A coalition of Ethereum OGs is tackling the so-called “lockup” issue, whereby the first generation of participants staking crypto on the transitioning Eth 2.0 blockchain must commit their coins to a restrictive multi-year contract.
Announced Wednesday, LiquidStake, which is being launched by crypto trading firm DARMA Capital, will allow ether (ETH) stakers to take out USDC stablecoin loan against their staked assets while earning staking rewards from the new network.
In addition, U.S.-registered investment fund DARMA, founded by former ConsenSys stalwarts Andrew Keys and James Slazas, intends to allocate over $50 million worth of ETH to Ethereum’s new deposit contract.
There are obvious economic incentives for participants to take part in Ethereum’s evolutionary step vis-a-vis staking because they can earn, say, 15% on those assets over the course of however many months it takes the network to complete further upgrades, said DARMA Capital founder Andrew Keys.
“I call it the one-way street problem,” Keys said. “Participants will not be able to ‘unstake’ those assets. So we’ve created LiquidStake, wherein users can earn staking rewards, and have their staked ETH be pledged as collateral to receive a USDC loan. This is very different from BlockFi and Celsius and other lenders, because in those cases you can’t stake the ether and you can’t earn the reward.”
Necessity and invention
The first phase (phase zero) of Ethereum’s migration to a proof-of-stake blockchain involves some 16,384 validators each committing a minimum of 32 ETH in a deposit contract. Those tokens will then be staked to secure and govern a new parallel Ethereum blockchain known as Beacon, a live environment for testing proof-of-stake, which will eventually return the staking rewards to those validators.
Since the deposit contract went live this week, some 52,801 ETH has been locked up, worth $23.8 million. (At least 524,288 ETH split between 16,384 stakers is needed to trigger Eth 2.0’s “genesis event” and