As another eventful year comes to a close, we're thrilled to present Reflections - a series that rounds up Chorus One's activities in 2023.
The first edition of Reflections takes a look at some of the major company headlines we released throughout the year. Dive in!
Ensuring the security of our customers' assets and information has always been our foremost priority at Chorus One.
In October, we proudly announced a significant milestone in our ongoing commitment to establishing world-class security measures for our customers: the attainment of the ISO 27001:2022 certification - one of the very few node operators in the industry to do so.
Full details: https://chorus.one/articles/chorus-one-achieves-iso-27001-2022-certification-setting-a-major-security-milestone
Visit Chorus One’s security page: https://security.chorus.one/
We launched Red Horizon, a platform designed to streamline developers’ interaction with the Urbit server.
Learn more: https://chorus.one/articles/announcing-red-horizon
Visit the Red Horizon website: https://redhorizon.com
As an industry leader in MEV research, we shared our approach to MEV this year. In the article, also featured by Flashbots’ in their July newsletter edition, we delve into the MEV extraction process, highlight key players, and offer insights into our MEV strategy.
Check it out here: https://chorus.one/articles/mev-matters-decoding-chorus-ones-winning-mev-strategy
We announced our partnership with Ledger, the global security platform for digital assets and NFTs.
Ledger extended its compatibility with the Cosmos ecosystem in May, and Chorus One is currently supporting this integration by providing our validator services, enabling over a million Ledger Live users to leverage the bolstering Cosmos ecosystem and stake numerous tokens, including Onomy (NOM), Quicksilver (QCK), Persistence (XPRT), Injective (INJ) and more through nodes operated by Chorus One.
Learn more: https://chorus.one/articles/ledger-by-chorus-one-securely-stake-your-tokens-via-the-ledger-live-app
Following our mutually co-hosted breakfast side event at Token2049 Singapore, we were pleased to announce a significant milestone in our collaboration with BitGo, a prominent regulated custody, financial services, and core infrastructure provider.
BitGo partnered with Chorus One to expand staking for a diverse range of networks, including Sui, Sei, Injective, Osmosis, and Agoric. This collaboration underscores our longstanding relationship, spanning over a year, and solidifies our position as a preferred staking provider for institutions seeking security, compliance, and cutting-edge research.
Full details: https://chorus.one/articles/chorus-one-partners-with-bitgo-to-expand-staking-for-leading-networks
We announced our partnership with Fordefi, a leading MPC wallet platform and web3 gateway that enables institutions to seamlessly connect to dApps across networks, while securing their digital assets. This partnership currently facilitates Chorus One’s OPUS customers to stake and unstake multiple tokens using the Fordefi wallet inside the OPUS dashboard.
Learn more: https://chorus.one/articles/fordefi-x-chorus-one-direct-staking-for-opus-customers-via-wallet-integration
We announced that Qredo, a premier self-custody protocol and platform, joined forces with Chorus One to expand staking accessibility for investors. From seamless staking to enhanced security measures, this partnership empowers users with a secure and efficient staking experience.
As part of the partnership, Chorus One's OPUS users can directly stake and unstake multiple tokens through Qredo Wallets. This eliminates the complexities associated with managing multiple wallets and platforms, making staking more accessible to a broader range of investors.
Full details: https://chorus.one/articles/qredo-x-chorus-one-providing-enhanced-staking-accessibility
In the interest of safeguarding investors from potential staking penalties, this year we partnered with Nexus Mutual, the leading decentralized coverage provider, to introduce a range of staking coverage options for our customers.
We were the first node operator to purchase on-chain staking coverage to protect our customers through Nexus Mutual’s innovative tokenised cover.
Full details: https://chorus.one/articles/chorus-one-partners-with-nexus-mutual-to-roll-out-industry-wide-on-chain-staking-coverage-2
We provide a glimpse into the results of our first pilot on the Ethereum mainnet, which combines several modifications that positively impact MEV extraction. This piece was also featured by Flashbots' in their November newsletter!
Read it here: https://chorus.one/articles/a-sneak-peek-at-validator-side-mev-optimization
Our research team published a pioneering research report, fueled by a grant from dYdX, that examines the implications of Maximum Extractable Value (MEV) within the context of dYdX v4 from a validator's perspective.
This comprehensive analysis presents the first-ever exploration of mitigating negative MEV externalities in a fully decentralized, validator-driven order book. Additionally, it delves into the uncharted territory of cross-domain arbitrage involving a fully decentralized in-validator order book and other venues.
