Jordan Sutcliffe - Transforming the ETH Staking Landscape

Transcript

thank you everyone for joining I am very excited to introduce Jordan from statewise he's going to be talking about what they're working on that's new and transformative and Innovative in the staking space so everyone please give Jordan a warm [Applause] welcome Al righty hello hello can you hear me all right okay cool so first all thanks one for for joining us here today um transforming the East staking landscape when we about this time last year we were very much in the like design phase for statewise V3 and coming up with theories about how we can utilize this this protocol and a

year on now the product is built it's actually great to see some of these use cases coming to life I gave a talk at staking Summit a couple of days ago outlining a whole bunch of different uh ways you can utilize the protocol I'm going to reh highlight a couple of those today but I also just wanted to give more of a general overview of stake wise V3 uh and also explore about how V3 has a potential to impact the current uh eth staking landscape so first off as as usual quick introduction uh for those of you who are not aware uh stake wise we've been around for quite a while now uh we were one of the first liquid staking solutions to launch on ethereum back in early 2021 we've got about just over 100k the state with us right now which is okay um but a lot of our Focus over

the past 18 months also has been on our version three upgrade called stake wise V3 a question we're getting a lot at the moment is when is uh V3 ready so a quick update on the the development side so the contracts are live on mainnet it's it's been a long time going but it's great to actually see this this uh protocol on mainnet we're just doing some final testing before we release it to the public we've you know got multiple partners that have been helping has developed this product and test this product over the past um nine months uh we're giving them some time to get set up uh ready on Main net before we make it public uh for those of you who follow statewise Dow you may have also seen the uh recent proposal which has passed which uh ratifies the Oracle Network

that'll be live when statewise V3 goes live um I think you fair to say we've got a pretty strong uh list of oracles that are helping us uh get stake wise V3 off the ground each of these oracles will be uh operating under slas uh ensuring our quality up time and also helping ensure the security of the protocols well and that was actually the last D vote that needed to happen before statewise V3 can be made public uh so yeah it's uh it's going to be uh ready for everyone very very soon before I look into some of the examples of statewise V3 I wanted to give you a high level overview of the architecture so the best way to think about V3 is currently stake wise is a single staking pool with a permissioned

node operator set what we do with the V3 upgrade is we are wh labeling our smart contract and and allowing any entity to launch a staking pool alongside the existing pool and so we're going to end up with an ecosystem of hundreds thousands of different staking pools each one is fully unique each one is fully isolated I'll go through uh the functions of of volts in a second but each of these staking pools are what we call volts and they form the foundation of stake wise V3 and they essentially automate the the entire operation or offering staking as a service everything apart from actually running the nodes for you they're a very comprehensive toolkit for offering staking as a service and we like to view vaults almost as like the nosis safe for E

staking we are not charging for the use of the vaults architecture they are free they are public good allowing anybody to offer trustless non-custodial staking as a service B3 is and so vaults another way I like to think about vaults as well is like the native delegation layer built on top of ethereum so Cosmos some of the newer proof estate networks have uh delegation built directly into the proof of stake Network itself obviously ethereum does not have this and so volt is a way for uh for users to cherry pick and delicate their assets to their preferred staking solution but V3 is more than just um a staking tet it is also and it's still will remain to be a liquid staking protocol and so with the V3 upgrade we are launching OS eth uh a new liquid

staking token called over collateralize State eth the clue is in the name here so this token sits on top of all of the volts uh in the ecosystem system and it's over collateralized this is important to ensure that even though we've got the same token sitting across every single volt in the ecosystem the overcollateralization ensures that any risks or penalties associated with one volt does not filter through to the rest of the ecosystem so for example let's say I stake I know 10 ether into the the enzyme Vault I will only be able to Mint N9 ether's worth of os e so just like rocket pool and other uh provide enure or require node operators provide collateral to protect against slashing

losses we provide this um via over collateralization in the staking token in that example I'm still earning my 10 ethers worth of staking yield with enzyme um but I'm only allowed to make nine of it liquid to access defi so it's a slight drop in capital efficiency and what you can make liquid um but that is an important feature to help protect the entire staking ecosystem that is built on V3 it's also worth mentioning that this system is designed to tend towards maximum capital efficiency you know each volt can have its own unique LTV uh for minting OS e and you know maybe one day when there's uh VI via collateral or maybe DVT or via technological Tech technological solution that uh

