Staking liquidity sector, the biggest winner of ETH2.0
ETH2.0 transforms into PoS, and the Staking market will usher in the largest player. On the other hand, the rise of DeFi has allowed more assets to flee from Staking to participate in DeFi applications with higher yields, and the decline in the pledge rate has seriously threatened the security of the PoS public chain.
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The contradiction between Staking and DeFi
Staking is a unique product of the PoS consensus mechanism. Proof of Stake (POS) requires users to prove that they own a certain amount of currency (that is, have rights to the currency). Simply put, the PoS mechanism is a system that pays you interest based on the amount and time you hold currency.
What is Staking?
To get inflation interest, you have to pledge your PoS tokens. This process is called Staking.
Where does the interest come from?
Inflation from the system, that is, the issuance of additional tokens.
What is the meaning of staking?
1. For investors, the most important thing is to obtain the inflation interest after pledge.
2. For the community, Staking can stimulate currency holders to participate in network construction, because the inflation interest of the PoS network is only given to Staking participants (Staking participants can offset system inflation), and currency holders who do not participate in Staking Exposure to dilution risk from systemic inflation.
3. In terms of system security, in the PoW mechanism, the greater the computing power, the higher the security, while in the PoS mechanism, security is linked to Staking. The more tokens involved in Staking, the more chips an attacker needs to collect to achieve a 51% attack. Therefore, the higher the pledge rate of the entire network, the safer the PoS network will be.
Disadvantages of staking:
The disadvantages of participating in Staking are obvious. Investors’ tokens will be locked for a period of time. During this period, you can only stare blankly at how the secondary price fluctuates. When you want to withdraw from Staking, that is, unstake, it often takes days or weeks to complete. Unlock tokens in stake.
This does not seem to be a defect. Investors are optimistic about a certain PoS token. Although it sacrifices liquidity for a period of time by pledging and locking it, it is completely acceptable to obtain inflationary interest. Until the arrival of DeFi, DeFi directly conflicts with Staking.
The conflict between DeFi yield and Staking security:
In this wave of DeFi, a large number of PoS public chains are deployed in DeFi. From the perspective of investors, whichever side has the highest yield, they will flock to that side. Therefore, a large number of tokens that originally participated in Staking were unlocked by investors and participated in In lending and liquidity mining, obviously, placing tokens in DeFi can not only obtain higher returns than Staking, but also have better liquidity than Staking.
This directly caused some PoS public chains to issue emergency announcements, and the withdrawal of a large number of tokens in Staking participated in DeFi, which directly and greatly reduced the security of the public chain.
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Solutions to Staking Liquidity
The principle of the Staking liquidity scheme is very simple. For example, the user pledges a PoS token A through the Stake contract, and you will get an rA token after the pledge. This rA token is equivalent to a substitute for the A token, and the rA token can flow freely.
When the rA token holder wants to redeem the A token that is in the Staking state, he can initiate an unstaking operation to the system. At this time, the A token returns to your hands, including inflation interest, and rA is destroyed.
To put it simply, the rA token is the key to unlock the A token in the staking state. In the staking state, the A token only recognizes the rA token as the key, not the person. So if you want to sell/buy Staking assets, you can buy and sell rA tokens directly in the market without waiting for the unlock time.
Are rA tokens equal to real A tokens?
Many people have questions, why should I exchange real tokens for fake tokens? This is a misunderstanding of many people’s staking liquidity schemes. Although rA tokens are not directly equal to A tokens, rA tokens have A tokens The sole control right of the currency, and the income right including the A token Staking.
This logic may be a bit convoluted, so think a little more.
The significance of staking liquidity:
For the public chain, the conflict between DeFi and Staking is resolved. Through the Staking liquidity plan, more currency holders are willing to participate in Staking, thereby improving the security of the public chain. At the same time, through the Staking liquidity plan, the tokens locked by Staking are released, providing more assets for the DeFi market.
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Opportunities on the Staking Liquidity Track
1. The continuation of the traditional ABS model in the currency circle
ABS is asset securitization, which means converting low-liquidity assets into high-liquidity securities. According to Wind data, the issuance scale of ABS in the first quarter of 2020 was 406.3 billion yuan. The ABS model is very mature in the traditional financial market.
The staking liquidity solution is the currency version of ABS. The A token in staking is a low-liquidity asset. Through the ABS model of staking liquidity, it is transformed into a highly liquid rA token. Therefore, the Staking liquidity solution has actually been verified in the traditional financial market, and now it is nothing more than being verified in the currency circle.
2. The scale of the PoS public chain
The market size of the staking liquidity track depends entirely on the size of the PoS public chain. We will not discuss the issue of which is better than PoW or PoS. As far as the current market trend is concerned, the new star-level public chains (such as DOT, ATOM, etc.) , most of them have adopted the PoS consensus mechanism.
According to stakingrewards data, the current Staking market size has reached 42.6 billion US dollars. In the future, Ethereum will also completely transform into PoS. There is no doubt that the market value of the PoS public chain will become larger and larger in the future. The size of the PoS public chain is the size of the Staking liquidity market.
3、ETH2.0 Staking
Phase 0 of ETH2.0 has begun, and ETH2.0 Staking has become a battleground. For example, the exchange has launched an ETH2.0 Staking entrance with no limit on the number of pledges. Originally, participating in ETH2.0 Staking needs to meet the minimum quantity requirement of 32 ETH , the way the exchange plays is to collect scattered ETH to participate in ETH2.0 Staking. This is the case for Staking on the market, but most of them adopt a centralized custody model, that is, the control of the private key is in the hands of the platform. At the same time, the unlocking period of ETH2.0 Staking is as long as 1 or 2 years, which further increases the risk of centralization.
epilogue
epilogue
The staking liquidity track is almost a certain direction, but the current staking liquidity projects are in the early design stage, and the products of this type of project have not yet taken shape. Staking liquidity is a brand new track in the currency circle and has not yet been verified. There are still various uncertain risks in investing in Staking liquidity projects.
