In the melee of ETH derivatives, which one is better, the centralized or decentralized solution?

Based on the above obstacles, ETH 2.0 Staking service providers came into being. At present, a large number of exchanges, professional service agencies, 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 provided valuable services for users .

To be more specific, well-known exchanges such as Binance and Huobi, well-known wallets such as Bitpie and TokenPocket, service platforms such as HashQuark and Yuchi, 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, and the operation is very convenient, but it is still necessary to carefully identify reliable participation channels.

Due to the development progress of ETH 2.0, it is generally believed that the ETH participating in Staking cannot be withdrawn within 1-2 years, that is, it loses its liquidity.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 is to issue ETH derivative tokens to users. The derivative tokens represent the redemption rights and income rights of Staking ETH. Derivative tokens generally have the characteristics of being tradable and negotiable. 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 launch BETH-related trading pairs so that users' derivative tokens can be liquidated, thereby indirectly releasing liquidity. The vETH and aETH issued by non-exchanges will release liquidity through DEX, and of course it is also possible to access centralized exchanges.

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It is not surprising that exchanges such as Binance, Huobi, and Coinbase have already or will soon open ETH 2.0 Staking services. Since users have natural trust in the top exchanges, and the number of users is huge, it is conceivable that the exchange will definitely gain a large market share.

Binance has 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 1:1 derivative token BETH.The Staking income obtained by the user will be distributed to the user account in the form of BETH.After a period of time, BETH trading pairs will be opened 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, and here there will be a question of whether and how to distribute staking rewards.

The solution of Binance and Huobi is to distribute directly to users, and this mechanism is in line with the characteristics of exchanges. What the exchange sends to the user is just an accounting certificate. If the user withdraws cash after converting it into real ETH, the excess 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 according to 1:1. Because of this strict 1:1 mapping, if the usage scenarios are not rich enough, BETH will have a discount.

Here let us consider a problem. Since it is an ETH-related derivative, it represents the redemption right of ETH. Technically speaking, it is not difficult to access 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 protocol accept it?

Although it is clear that exchanges want their assets to be accepted by DeFi, judging from past developments, BUSD and HBTC issued by Binance, Huobi, etc. have not been widely accepted in the DeFi ecosystem.

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In terms of integration into the DeFi ecosystem, decentralized derivatives based on smart contracts are undoubtedly easier to accept. The current main players in this field are Bifrost, Stkr and Stafi.

At present, the ETH2.0 Staking services of Bifrost and Stkr have been launched, and the smart contracts have been audited. They are currently promoting the integration of ETH derivatives into the DeFi ecosystem. Stafi has released documents related to the ETH 2.0 Staking service, but the service has not yet been officially launched.

In principle, there are many similarities between the smart contract-based Staking service platforms, and the core lies in how to achieve the security of user funds without trust.

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Bifrost

Bifrost is a cross-chain network designed to provide liquidity for Staking. It has obtained the 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, it is natural not to miss ETH 2.0, the largest Staking market. At the end of November, Bifrost announced the launch of the audited ETH 2.0 Staking service, and started coin mining at the same time.

In the ETH 2.0 Staking service based on smart contracts, there are three participants, namely Staking users, nodes and contract managers.Bifrost nodes are built in cooperation with professional node service providers, which is also the solution chosen by many exchanges and wallets.

The core of this model is how to ensure asset security in a decentralized manner.Specifically, Bifrost will be divided into four stages to fully decentralize vETH. It is currently in the second stage. Since the Bifrost mainnet is not yet online, at this stage Bifrost will jointly initiate multi-signature institutions (5 institutions). The signing operation uses the 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, rather than controlled by a single institution, so as to achieve partial decentralization. When the Bifrost mainnet is launched, vETH will become an asset that coexists with ERC20 and Substrate Base. 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 methods of participation,Wallets such as imToken and TokenPocket on the mobile phone have already implemented support, and you can also go to the official website to participate directly, which is more convenient. On the wallet side, as shown in the figure below, both Stkr and Bifrost's vETH minting are in the same section.

It is worth mentioning that, in order to expand the project ecology, Bitfrost took out 1.25% of the total BNC tokens to motivate vETH minters, and the reward period lasted until the end of Decemberimage description

texthttps://vtoken.io/drop

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Stkr

Stkr is an ETH Staking service platform developed by Ankr. Ankr is a professional node service provider. Through Ankr, nodes of various public chains can be easily built. Currently, it supports more than 50 public chains. Relying on its node building capabilities, Ankr established the Stkr platform to connect Staking demanders and node suppliers.

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source:https://stkr.io

In terms of security, Stkr also uses the multi-signature-based threshold signature technology, and will work with institutions to perform multi-signatures to ensure asset security.text

Staking on Stkr will generate aETH. At present, aETH and vETH have not yet been launched on DEX, but it is expected that the time to go online will not be too far away.

The listing of aETH and vETH on DEX is the first step for the integration of ETH derivatives into DeFi. After that, more and more ETH derivatives will 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 protocols that provide users with ETH Staking services through access to platforms such as Bifrost and Stkr may become standard, and we look forward to this day.

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Rocket Pool

Originally, the ETH derivatives track is inseparable from Rocket Pool. Rocket Pool is a project specially designed for ETH Staking, and several rounds of testnets have been launched.

However, Rocket Pool recently announced that Rocket Pool will not go 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 intends to start after ETH 2.0 opens smart contract withdrawals to realize non-custodial service solutions, and said it is expected to be realized in the first quarter of 21.

Why does Rocket Pool think it will be able to achieve withdrawals in the first quarter of 21? Because recently the Ethereum community has a proposal about using a simple method to launch the withdrawal function in advance. If the proposal is passed, it is possible to speed up the withdrawal progress of ETH2.0.

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Regarding the distribution method of staking rewards on the decentralized platform, some friends may not understand it, so I will talk about it separately here, taking Bifrost as an example for convenience.

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 number of vETH that can be minted per ETH will decrease, that is, vETH and ETH are not in a 1:1 anchor 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 common way to release the liquidity of Staking assets in a decentralized way, and 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 you get a Staking reward, it will be issued to the user, and the address holding vETH will get the reward in proportion.

If your vETH is being used as collateral on a lending platform, when rewards are issued, will the contract address also receive rewards? If rewards are also received, how will they be distributed? Will this disrupt the design of the platform, creating additional risks?

Four. Summary

Both centralized and decentralized solutions for ETH derivatives solutions have emerged. Centralized exchanges have an advantage in terms of user base, but in terms of DeFi acceptance, decentralized platforms have more advantages.

The most important point of an asset is the usage scenario, and rich usage scenarios will promote the development of the platform. In terms of expanding usage scenarios, it is easier to create new gameplays by combining decentralized platforms with DeFi.

Disclaimer: This article is the author's independent opinion, does not represent the position of the Blockchain Institute (public account), and does not constitute any investment opinion or suggestion.

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Disclaimer: This article is the author's independent opinion, does not represent the position of the Blockchain Institute (public account), and does not constitute any investment opinion or suggestion.