The Liquid Staking Revolution
You can’t have your cake and eat it too, goes an old English proverb intended to outline the concept of trade-offs or opportunity cost. Similarly, the entire field of economics can be defined as the study of how to allocate resources given trade-offs and scarcity. For a while, this framework of tradeoffs was seen as a given for token holders, who had to make a difficult choice between staking tokens to secure the network, and keeping their tokens liquid and transferable for use in lending or other yield-generating DeFi services. Avoiding this tradeoff seemed like an economic impossibility, as one cannot both stake their money (think buying a bond) and still have access to that money as liquid capital. That was all, of course, prior to the liquid staking revolution.
Liquid staking protocols allow users to deposit a token into the protocol which is staked to earn yield and secure the network, and in exchange the user receives a derivative token (for example stETH) that is pegged in value to the original and can be used as equivalent to the liquid token for transfers, use in DeFi protocols, etc.. The liquid staking protocols take a small percentage of the user’s earned staking rewards in exchange for providing them with liquidity, in a true win-win scenario for both the protocol and its users. Lido is known for pioneering the space with their product built for Ethereum, but people quickly saw the incredible potential for such services and began launching liquid staking protocols on other layer-1s. Today, liquid staking is one of the hottest spaces in DeFi with steep competition to become the go-to liquid staking solution on nearly every layer-1.
Why Cosmos Network
Cosmos is a “layer 0” chain that supports an ecosystem of application-specific layer 1 blockchains connected by IBC (Inter-Blockchain Communication). Their vision is to build an internet of blockchains by expanding their ecosystem of independent interconnected chains on Cosmos. The Cosmos ecosystem has grown tremendously in the past couple of years, and is now a $10+ billion TVL ecosystem with more than 30 blockchains and 45% month-over-month transaction volume growth.
Furthermore, Cosmos’ ecosystem is especially suited for liquid staking. The actual network is well suited for DeFi in general as it has very low fees and fast transactions, in addition to scalability and security. Still, the primary market opportunity is that more than 60% of all Cosmos’ ATOM tokens are staked by users to counteract inflation. This puts the Cosmos ecosystem at the 3rd most total value staked only behind Solana and ETH 2.0 and represents an incredible market opportunity for liquid staking. The interoperability between the DApps on Cosmos also provides a large ecosystem for users to deploy their stATOM or other assets.
Capitalizing on this market, enters Stride: a multichain liquid staking protocol for the Cosmos ecosystem which allows users to earn both staking and and DeFi yields and liquid stake their assets on any IBC-compatible blockchain.
Why we’re investing in Stride
While Stride is not the only company competing in the space, we are confident that it will be a winner due to their superior features and design, in addition to their world-class team.
Stride is being built with incredibly simple UX, making it easy for first-time users to use their app and receive stTokens. Also, they are the only liquid staking protocol currently offering redemptions, greatly minimizing risk of a depeg between staked assets and their parent tokens. Stride has been audited by leading firms Certik and Oak Security to ensure the security of their protocol. They currently support staking only for Cosmos Hub (stATOM) but plan to add integration for more than 40 additional tokens such as stDYDX, stOSMO, and stNEAR. They are working with trusted validators and are also in talks with exchanges and money markets about potential integrations.
Stride’s 3 person founding team includes graduates from UC Berkeley and the University of Chicago with deep experience in DeFi, quantitative finance, product management, and engineering. They also have prior experience founding a self-funded Cosmos ecosystem startup and running their own Cosmos validator node.
They plan to launch on mainnet early this month, and are looking to add more engineers in addition to one or two full-time security experts.
We are proud to co-lead Stride’s seed round alongside North Island VC and Distributed Global, with participation from 1Confirmation and others to support Stride in building the premier liquid staking solution for Cosmos.
Learn how to develop on Stride here and find opportunities across the entire Pantera network here.