This paper, marking a significant milestone in exploring MEV dynamics, identifies factors that influence undesirable MEV extraction, and proposes concrete strategies to level the playing field in derivative trading by counteracting such behavior.
Read the report: https://chorus.one/reports-research/mev-on-the-dydx-v4-chain
Report TL;DR: https://chorus.one/articles/exploring-mev-implications-and-cross-domain-dynamics-on-dydx-v4
In January, we released ‘Eth-staking-smith’, an optimized, open-source Ethereum validator key-gen tool to facilitate key and deposit data generation.
The tool, an industry-first, streamlines the often complex Ethereum validator key management process, especially when dealing with it on a large scale.
Learn more: https://chorus.one/articles/a-deep-dive-into-eth-staking-smith
We published a whitepaper comparing key characteristics of Ethereum and Solana, which explores the block-building marketplace model, akin to the "flashbots-like model," and examines the challenges of adapting it to Solana.
Additionally, recognizing Solana's unique features, we also proposed an alternative to the block-building marketplace: the solana-mev client. This model enables decentralized extraction by validators through a modified Solana validator client, capable of handling MEV opportunities directly in the banking stage of the validator. Complementing the whitepaper, we also shared an open-source prototype implementation of this approach.
Learn More: https://chorus.one/articles/solana-mev-client-an-alternative-way-to-capture-mev-on-solana
OPUS is the simplest staking solution for investors and institutions.
Resources:
A guide to OPUS: https://chorus.one/articles/opus-api-what-is-it-and-why-did-we-build-it
All you need to know about OPUS: https://docsend.com/view/rye2auvy87hcx8vy
Start staking on OPUS: https://opus.chorus.one/portal/login
We’re thrilled to have launched our liquid staking pool on Stakewise v3, enabling individuals to stake any amount of ETH and benefit from Chorus One’s enterprise-grade staking infrastructure and industry-leading MEV yields!
Additionally, staking on Chorus One’s pool enables users to unstake at any time, or utilize their staked ETH capital throughout DeFi.
You can start staking on our vault here.
To learn more, check out the following resources:
In September of this year, we made it possible for OPUS users to stake up to 8000ETH in one, single transaction, eliminating the cumbersome process of signing multiple transitions for substantial deposits.
Learn more: https://chorus.one/articles/stake-8000eth-in-one-go-with-chorus-one
Stake on OPUS: https://opus.chorus.one/portal/login
In tandem with our support for dYdX Chain, we also launched the first ‘Bridge and Stake’ solution for DYDX - enabling users to bridge and stake their tokens from Ethereum to Cosmos in one, single, seamless move.
Full details: https://chorus.one/articles/how-to-bridge-your-dydx-tokens-from-ethereum-to-cosmos
Bridge and Stake your DYDX here: https://opus.chorus.one/portal/dydx
We announced staking support for Gnosis Chain (GNO), Onomy (NOM), Mars (MARS), and Kyve Network (KYVE) in the first quarter of 2023. Learn more and find out how you can stake GNO, MARS, or KYVE with Chorus One:
Gnosis Chain: https://chorus.one/crypto-staking-networks/gnosis
Onomy: https://chorus.one/crypto-staking-networks/onomy
Mars: https://chorus.one/crypto-staking-networks/mars
Kyve: https://chorus.one/crypto-staking-networks/kyve
We announced staking support for Aptos (APT), and Sui (SUI) in the second quarter of 2023. Learn more and find out how you can stake each network with Chorus One:
Aptos: https://chorus.one/crypto-staking-networks/aptos-2
Sui: https://chorus.one/crypto-staking-networks/sui-2
We announced staking support for Archway (ARCH), Sei Network (SEI) in the third quarter of 2023. Learn more and find out how you can stake each network with Chorus One:
Archway: https://chorus.one/crypto-staking-networks/archway
Sei: https://chorus.one/crypto-staking-networks/sei
We announced staking support for dYdX Chain (DYDX), Celestia (TIA), and Chainflip (FLIP) in the fourth quarter of 2023. Learn more and find out how you can stake each network with Chorus One:
dYdX Chain: https://chorus.one/articles/chorus-one-announces-staking-support-for-dydx-v4-as-a-genesis-validator
Celestia: https://chorus.one/articles/how-to-stake-tia-celestia
Next Up: Keep your eyes peeled for Edition #2 of our Reflections series, coming soon!
