to solve many of these problems. The PoS consensus algorithm replaces PoW's miners and electricity with validators and staked stakes. Validators run node software to approve transactions and maintain the public mainnet. Validators lock and pledge ETH on the Eth2 chain. The staked 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. Validators are rewarded with ETH when they stay online and perform their duties of recording and maintaining the latest blocks. If a validator goes offline or attempts to alter data records without fulfilling its duties, its ETH rewards will be reduced, and even its staked ETH will be slashed as a penalty. Together, these incentives ensure that the Eth2 network retains an accurate record of historical transactions and protects against unplanned downtime or intentional malicious attacks.

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Problem: Liquidity

When Phase 0 goes live, you can start staking ETH and get rewards. Validators will send their ETH to the ETH2 deposit contract address, after which the funds are locked. The withdrawal time of the pledged ETH is still 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 a successful launch. However, as a result, the locked ETH loses liquidity, and during this period, stakers cannot sell or mortgage their ETH holdings.

For many Ethereum stakeholders, staking on Eth2 for rewards is a powerful incentive to become a validator. However, staking ETH also means losing access to encrypted ecosystems such as DeFi protocols, CEXs, and DEXs. This is a considerable trade-off, and many people may worry about losing the liquidity of ETH.

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