What Is StakeWise? What's New in v3? - Rating & Analysis
What is StakeWise?
StakeWise is a liquid staking protocol that currently supports Ethereum Network and Gnosis Chain. The protocol runs by the StakeWise DAO. The primary service of StakeWise is $ETH liquid staking. (Related Reading: What is Frax Ether (frxETH) - Rating & Analysis)
Users can stake their $ETH via the StakeWise Pool, and receive a liquid staking derivative, sETH2, as a staking certification. As time passes, the staking reward will accumulate and be distributed to stakers in rETH2. Both sETH2 and rETH2 tokens can be used to earn additional revenue in external DeFi protocols, like Uniswap V3. Like other liquid staking platforms, StakeWise charges a certain percentage of staking rewards as a service fee. The fee structure is similar to Lido Finance, where the platform charges 10% of the staking reward (rETH2) as a fee. Among these, 5% is allocated to the node operator; the remaining 5% is allocated to the StakeWise DAO.
What Is TokenInsight's Rating for StakeWise?
TokenInsight has rated StakeWise's current performance with a B and a positive outlook.
The breakdown of the rating results is scored as follows.
- Underlying Technology & Security 68.95%
- Roadmap & Progress 57.67%
- Token Economics 67%
- Token Performance 41.07%
- Ecosystem Development 29.85%
- Team, Partners & Investors 48%
Underlying Technology & Security (68.95%)
StakeWise has made its code base publicly available on GitHub. The code includes its smart contracts, Oracles for staking reward distribution, and other related technical documentation.
As of January 31, 2023, StakeWise has already finished six code audits, the most recent one in September 2022. These audits involve codes related to sETH2, rETH2, StakeWise Pool, and others. According to the audit results, none of the codes was found to have any Critical or High-severity issues. Most of the issues found in these audits were Medium, Low, or Informational-severity issues, and most of them have been addressed.
In addition, StakeWise partnered with Immunefi and launched its Bug Bounty Program on May 31, 2022, with a maximum award of $200,000.
As of January 2023, StakeWise has not experienced any security-related crisis.
Roadmap & Progress (57.67%)
StakeWise started in 2020. In the same year of May, StakeWise joined the Topaz Testnet and launched its initial test version. Then, it successfully migrate to the Ethereum Testnet Medalla on August 12. The v2 version of StakeWise was launched on November 5, 2020, and joined the Pyrmont Tesnet for final testing in December. StakeWise also closed a $2 million private funding round led by Greenfield One prior to its official public launch. On March 8, 2021, StakeWise officially launched on the Ethereum mainnet.
As of January 2023, StakeWise has not publicly disclosed any project-related development roadmap. However, its official media accounts, such as Twitter and Medium, are continually updating the project's operational status and short-term development plans. On September 29, 2022, StakeWise announced the development plan for StakeWise v3 in a Medium article.
According to StakeWise, the underlying purpose of StakeWise v3 is to reduce the degree of centralization in $ETH staking and decentralize the Ethereum network. Compared with StakeWise's current version, the v3 version has two main innovations.
- The Vault Network
- The Over-collateralized Liquid Staking Derivative osETH
Most liquid staking protocols will pick the node operator for the user, and the user only needs to deposit $ETH to receive staking rewards. StakeWise v3 is innovative in that it will allow node operators (can be any solo staker or institution) to create their own Vault for users to deposit $ETH. StakeWise will score all Vaults using its Vault Scoring Model. The score depends on the node operator's validation technology, collateral situation, operational performance, etc. Users can independently choose the Vault to stake and earn staking rewards, based on the Vault score. Unlike other liquid staking protocols, StakeWise v3 puts the choice in the users' own hands, rather than concentrating on a few large node operators chosen by the project itself.
In addition to the Vault network, StakeWise v3 also transforms the previous dual-token model into a single-token model. In v3, the sETH2 and rETH2 tokens will be replaced by the Vault token ($VLT). $VLT exists as a single $ETH staking certification and will reflect the value of both the deposit and the staking reward. However, $VLT itself can not release liquidity. $VLT holders need to stake $VLT to mint a liquid staking derivative osETH to obtain liquidity. It is worth noting that, unlike general liquid staking derivatives, StakeWise designs osETH as an over-collateralized liquid staking derivative in order to reduce the potential slashing loss within Vault. For instance, staking $100 ETH worth of $VLT from a vault will allow the user to mint $95 ETH worth of osETH, with the remaining $5 ETH worth of $VLT serving as loss insurance. Moreover, according to StakeWise, in addition to staking $VLT to obtain osETH, users can also trade osETH directly on the secondary market.
