Stader - One-stop Solution for PoS Staking
Problems in the current PoS Staking
Staking is crucial to PoS blockchain. This market has great potential, yet there are some significant problems now. The participants of PoS staking can be divided into three categories: PoS network, Delegator, and Validator.
For PoS network, the biggest challenge today is the over-centralized voting power among top validators.
One popular metric is Nakamoto Coefficient, which represents the number of validators needed to collude together to successfully slow down or block any respective blockchain from functioning properly.
While some chains have an extremely low Nakamoto coefficient, it is important to note that blockchain project teams are often dedicated to ensuring they are one of the top validators of their network, thus most voting power may concentrate on the internal validators. Thus, a very low number doesn't mean the network can be easily controlled by a few external bad validators, it just means the network is not decentralized and can be controlled by a few entities.
For retail delegator, it is quite time-consuming and requires specific knowledge to choose a validator to delegate.
The above chart shows the top validators for the Cosmos Hub network. Just look at the top two, Stake.fish and Binance Staking. For a new user, it is very likely just to choose the top validators and assume they are good. While Stake.fish is a good choice, I personally have quite a bad experience using Binance. Binance staking has repeatedly missed validating blocks and was even jailed sometimes! (Jail is triggered by a validator's bad actions and your staked asset may get slashed)
Moreover, as you can see from the Governance Vote column, Stake.fish is actively participating in the network's governance while some other validators never vote using the delegated votes.
Choosing a good validator needs an evaluation metric, the specific knowledge required to evaluate a validator for delegation definitely hinders the expansion of the blockchain network to retail delegators.
For validators, it is difficult for small ones to attract delegation. As the majority of delegation is concentrated in top validators, small validators struggle to expand their business. Having a large number of small validators is beneficial for the decentralization of the network.
How Stader solve these problems?
Stader provides a simple but powerful solution to the problems discussed above. The protocol selects and divides validators into different pools with different characteristics, and allows users to stake their tokens into a group of validators in a single transaction. The protocol will monitor validators' performance according to a metric and rebalance across validators for optimal performance.
Some other extra value-added services include auto-compounding rewards and 1-click claiming of airdrops.
Stader also provides its liquid staking product, currently only available on Terra, with the liquid staking token $LunaX. $LunaX's validator is selected by the team and consists of 11 validators. In the future, the staking pool composition and liquid staking validators will be selected by DAO governance.
Lido and Stader – a comparative analysis
Lido is undoubtedly No. 1 in the liquid staking sector, which has a TVL of over $19 billion. Stader has been growing fast since launched last November and climbed to second place . Its TVL is still smaller than half of that of Lido's.
Stader provides more diversified products compared to Lido which only focuses on liquid staking. Lido's current service is mainly on Ethereum and Terra, while Stader focuses on Terra now. Both are expanding to multiple chains.
Lido charges an all-in 10% fee on liquid staking reward, 5% goes to validators and 5% goes to slashing insurance.
Stader has quite an aggressive pricing structure. The staking pool fee is 3%, which is an extra charge on the staking reward in addition to the validator's commission. For the liquid staking solution, $LunaX, the fee is 10% in addition to the validator commission. The team justified this aggressive pricing due to their value-added service, such as Degen Vault (will be discussed below), which could potentially significantly increase the yield for $LunaX.
In addition to Staking pool and liquid staking, Stader also integrates Degen Vault into its platform, allowing $LunaX (the Stader version of liquid staked $Luna) holders to easily deposit and generate additional yield through DeFi yield farming strategy.
After Stader expands to more chains, Degen Valuts for various liquid-staked PoS tokens from different chains could make Stader a liquid staked token yield farming hub.
Team & Funding
The founders of Stader are Sid Doddipali and Amit Gajjala. They have more than two decades of experience in top start-ups across technology, strategy, and scaling business. Sid has deep expertise in building and managing mining pool optimizers, while Amit has held multiple top management positions with several start-ups.
Stader has two rounds of private funding. The seed round was in Oct 2021 with $4M raised, and the venture round in Jan 2022 raised $12.5M. Investors include many top funds: Pantera, Coinbase Venture, Three Arrows Capital, trueVenture, JumpCapital, etc.
In addition, in January of this year, Stader raised $23.5 million in a public token sale on CoinList.
The protocol token is $SD, with 150 million total supply. Distribution and vesting plan is as below:
Source: Stader Whitepaper
Source: Stader Whitepaper
$SD is a governance token, and the main value capturing is to share some revenue of the protocol. The revenue of the protocol is currently from the fee charged from staking pool and liquid staked token.
For Lido, $LDO doesn't accrue any revenue from the protocol. The 10% fee changed by Lido goes to validators and insurance, and the protocol itself doesn't earn any revenue. Due to the aggressive pricing of Stader, we can expect $SD to have a better value accruing ability.
Stader is the first in the market to provide a one-stop staking solution from Staking pool and liquid staking to Degen Vaults. Stader has innovative product offerings and has gained significant traction, but we need to be aware that it is not difficult for a market leader such as Lido to launch similar services.
Brand value is important for this kind of business. Lido is now more focused on $ETH2 and $Luna. If Stader can quickly capture the market for other alternative L1s and offer Degen farming hub for liquid staked tokens and hence build a strong brand, I think it could evolve into a strong contender to challenge Lido's leading position.