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
People like to say that those who cannot remember the past are condemned to repeat it. However, sometimes forgetting the past is a deliberate choice: an invitation to build on completely new grounds, a bet that enables a different future.
All bets have consequences. Specifically in crypto, many of t hese consequences are so material t hat t hey become hard to comprehend: hundred-million dollar exploit after exploit, billions vanishing in thin air... In its relatively short history, Ethereum has made many bets when deciding what the optimal protocol looks like. One such gamble was the decision to not enshrine native delegation into their Proof-of-Stake protocol layer.
Before the Merge, the standard PoS implementation was some sort of DPoS (Delegated Proof-of-Stake). The likes of Solana and Cosmos had already cemented some of the ground work, with features like voting and delegation mechanisms becoming the norm. Ethereum departed from this by opting for a purePoS design philosophy.
The thought-process here had to do with simplicity but even above this, the goal was to force individual staking for a more resilient network: resilient to capture and resilient to third-party influence, whether in the form of companies or nation states.
How successful have these ideas been? We could write ad infinitum about the value of decentralization, creating strong social layers and any other such platitudes, but we believe there’s more weight in real arguments. In this analysis we want to expand on the concepts and current state of the liquid staking market and what it actually means for the future of Ethereum. Also, we talk about the role of Lido and other LST protocols such as Stakewise in this market.
If t ere’s some hing that history has shown us is that derivatives can strengthen markets. This is true of traditional commodities where the underlying asset is difficult or impossible to trade, like oil, or even mature financial instruments, like a single stock becoming a complicated index. In fact, the growth in the use of derivatives has led to exponential growth in the total volume of contracts in our economy.
It is common as well that in most markets, the volume of derivatives greatly surpasses the spot, providing significant opportunities across a large design space. It might sound familiar (and we will get to crypto in a moment), but this open-design space has posed major challenges for risk-management practices in the already mature traditional finance, in areas such as regulation and supervision of the mechanisms, and monetary policy.
Liquid tokens are one of the first derivative primitives developed solely for the crypto markets, and have greatly inherited from their predecessors. When designing these products in the context of our industry, one has to account not only for the protocol-specific interactions, but also the terms of regulation (from the internal governance mechanisms and also in the legal sense), fluctuating market dynamics and increasingly sophisticated trading stakeholders.
Let ’s review some of Ethereum’s design choices, and how they fit into t his idea. Ethereum has enforced some pretty intense protocol restrictions on staked assets, famously their 32ETH requirement per validator and lack of native delegation. Game theory has a notoriously difficult reputation in distributed systems design. Mechanisms for incentivizing or disincentivizing any behavior will typically almost always have negative externalities.
Also, on-chain restrictions tend to be quite futile. In our last edition, we discussed some effects that can be observed in assets that resemble “money ”, like the token markets of LSTs, including network effects and power law distributions. But now we want to go deeper and consider, why is Liquid Staking so big in Ethereum and not other chains?
We observe a clear relationship between the existence of a native delegation mechanism and the slower adoption of Liquid Staking protocols. In that sense, other chains have enshrined DPoS, which makes it significantly less likely to result in high-adoption or a similar dynamic, whilst Ethereum has found it self increasingly growing in that direction.
We observe the results of the restrictions imposed at the protocol level. The network *allows* stake to be managed by individual actors, but there is no way to prevent aggregation or pooling. No matter how many incentives you create for the behavior on-chain to be as observable and maximally auditable as possible, the reality is that as it stands, the effect is never auditable.
At the time of writing this analysis, Lido has managed to concentrate 31.76% of the market share for staking in Ethereum under its signature token stETH. This is an out standing figure, not only in absolute terms but also relative to its position in the Liquid Staking market, where it controls an extraordinary ~80%, with close to 167,000 unique depositors on their public smart contracts. It is, by a margin, the largest protocol in crypto by Total Value Locked.
A big issue with TVL is that it is heavily dependent on crypto prices. In the case of Lido, we actually observe that the inflow charts show a constant growing trend from protocol launch to the present day. This is independent from the decreased crypto prices, minimal transaction output on-chain and t e consequent inferior returns on the asset, with an APR that moves in between 3.2 and 3.6% on the average day. This is of course, below the network average for vanilla nodes considering the protocol takes a 10% cut from staking rewards, divided between the DAO and its 38 permissioned Node Operators.