Token Economics (67%)
Native Governance Token
$SWISE is the native governance token issued by StakeWise. It has a relatively singular function, which currently can only be used for governance. The total supply of $SWISE is 1 billion. According to StakeWise, 51% of the $SWISE supply will be allocated to the community and the rest will be distributed to the founding team and investors. The initial emission date of $SWISE is April 1, 2021, and will be fully released within 4 years. The specific allocation and vesting schedule is as follows:
Liquid Staking Derivative Token
Unlike liquid staking protocols which use a single-token model, such as Rocket Pool and Lido Finance, StakeWise currently uses a dual-token model with separated deposit and reward. Therefore, in addition to the native governance token mentioned above, StakeWise's utility tokens also contain two others: the liquid staking derivative token sETH2 and the staking reward token rETH2.
sETH2 served as a $ETH staking certification, will be sent to $ETH stakers within the StakeWise Pool in a 1:1 ratio (i.e., 1 $ETH staked receives 1 sETH2); the reward generated by the staking will be distributed to stakers in the form of rETH2 later (rETH is also pegged 1:1 to $ETH). As time passes, rETH2 (the reward) will accumulate, while sETH2 (the deposit) will remain the same. According to StakeWise, this dual-token model, in addition to helping users more flexibly manage their earnings, also help users to separate their assets into different categories for risk segregation. The separated assets would help users to avoid impermanent losses when providing liquidity. Furthermore, in addition to the liquidity use case in external DeFi protocol and StakeWise, stakers can also convert rETH2 into sETH2 for more compound staking rewards.
Token Performance (41.07%)
Currently, the token performances of all three StakeWise tokens, $SWISE, sETH2, and rETH2, are relatively poor. As of January 31, 2023, the 24h spot trading volume of $SWISE was only $0.54 million. The 24h trading volume of sETH2 is less than $50,000, which is only 0.05% of stETH's trading volume. As of January 31, $SWISE is available for spot trading on Uniswap V3, 1inch Liquidity Protocol, and Bitforex exchange.
The price of $SWISE has fluctuated significantly since it launched. Its initial launch price was around $0.1996 and reached an ATH price of around $0.2667 on November 24, 2021. Currently, the price of $SWISE is stable at around $0.1509.
Ecosystem Development (29.85%)
StakeWise has been operated for about the same amount of time as Lido Fiance. The time difference between the two projects' mainnet launch is only about 4 months (December 2020 for Lido). However, the amount of staked $ETH in these two projects is very different. As of January 31, 2023, Lido Fiance has over $4.8 million staked $ETH, accounting for 29.27% of the overall market share and 87.75% of the liquid staking protocol market share, ranking 1st. The amount of staked $ETH in StakeWise is only 72,000, which is only 1.5% of Lido's and accounts for 1.33% of the liquid staking protocol market share, ranking 4th. Even Frax Finance, the protocol only started at the end of last year, has overtaken Stakewise, and reached a total staked $ETH amount of over 78,000.
In terms of DeFi use cases, the DeFi protocols that support StakeWise are still relatively few. Aside from StakeWise's own liquidity mining plan, the DeFi protocols that currently support sETH2 and rETH2 include Uniswap V3 and 1inch Liquidity Protocol.
The community of StakeWise is also relatively small. While StakeWise currently operates its accounts on Twitter, Telegram, Discord, and Medium, its best-run Twitter account has only 8,361 followers and is relatively inactive.
Obviously, StakeWise's liquidity staking dual-token mechanism, although unique, has not attracted users for it. Since its mainnet launch, its market share has not broken through significantly, and it has been overtaken by protocols such as Rocket Pool and Frax Finance one after another. The use cases of its liquid staking derivative in DeFi protocols are also slightly insufficient. The overall liquidity of tokens is relatively low.
Therefore, the upcoming v3 version of StakeWise could be a crucial turning point for the project. Will the Valut network and osETH in StakeWise v3, bring a bright future to the project? Will v3 attract more users to stake $ETH? It is not yet known. But, it surely will be StakeWise's major focus in a short term. Furthermore, like Lido Finance, adding more DeFi protocol usage scenarios for its liquid staking token, providing more options for stakers, and releasing liquidity will also be the next step that StakeWise needs to consider.
Based on the above information, TokenInsight has rated StakeWise's current performance with a B rating and a positive outlook.
Liquid Staking Token