Quick Overview of pSTAKE: How to Unlock Liquidity from Staked Assets?

Source: Coinlist Blog

Translation: Nianqing, Chain Catcher

CoinList will conduct a pSTAKE token sale on December 16. In November, pSTAKE completed a $10 million strategic financing round led by Three Arrows Capital, Galaxy Digital, Sequoia Capital India, and DeFiance Capital.

pSTAKE is a liquid staking protocol based on Proof of Stake (PoS) that allows holders of staked assets to earn rewards while maintaining the liquidity of their assets. Staked tokens generated from staking PoS assets can be received through pSTAKE, and these staked tokens can enter the Cosmos ecosystem for growth via a custom bridge, while also accessing liquidity and composability on Ethereum.

This article is translated from an interview with the pSTAKE team on the official CoinList blog, providing a quick overview of pSTAKE's liquid staking protocol and its advantages.

1. What is pSTAKE, and what problem does it solve?

Most PoS token holders are optimistic about the project in the long term. It is well known that staking yields more rewards than simply holding tokens. HODLers (long-term holders) see their assets diluted over time as new tokens are minted annually to distribute to stakers, but they also earn rewards for securing the network.

However, this long-term approach comes at the cost of liquidity, leading to insufficient liquidity for staked positions. Stakers provide security to the network by participating in on-chain consensus and governance, earning block rewards in return. However, due to network lock-up, stakers cannot use their staked assets for other purposes.

The creation of pSTAKE is aimed at addressing this challenge. pSTAKE creates liquid staking positions by issuing 1:1 pegged tokens for users' staked assets, which can be used in various DeFi applications to explore yield opportunities in DeFi.

2. Who is the target audience for pSTAKE, and what attracts them? What interactions can users have with pSTAKE?

Current traditional staking mechanisms limit stakers who contribute to protocol security from participating in the broader DeFi ecosystem. pSTAKE aims to increase the opportunities for stakers to earn greater rewards by providing liquidity for staked assets.

As major PoS networks benefit from liquid staking as a solution, pSTAKE's target market is the entire staking industry, with PoS asset stakers on its network being the primary target audience. Additionally, pSTAKE's target customers are DeFi users who wish to earn staking rewards outside of DeFi while contributing to the security of PoS networks.

pSTAKE launched its mainnet in September, currently supporting liquid staking for ATOM and XPRT, and has received a warm response since its launch, as follows:

• Protocol TVL: Over $32 million TVL
• stkTokens-ETH liquidity pool on Sushiswap: Over $27 million
• Daily Active Users (DAU): 300+

pSTAKE supports more PoS assets and will introduce more use cases for stkTokens in the near future, such as lending, borrowing, and staking for synthetic assets.

pSTAKE will provide services that traditional staking protocols do not offer:

• Fixed Income: Deposit and stake native PoS assets, hold staked tokens, and earn staking rewards while maintaining liquidity;
• DeFi Protocols: Utilize tokens in the DeFi ecosystem for multiple use cases such as liquidity mining and lending, to gain additional exposure to DeFi protocols;
• Cross-Chain Compatibility: Access multiple PoS ecosystems through asset issuance options provided by pSTAKE.

3. What are the advantages of pSTAKE's multi-chain liquid staking protocol?

The pSTAKE team is an early adopter of the Cosmos ecosystem and firmly believes that the future of Web3 will be multi-chain, with interoperability being the most important foundation for the future. After more than three years of building a Proof of Stake ecosystem, the team has recognized the challenges of staking and staking liquidity. pSTAKE is dedicated to addressing the challenges of PoS assets while unlocking the liquidity of assets and supporting multi-chain use cases.

With pSTAKE's current solution for liquid staking based on Cosmos assets, pSTAKE enhances the security of the Cosmos ecosystem chains while leveraging Ethereum's composability.

As networks like Cosmos, Solana, Terra, Polkadot, and now Ethereum have developed, the PoS ecosystem has seen explosive growth over the past two years. Ethereum's migration to PoS demonstrates its future potential and value.

As each major PoS chain guides its own DeFi ecosystem, solutions that allow staked assets to flow on-chain will support more innovative use cases, such as the Anchor Protocol on Terra, which accepts collateralized representative assets to enable borrowing UST.

4. What are the inherent use cases of pSTAKE's native token PSTAKE?

PSTAKE is an ERC-20 token that gives holders the opportunity to participate in governance proposals for protocol improvements and to protect the pSTAKE network through staking, thus playing a decisive role in the direction and development of the pSTAKE protocol.

PSTAKE holders can vote on key proposals and parameters that drive protocol growth, such as:

• Minting and staking service fees
• Onboarding validators for delegated staking
• pBridge validator onboarding
• Increasing support for other blockchains
• Providing grants and funding for team building within the pSTAKE ecosystem

5. How does PSTAKE interact between Cosmos and Ethereum?

The custom bridge used by pSTAKE is called pBridge, specifically tailored to meet the needs of pSTAKE. pBridge is a unique bridge that not only mints and burns pegged tokens but also supports cross-chain staking, unstaking, reward generation, and other cross-chain staking transactions on Proof of Stake chains. pBridge is a highly decentralized bridge managed by leading validators. Validators are responsible for signing transactions on the bridge while ensuring high-speed transaction processing.

6. What is the future direction of pSTAKE?

PoS is rapidly evolving, and the following points are quite pioneering for the pSTAKE ecosystem:

• Increasing adoption of PoS as the default consensus mechanism, along with various solutions attempting to address the limitations of PoS;
• The evolution of liquid staking solutions, unlocking greater liquidity for staked assets on PoS networks and linking staking with the DeFi ecosystem;
• Improvements in bridge architecture, facilitating rapid growth of cross-chain DeFi opportunities by realizing new use cases utilizing interoperability;
• Security concerns regarding PoS chains have been ongoing. Therefore, with the development of shared security, cross-chain staking, and Maximum Extractable Value (MEV), security issues are worth further exploration;
• The migration to ETH 2.0, combined with the evolution of Layer 2 chain roles, marks a key step in the roadmap of the Ethereum ecosystem.