Recently, there’s been heated debate related to the position and surface of Lido inside Ethereum, as it relates to decentralization concerns and a specific number that constantly pops up. What is this 33.3% we keep hearing about ?
There are two important thresholds related to PoS, the first one being t his 33.3 percent number; which in practical terms means that if an attacker could take control of that surface of the network they would be able to prevent it from finalizing... at least during a period of time. This is a progressive issue with more questions than answers: what if a protocol controls 51% of all stake? How about 100%?
Before diving into some arguments, it is interesting to contextualize liquid ETH derivatives as they compare to native ETH. In the derivatives market, the instrument allows the unbundling of various risks affecting the value of an underlying asset. LSTs such as stETH combine pooling and some pseudo-delegation, and although this delegation is probably the main catalyst of high adoption, it is the pooling effect that has a huge effect on decentralization. As slashing risk is socialized, it turns operator selection into a highly opinionated activity.
Another common use of derivatives is leveraged position-taking, in a way the opposite of the previous one that is more focused on hedging risk. This makes an interesting case for the growth of stETH, as in a way its liquidity and yielding capabilities are augmenting native ETH’s utility. There is no reason you cannot, for example, take leveraged positions in a liquid token and enjoy both sources of revenue. At least, this is true of the likes of stETH which have found almost complete DeFi integration. As long as they are two distinct assets, one could see more value accrual going to derivatives, which is consistent with traditional markets.
This growth spurt is an interesting subject of study by itself, but we think it would be also possible to identify growth catalysts, and also apply them across the industry, to discover where some other undervalued protocols might exist if any. For this, you would want to identify when the protocol had growth spurts, find out which events led to that and search for these catalysts in other protocols.
One such example comes when protocols become liquid enough to be accessible to bigger players.
What would happen if we addressed so-called centralization vectors, and revisited the in-protocol delegation. Or more realistically, if we had the chance to reduce the pooling effect and allowed the market to decide the distributions of stake, for example, by having one LST per node operator.
Alternatives like Stakewise have been building in that design space to create a completely new staking experience, one that takes into account the past.
In particular, Stakewise V3 has a modular designt hat mimics network modularity, against more monolithic LST protocols. For instance, it allows stakers the freedom to selectt heir own validator, rather than enforcing socialized pooling. The protocol also helps mitigate some slashing risk, as losses can be easily confined to a single “vault”. Each staker receives a proportional amount of Vault Liquid Tokens (VLT) in return for depositing in a specific vault, which they can then mint into osETH, the traded liquid staking derivative.
Although not without its complexities, it offers an alternative to the opinionated nature of permissioned protocols like Lido, in an industry where only a better product can go face to face with the incumbent.
If you design a system where the people with the most stake enforce the rules and there is an incentive for that stake to consolidate, there’s something to be said about those rules. However, can we really make the claim that t here’s some inherent flaw in the design?
One of the points that get brought up is in the selection of the protocol participants. However, a more decentralized mechanism for choosing node operators can actually have the unintended result of greater centralization of stake. We need only to look at simple DPoS, which counts into its severe shortcomings a generally poor delegate selection with very top heavy stake delegation and capital inefficiency.
Another issue has to do with enforcing limits on Liquid Staking protocols, or asking them to self limit in the name of some reported values. This paternalistic attitude punishes successful products in the crypto ecosystem, while simultaneously asserting the largest group of stake in a PoS system is not representative of the system. Users have shown with their actions that even with LST or even DPoS downsides (all kinds of risk, superlinear penalty scaling) this is still prefered to the alternative of taking on technical complexity.
An underlying problem exists in the beliefs that control a lot of Ethereum’s design decisions, meaning that all value should accrue to just ETH and no other token can be generating value on the base layer. This taxation is something that we should be wary of, as it is very pervasive in the technocracies and other systems we stand separate to. Applications on Ethereum have to be allowed to also generate revenue.
Ultimately, the debate about Lido controlling high levels of stake does seem to be an optics issue, and not an immediate threat to Ethereum. Moreover, it is the symptom of a thriving economy, which we have observed when compared to the traditional derivatives market.