eradicates those slashing impact or slashing risks maybe we can mint OS one to one versus volts in the future so you know this this this architecture can very much tend towards maximum capital efficiency as the te as technology advances a couple of other things to mention about OS e is that it's uh it's optional and this is something that James mentioned in his talk earlier today you know the majority of Lio statey for example is not actually used in defi people are paying a premium for holding a liquid staking token which they don't actually use and so that is why we've made OS e optional if you want to if you want to Native stake you can do that when you want to liquid steak you can mint OS on demand to act to utilize uh

that stake in Defi and when you're finished you can you can simply burn OS e it's a very cost- effective way for people to stake um in what can be a very decentralized staking solution without having to pay the premium for a liquid staking token they do not use the other thing to mention as well is that OS is a repricing token and so one of the simplest ways that users will be able to stake with stake wise V3 is by simply buying and holding OS eth because OS is over collateralized that has that provides inbuilt slashing protection and because it Acres the yield from the whole volts ecosystem it is an incredibly like it's almost the gold standard uh for for lsts uh inbuilt

slashing protection and uh D High diversity on the Node operator set so it's a very high quality LST to hold as a Staker but also to integrate across def5 the key thing about L about o is that we will be providing a statewise or statewise the liquidity and Integrations for this token so not only do we provide people with the toolkit to offer trustless noncustodial staking via vaults we also give them a ready-made liquid staking ecosystem that all of their users can access and the goal of this protocol is very much to democratize uh staking as a service and allow anybody to compete uh with the larger staking protocols in the liquid staking

environments so just diving down into the vault layer a little bit more in more detail vaults can be configured can be configured in many ways for example you can make a public Vault where anybody can delegate assets or you can make a private Vault um where there's Whit listing uh functionality involved but at the end of the day each vault is a staking pool uh and allows for pulled staking or less than 32 e staking um another thing that vaults do is as I mentioned they automate the whole staking process or staking as a service whenever 32 ether ACR into a vault uh the validators are automatically generated uh on behalf of the node operators that run within the Vault and also more importantly they're

also automatically exited this is uh argue quite a Hot Topic right now um with the EIP going through to look to enable Smart contract withdrawals um but for us we are able to uh trigger validator exits from day one as soon as V3 goes live the way this works is that whenever validators are generated on the statewise prod call the exit message for that validator is encrypted and sharded across the Oracle Network so that whenever a user wishes to unstake and a validator is needs to be exited to facilitate that unstaking request uh we can U generate regenerate that exit message exit signature and and exit the validators this is really important when you're allowing permissionless node

operators onto your platform it means that operators cannot hold funds hostage and it also just means that node operators just don't need to be on hand whenever unst requests need to be submitted um so volts also enable auto compounding the me the tips the base yield of staking flows back into the vaults and just like the automatic validator registration whenever 32 ether is aced more validators can be created um they also allow for tokenization so for example when you create a vault you can specify whether assets that deposit into the Vault are tokenized and you can create your own custom erc20 token uh that represent deposits in your Vault and you can brand that token however you

want the name the ticker what have you and this actually allows people to create their own LST Solutions completely out of the box and I'll show you an example of this uh in a second volts are also very flexible on the staking configuration you can have maybe one node operator but you could also have multiple and the volts handle the automatic delegation across these various node operators and each node operator in the vault can run whatever their preferred client me relay or even a DBT solution we're completely agnostic to what's the stake in configuration is Within These volts and that's going to allow this V V3 ecosystem to be very eclectic every volt is going to be very different uh we've had obal and SSV

clusters running in test net and there are entities that are be going to be launching those similar clusters on Main net as well um and just like a you need if you if you got multiple operators you need a way to split the staking fee across these operators and once again again vaults handle that automatically when you create the Vault you specify the staking fee uh that will be charged as a percentage of staking rewards and you can you can then specify how that fee is split across all the node operators in the vault it could Al it doesn't just have to be node operators maybe there's there a node operator who's working and staking on behalf of a wallet they can then set up a revenue share agreement between the wallet and the node operator however they please and the vaults handle handle that for

them so hopefully you the idea here that you know the volts as I mentioned they are pretty much a comprehensive toolkit for offering staking as a service now every Vault on V3 will be displayed in the V3 or volts Marketplace this is a way for node operators staking solutions to Brand their vaults and uh offer staking as a service through this completely Open Marketplace it doesn't just give operators um control it also gives stakers control too as a Staker you can come and view the marketplace and cherry pick your preferred staking solution maybe you want to stake with Solo stakers or those running DVT it gives you the power as as a staking delegator

