Ethereum‘s transition to proof-of-stake (PoS) has reshaped blockchain dynamics, emphasizing capital over computing power. While this move has notably reduced the network’s carbon footprint by 99%, a significant challenge persists— the 32 ETH economic requirement for running a dedicated node.
Drawbacks of the 32 ETH Hurdle and Concentration of Power
The hefty 32 ETH requirement, currently valued at $84,724, poses accessibility issues, particularly in regions with lower incomes. Staking funds becoming locked and lacking liquidity has led to the dominance of staking pools. Unfortunately, this concentration of power undermines Ethereum’s core principles of decentralization.
Addressing Challenges with Liquid Staking Protocols
Breakdown of top depositors on Ethereum | Source: Etherscan
In response to these challenges, community-driven liquid staking protocols are emerging, providing innovative solutions to maintain liquidity and flexibility while enjoying the benefits of staking. We explore three promising platforms: ether.fi, Diva, and Tenderize.
Ether.fi: Unlocking Liquid Staking
ether.fi business model | Source: ether.fi
Ether.fi pioneers a non-custodial protocol allowing users to stake ETH while retaining control of their private keys. Prioritizing security, the platform employs renowned auditors for safety measures. Notably, Ether.fi tackles liquidity issues through its eETH liquidity pool, providing users the flexibility to trade or withdraw staked assets.
Fastest growing Ethereum staking protocols sorted by % growth over the last week, month, and 6 months. Good company 🫡
h/t @hildobby_ for the amazing dashboard pic.twitter.com/iI7LU5V2YX
— ether.fi (@ether_fi) January 11, 2024
Diva: Redefining Liquid Staking for 2024
Diva, set to launch in 2024, introduces a distributed validator technology (DVT) for enhanced security and reduced centralization risks. Diva’s unique approach, including an operator union model, makes staking accessible with as little as 1 ETH, fostering better rewards and flexibility. Community engagement is a cornerstone, with Diva involving users in governance decisions.
14/ Then he concludes by speaking of the other exciting initiatives for solo stakers and custodians: pic.twitter.com/Gb3VW9D5dc
— diva (@divastaking) December 21, 2023
Tenderize: Empowering Validators and Liquid Assets
Tendirize ecosystem | Source: Tenderize website
Tenderize stands out by empowering any validator on the network, potentially unlocking $30 billion in neglected crypto for liquid staking. The self-custodial nature of Tenderize eliminates intermediaries, allowing users to exit staking swiftly through a decentralized exchange. The platform’s emphasis on community involvement and two conversion methods enhances stability and liquidity.
💡 When staking with Tenderize v2, the protocol mints a validator-specific LST
These LSTs are used by node operators offer liquid staking on a specific validator or let’s retail stakers create custom indexes comprised of any validator they wishhttps://t.co/rmWN6FRtWO
— Tenderize (🥩,🔨) (@tenderize_me) January 12, 2024
Ethereum Shanghai Upgrade’s Impact
The Ethereum Shanghai upgrade has played a pivotal role in accelerating the growth of liquid staking, especially for Diva and Tenderize. This upgrade, completing the circle for Diva’s liquid staking tokens (LSTs), reduces the cost of providing liquidity in DeFi, potentially giving these protocols a competitive edge.
The Future Landscape of Staking
Projects supporting ETH staking below the 32 ETH threshold mark a significant development in the cryptocurrency space. These liquid staking protocols not only enable broader participation but also offer methods for users to liquidate staked assets with smaller investments. As Ethereum evolves, these protocols contribute to a more inclusive and flexible staking ecosystem.
The rise of liquid staking protocols signifies a transformative era for Ethereum’s staking landscape, addressing accessibility and concentration of power concerns while embracing the principles of decentralization and community involvement.