Ethereum’s co-founder, Vitalik Buterin, recently wrote an article out lining some changes that could be applied to protocol and staking pools to improve decentralization. There he outlines the ways in which the delegator role can be made more meaningful, especially in regards to pool selection. This would allow immediate effects in the voting tools within pools, more competition between pools and also some level of enshrined delegation, whilst maintaining the philosophy of high-level minimum viable enshrinement in the network and the value of the decentralized blockspace that is Ethereum’s prime product. At least, this looks like a way forward. Let ’s see if it succeeds in creating an alternative, or if we will continue to replicate the same faulty systems of our recent financial history.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
We’re proud to launch our liquid staking pool on Stakewise v3, enabling individuals to stake any amount of ETH and benefit from Chorus One’s enterprise-grade staking infrastructure and industry-leading MEV yields! Additionally, staking on Chorus One’s pool enables users to un-stake at any time, or utilize their staked ETH capital throughout DeFi. You can start staking with on Chorus One’s pool here .
We're also introducing exclusive Private Vaults tailored for our institutional clients and investors who desire a dedicated liquid staking solution. These personalized Vaults come with individual agreements, ensuring user assets remain distinct and aren't mixed with other Vaults.
Additionally, in the upcoming months, we plan to deepen our collaboration by seamlessly integrating our public Vault into our Staking Dashboard. This integration will make it incredibly easy for OPUS customers to access liquid staking and mint osETH, enabling them to participate in the DeFi space effortlessly. Stay tuned for more updates!
Below, we dive into some of the key details about Stakewise and how you can start staking ETH on Chorus One’s Vaults.
Stakewise v3 represents the latest version of the Stakewise protocol, announced by the Stakewise DAO in 2022.
V3 was conceived to tackle the issue of stake centralization, a significant challenge impacting the security and well-being of Ethereum. Setting up Ethereum validators has traditionally been complex for node operators, with factors like the 32ETH minimum requirement, technical and hardware demands, and the risk of financial penalties for validator mistakes. Consequently, there has been a decline in solo stakers engaging in individual ETH staking. Many have opted to outsource validator operations to commercial node operators, who possess the expertise, hardware, and security measures required to establish validator nodes for individuals and organizations with 32 ETH.
Stakewise v3 tackles this challenge by elevating its existing liquid staking solution, introducing mini staking pools referred to as "Vaults." These Vaults empower individuals, node operators, or organizations to effortlessly launch their own nodes, mint staked ETH (osETH) tokens against those nodes, accept delegations, or delegate any amount of ETH across multiple nodes to mitigate network concentration.
Importantly, each Vault or mini Pool is entirely agnostic to the configurations set up by its operator. This means that the operator can fully customize its vault according to its own design, allowing users to select a vault based on features that best suit the depositor. Whatever client solutions, KYC features, MEV relays the entity wishes to run are under their control, resulting in a diverse marketplace of staking solutions for users to explore and choose from.
Moreover, users can establish private pools, allowing deposits only from addresses whitelisted by the Vault Operator. This ring-fences the Vault, ensuring that staked assets are not co-mingled with funds from other Vaults.
We've covered everything you need to know about how Stakewise v3 works and its use cases for solo stakers, institutions, DeFi users, and commercial node operators in this guide. Check it out!
For investors
Previously, staking ETH was restricted to investors and institutions with a minimum of 32 ETH. They could delegate validator maintenance responsibilities to an experienced node operator like Chorus One, known for its enterprise-grade staking infrastructure.
By staking on Chorus One’s Pool on Stakewise v3, anyone with any amount of ETH can now access the same infrastructure and benefits as our institutional customers. This opens doors for a significantly larger number of individuals to safely and seamlessly stake and unstake their ETH without any minimum requirements.
Chorus One has garnered widespread recognition for our dedication to research and the implementation of strategies aimed at enhancing our MEV performance. We consistently optimize our infrastructure to maximize MEV rewards.
The following graph illustrates our performance over a 60-day period. Over this time period, Chorus One nodes have captured close to 14% more MEV rewards per validator (ETH) when compared to the weighted industry average, observed on Lido.
*Please note that this is a snapshot, and that MEV rewards fluctuate as a function of variance and market conditions. Please visit Rated Network to view the latest figures.
To learn more about the work we’ve done in in spearheading MEV research in the industry, please visit our dedicated MEV page.
We are one of the very few node operators to hold the ISO 27001:2022 certification, representing the industry standard for implementing top-tier security practices. Safeguarding customer assets and data is our utmost priority, ensuring users that their funds are in experienced hands.
Our in-house team of researchers and experts consistently scrutinizes the crypto ecosystem and the Ethereum network with a keen eye. We regularly publish reports and analyses addressing current industry issues, providing fresh insights based on our expertise. We are dedicated to ongoing improvement, constantly exploring opportunities to enhance our performance and deepen our understanding of the network in ambition to improve the overall experience and rewards for our customers.