to cherry pick your preferred solution and this is something that actually vitalic mentioned uh in one of his recent blog posts uh currently delegators in the consensus mechanism are are almost redundant uh you want to give them a role uh in the ecosystem and one of the ways to do this is by allowing them to cherry pick and choose their preferred node operators you don't want a dow or you know any other entity controlling how stake is um delegated the delegators themselves should be able to have that control and that is exactly what the V3 Marketplace will provide there's also going to be a verification process here so if fooa are offer there's a vault branding branded as fena you know stakers need to be sure

that it is actually fooa running that Vault and so there's going to be a verification process where we provide that verification for stakers it's not suddenly not a kyc solution here it's just a way that we can provide assurances for stakers that it is truly who it says it is running behind the Vault the last key thing I would mention on V3 here is the the way this protocol is structured um stake wise is a dow and it's the Dow that governs uh the protocol uh and the Dow also CS some of the key parameters of the protocol like the O minting LTV Etc one of the key topic of conversations though is smart contract upgradability now we have made as much as possible of this contract this whole

protocol immutable um so for example OS and mbb contracts are imut the problem is we cannot make the vaults contracts immutable right now there's too many potential EIP and changes at the core consensus level that will require us to update uh the vaults contracts having said that though we've we've implemented a system which we think is the best um solution um and that is what we call dual governance the process for updating a vault smart contract is this firstly statewise Dow must approve the an upgrade but after that approval each individual Vault admin must also approve um that upgrade for their unique Vault this is really important it means that if you are offering staking as a

service through V3 it means that you have the assurity that um you know your clients are not going to get rug pulled because some third party can up upgrade the smart contract you as the entity offering that service control the smart cont contract upgradeability so let's have a look at some of these examples that you can utilize with this protocol gravitar they are a defi protocol they are a friendly liqu Fork um they allow people to take lsts like reth sth they're also on boarding OS eth um to use this collateral to Mint their stable coin gry gravitar wanted to go one step further and rather than just on boarding third party lsts they also wanted their own liquid staking solution and V3 is

perfect for them it works completely out of the box for exactly what they need so what gravitar are doing is they're going to be launching a public Vault where again they enable pulled staking that it's fully permissionless just like Lio what stake wise is currently today anyone can stake however much ether they want into this uh gravitar branded uh staking pool and all um all deposits are going to be tokenized into their unique liquid staking token Geth they can then onboard Geth as collateral and integrate it into their own protocol um it's also worth mentioning here that g users can still mint OS if if they wanted to um so for example maybe if they wanted to if stakers into gravitar wanted to use a rather than

gravit gravitar they they can still do that via OS eth um but gravitar is a way for for um GE is a way for gravitar to offer and on board their own LS system solution into their own stable coin what's cool about the gravitar solution and it also highlights the flexibility of vaults is that they partnered with nodet so nodet is actually a product a project that's spun out of Rocket pool it is a permissioned group of node operators um and by the last count they've got over 100 node operators the majority of which are actually rocket Bol node operators who can plug and play into any V3 volt to offer node operation services for third parties and so gravitar has partnered with node sets such that gra um no set will be staking the eth on behalf of

gravitar uh on behalf of their staking solution it's a great example of uh a protocol providing you know using V3 in a fully white label manner to create their own LST while it's also having an incredibly Diversified node operator set providing that solution so another example is uh blockscape so blockscape are a commercial node operator um they are a li node operator and just like many other operators on Lio they have their own clients that want to liquid stake the problem for blockscape is that they are it doesn't make sense for them to send their clients to LI or any other staking solution because they lose them as

clients and so what V3 does it is enables not just BLC but any node operator who has their own clients to offer liquid staking directly to those clients and so what blockscape are doing is they are launching u a blockscape vault it is going to be private so this allows blockscape to do whatever kyc whatever client on boarding they want to do into their solution and it also gives this solution some degree of regulatory security you know this is not a completely permissionless pool of capital bless you um but one that you know has regulatory security as all the all the capital that enters it is kyc what's also cool about this solution and again it shows the flexibility of vaults is that they're utilizing DBT

specifically SSV technology uh within this vaults just to be clear here blockscape are not launching their own liquid staking token this Vault will be tokenless um and so they are relying on the liquidity and Integrations provided by stake wise Dow on the OS eth token for their users to liquid stake and again this is a good example of utilizing statewise V3 as a fully white label solution uh where blockscape do have to worry about the the about providing liquidity or Integrations for a liquid staking token they can piggyback off what the work we are doing with OS eth another key uh use uh use case of V3 is um how solo stakers can interact with

