This is the follow-up article for the “The Future of Liquid Staking” panel. This presentation is part of GeckoCon 2022.
You can read Part 1 of our overview of the panel discussion here. The liquid staking (LS) panel featured the following individuals:
- Cole Kennelly (Founder and CEO of Volmex Labs) moderated the panel.
- Filipe Gonçalves (Chief of DeFi at Ankr).
- Amitej Gajjala (CEO and Co-Founder of Stader Labs).
What Are Your Thoughts on One or More Big Staking Protocols Like Lido, or Should It Be More Decentralized?
Because a bug in the code can be catastrophic to the entire chain.
Amitej
He argues that we are in a free market, and this should play out on its own. Restrictions and regulations go against free market principles. He would like to see more competition on blockchains.
Filipe
Eventually, whales will be able to create their own LS tokens. This is part of later adoption, when institutions enter. Just give them the keys to the smart contracts.
Do You Have Any Milestones You Look Forward to Within the Next Five Years?
Both Filipe and Amitej see an increase in institutional adoption. Amitej expects the LS market to grow to 20-30%. Currently, that’s at 5-7%.
Filipe expects the market level to rise once you can unstake Ethereum. LS has less liquidity risk. He also expects the total staking market to increase in size. There will be new and innovative products, like stablecoins backed by LS.
Do You Expect Differences in Staking Mechanics? How Will This Impact LS Ecosystems?
It requires alternative solutions for each chain. Filipe and Amitej gave various samples. For example:
- Ethereum doesn’t have delegated staking.
- Fantom has staking locks and penalties. LS providers need to find the balance in the right staking period. Staking too long makes their LS tokens illiquid because they can’t redeem them.
- BNB is different because their staking rewards come from gas fees. With other chains, it’s mostly incentivized.
- Solana has a Proof-of-History instead of PoS.
It is important that staking happens with native tokens. They allow for LS token implementation. As a result, different providers have different solutions. There’s also a tendency that new chains want liquid staking. This even though they don’t have much DeFi exposure yet. They approach providers to ask for advice, guidance, and ideas.
Closing Remarks
Cole thinks that LS is ready for some huge growth. Amitej also has an optimistic long-term view. He thinks of the benefit and convenience it brings to users across all segments.
Filipe thinks LS is interesting on the macro level. However, for the providers, there’s a low margin level. It’s challenging to find value for governance tokens of LS pure play. Even more so if there are more and more competitors.
In a winner-takes-all scenario, and Lido takes it all, current providers are valuable. They influence what node operator they delegate to, because of their large share. On the other hand, with many smaller players, this changes. The influence of getting the governance benefit will be less valuable. So, concentration in LS is good for LS governance tokens. With more smaller players, it’s challenging to find value. As a result, having many smaller players is not so good for the value of these tokens.
What will happen is more growth and value in TVL. However, this will go to the chains and not to the providers. That’s why he has a mixed outlook. It depends on from what perspective you look at it.
Conclusion
This presentation looks at the future of liquid staking. The panelists expect liquid staking to grow over the coming years. It offers benefits and convenience to users. They also expect institutions to enter this playing field in the long term.
They discussed potential obstacles and looked into large funds using LS. It was also interesting to see how providers need to adjust their strategies per protocol. In general, the panel and the moderator are excited about liquid staking and its future.
We hope you enjoyed this second part of this presentation. Here’s a link to part 1.
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