For institutions
Our institutional clients have the option to establish their own secure vault, operated exclusively by Chorus One. This choice allows them to implement additional measures to safeguard their funds, ensuring that staked assets remain isolated from other vaults. Opting for Chorus One as the operator of their private vaults provides institutions with the assurance that their assets are in capable hands, coupled with the added benefits of our infrastructure, including the highest MEV yields, enhanced security, and streamlined operational processes.
In the upcoming months, OPUS customers can seamlessly stake on our liquid staking pool and earn staked ETH (osETH) directly from our Staking Dashboard. This empowers users to effortlessly access the liquid staking ecosystem with just a few clicks on our platform, allowing you to conveniently track your rewards in one place! Stay tuned for more details – coming soon! 😉
To stake ETH on Chorus One’s Vault, visit here.
If you're interested in launching a private Vault operated by Chorus One, please reach out to us at staking@chorus.one.
To delve deeper into Stakewise v3, check out our explainer guide here. For a step-by-step guide on how you can start staking on Chorus One’s Vault MEV-Max, please refer to this article.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
Stake centralisation has been the talk of Ethereum’s town in 2023. Recognizing its detrimental effect and the risk it poses for Ethereum’s security and vitality, the Stakewise DAO announced its V3 in September 2022 - a permissionless and decentralized liquid staking protocol with a novel design and a liquid staked ETH token called osETH. The primary goals of v3 were stated to reduce the degree of stake centralization on Ethereum by i) making solo staking more appealing, ii) putting the choice of node operator(s) into the user’s hands, and iii) offering a new, less risky staked ETH token standard as an alternative to prevailing models.
Chorus One is proud to partner with Stakewise to support these goals by launching our liquid staking pool on Stakewise v3, enabling individuals to stake any amount of ETH and benefit from Chorus One’s enterprise-grade staking infrastructure and highest MEV yields. Additionally, staking on Chorus One’s pool enables users to un-stake at any time, or utilize their staked ETH capital throughout DeFi.
As 2023 approaches its final weeks, over a year since Stakewise announced their V3, we take a closer look at the protocol's current state - diving into its architecture, distinctions from existing liquid staking protocols, and its potential to broaden the landscape for ETH staking amongst solo stakers and institutions.
Jordan Sutcliffe, Head of Business Development at Stakewise, aptly coined Stakewise V3 as the ‘Swiss army knife’ for ETH staking, sparking a flurry of interest from ETH enthusiasts. During the unveiling, the team revealed that the new version opens the doors for anyone capable of running Ethereum validators to engage in liquid staking and receive delegations in a permissionless manner - an approach that aims to welcome a broader range of participants, fostering control and driving decentralization within the ETH staking ecosystem.
StakeWise V3 achieves this by introducing the concept of layered staking, allowing users i) to delegate ETH to a vault of the node operator(s) of their liking (1st layer), and ii) giving them the option to mint osETH to represent their stake (2nd layer). This design enables anyone to join as a solo staker who can mint osETH tokens against their node, or delegate ETH across multiple nodes to counteract network concentration. Notably, V3 introduces a slashing-resistant staked ETH token, osETH, ensuring scalability without introducing systemic risk to the broader ecosystem.
Ethereum was conceived with the mission of building a permissionless, censorship-resistant and financially robust network for value exchange.
The transition to Proof of Stake (PoS) through the Merge aimed to democratize participation, shedding the hardware and compute costs of Proof of Work (PoW). A year on from the Merge, however, centralization remains one of Ethereum’s biggest challenges - ironically, drifting towards the paradox of its own mission statement.
Currently, staking on Ethereum mandates validators to lock up 32 ETH with the network. While this investment yields interest, any misstep or dishonest conduct by a validator can lead to the revocation of funds. Setting up a validator node to stake on the network can also be a complicated task, meaning financial penalties can result if things are set up improperly.
To address this, liquid staking protocols emerged as intermediaries, enabling solo stakers and institutions to pool their ETH, collectively forming the 32 ETH required for a node. This innovation democratized ETH staking, allowing nearly anyone to participate. Intermediaries assumed the operational responsibilities, handling the pooling, staking, and technical requirements, while taking a share of the rewards for their efforts.
So, why Stakewise V3?