this protocol now it kind of goes without saying but you know sell stakers are the gold standard for decentralization on ethereum and currently their options are fairly limited you know you can native stake on your own node you could also become a node operator for some of the other liquid staking protocols um the problem you have there though is that your Capital whilst it is Stak it is still just locked ultimately as insurance uh on those other protocols and you are rewarded by uh token emissions from those uh protocols uh in return now currently there's a decision that entity that users or stakers have to make do I want a liquid stake or do I have do I want a um or solo stake V3 takes away

that decision you as a solo Staker will be able to become a node operator for your own Vault on stake wides V3 and providing you stake on node through that Vault you'll be able to Mint and access OS eth it is a great way to give solo stakers the ability to liquid stake and we're really hoping that this can be a mechanism to help encourage more solo staking and obviously help uh encourage the diversity of eaking on the network also as a solo Staker you will have the ability to offer staking as a service in a trustless non-custodial way via the Vault Marketplace um and this could be as on your own or it could be in partnership with other solo stakers running DBT however you want to structure it you're

able to sell staking as a service through V3 there's also some other funky ways that uh sell stakers can get involved I've heard it numerous times that there's a group of friends who do not have enough eth to form a validated themselves but there's so they all send their e to one guy who's the node expert and he runs the eth for them you know B3 just allows you to do that in a completely trustless way um there's also might be some tax efficient ways for you to stake as well so for example if you create a vault where you have your unique Vault token that Vault token is repricing and so if you stake into your Vault you do not have to worry about the daily uh eth rewards to account as taxable events that single token you just basically just effectively Buy and

Hold That token and so it might be I'm not again not giving any tax advice here but there might be Avenues where depending on your jurisdiction that staking with V3 can actually be more tax efficient for you as solo stakers all righty that list is far from exhausted like there's so many different use cases as I mentioned I I gave a talk before where there's there's many more to to mention but hopefully you get the idea that this protocol is pretty powerful um you know the gravitar solution is a great example it takes it would literally take them five minutes to launch their own LST with a node operator set that is incredibly uh Diversified and it's not it's not just launching your own LST whilst that is helpful for projects what we certainly don't need in this space is are more lsts and I've ranted on stage about this

before so I I promise I won't go into too much detail again but essentially there are millions of dollars spent on LST liquidity in this space and ultimately it's fragmented liquidity because everyone wants their own LST and cre create liquidity for that LST what we are doing at statewise is removing the need for that entities should be focusing and investing money at the core infrastructure level on ethereum how can you um delegate ether in a maximally decentralized and secure way DBT is a great example of this um but we need more focus on that core infrastructure level and so what V3 allows people to do or entities to do is to focus on their own core infrastructure solution um invest in that solution while still

being able to offer liquid staking through the the services we provide with OS I'm conscious I'm quickly running out of time so I I'll pause now for for questions but um yeah this this solution offers a lot more uh utility and hopefully gives people the ability to democratize staking as a service that is our ultimate goal here um so yeah I'll pause now for questions thank you that was really interesting thanks for sharing any questions from the audience uh great talk Jordan um for the

the vaults that are going to be multiple node operators um I guess you know we have Pacific test net to kind of give some some insight here but how do you see them marketing themselves going forward on mainnet do you think some of them will advertise like the me relays they're using or or how do you see them differentiating each other going forward yeah that's exactly right so um ultimately it's a marketing exercise and these operators want to find ways to stand out so so one of the way you mentioned M that is a great way for uh operators who have do some operators do a lot of research in me and they have some funky M relays it'll be very easy for them to offer for custom M relays maybe get higher apy what have you but it's more than just apy it's like using

DBT Solutions you know we're going to be big Advocates of people using DVT within V3 and so having a group of node operators that form a DVT cluster would be a great way to stand out uh and provide you know a higher quality staking service than maybe just a standalone node operator there are also other Niche examples like maybe operators in certain jurisdictions grouping together to offer like regulatory secure staking towards a specific uh institutional group uh or even the opposite actually and having like one node operator from Latin one node operator for Europe Etc highly divers like geographically Diversified set of operators all coming together you know ultimately um you know in the marketplace it's going to be unique um structures that stand out and there are

many ways that operators can ultimately provide that one other thing I wanted to flag here is that you know node operators don't need to be reliant on the marketplace that we provide this is fully white label and so as a node operator you can have your own sales pipeline where you can attract car capital and do however you please and you never actually need to send uh stakers to the stake wise UI you can do it completely embed it completely in your own UI if you want to go down that route um so there's many yeah many many possibilities for operators there thank you very much troan awesome