The drawback of the pre-existing version of Stakewise and its counterparts is simple but crucial. The absence of technical or capital requirements, the ability to temporarily exit from staking, and the increased efficiency of staked capital presented by liquid staking protocols resonate with depositors to an extent that it leads to a decrease in solo stakers (for example, individuals setting up ETH validators at home). Over time, this decline can significantly impact Ethereum’s security and decentralization.
To address this, the Stakewise DAO introduced Stakewise V3, its latest version that allows anyone—from solo stakers to established node operators to financial institutions—to participate. As a solo staker, one can seamlessly launch their own nodes, mint staked ETH (osETH) tokens against their nodes, or delegate any amount of ETH across multiple nodes to counteract network concentration.
Layer 1: Vaults
At the heart of Stakewise V3 are ‘Vaults’ - a network of permissionless, non-custodial staking mini pools that anyone can launch on the Stakewise platform and receive ETH delegations on their nodes. It offers users the freedom to stake with whichever vault they want, choosing between vaults run by solo stakers, node operator companies, and groups of solo/commercial operators.
For every 32 ETH of deposits accumulated in a Vault, the Vault operator(s) registers an Ethereum validator in the Beacon Chain and starts staking. The staking rewards belong to the depositors, net of the staking fee charged by the Vault.
Importantly, each of these Vaults is completely unique to the configurations set up by its operator, meaning that the operator can fully customize its vault as per its own design, allowing users to pick a vault based on the features that best suit the depositor. Essentially, Vaults are completely agnostic to the staking solutions that an operator wants to run - whatever client solutions, KYC features, MEV relays or DVT middleware that the entity wants to run are under their control. This leads to a very diverse marketplace of staking solutions that users can shop around and choose from.
Moreover, Vault Operators can set their Vault to a private setting, allowing deposits only from addresses whitelisted by the Vault Operator. This enables use cases like solo stakers depositing ETH into their own Vault and not accepting deposits from others. For instance, compliance-sensitive organizations can create a Vault to enable staking for only a limited number of KYC'd participants.
Layer 2: The osETH Token
The osETH Token is a new type of overcollateralised ETH token introduced by V3, which is a liquid ERC-20 representation of staked assets that uses Vault Token(s) as collateral. It can be minted by anyone who has staked ETH into a Vault(s), or can be bought/sold on decentralized exchanges.
Importantly, osETH represents a new type of liquid-staked ETH token that has its value pegged to staked ETH 1:1, but that does not directly pass on the slashing losses to holders, ensuring that all the staking rewards and penalties remain isolated to the individual Vault. To ensure this, V3 requires >1 ETH for every osETH that stakers in Vault want to mint. In the scenario where slashing does occur, there is always a reserve of ETH that absorbs the slashing losses before osETH holders are affected. This protects osETH holders from losing their principal, making osETH a safer option for staking.
Note that the stakers who mint osETH are still exposed to the slashing risk of the Vaults in which they staked ETH, and excess collateralization makes sure that the other osETH holders are not affected.
For solo stakers -
StakeWise V3 empowers solo stakers by allowing them to mint osETH tokens against their nodes, providing access to DeFi opportunities while maintaining a non-custodial setup. Solo stakers can set up private vaults, mint osETH, and even earn additional revenue by hosting validators for other stakers. Alternatively, public vaults enable solo stakers to accept delegations, maximize their score, and mint osETH based on received vault tokens.
For DeFi users -
StakeWise V3 caters to users seeking yields by providing osETH tokens, tradable in decentralized exchanges or minted within vaults. osETH integrates slashing protection, and ensures that staked capital are not co-mingled across funds, thereby offering a less-risky, diverse marketplace for users to mint osETH and use it in DeFi.
For institutions and exchanges -
Financial institutions typically prefer direct engagement with trusted staking service providers to ensure due diligence and favorable terms. StakeWise V3 caters to this preference by enabling institutions and exchanges to create private vaults, allowing exclusive collaboration with chosen operators and staking clients. Vault tokens from staking represent staked ETH, offering institutions the flexibility to enable liquidity and utility within their ecosystem. Additionally, for broader access to DeFi markets, institutions can mint or permit customers to mint osETH tokens.
For commercial node operators -
In StakeWise V3, operators, whether independent or collaborating with other entities, can establish vaults to accept delegations, allowing depositors to tokenize their staked ETH into osETH. Operators can choose to keep vaults private or public, showcase strong performance, and enhance their vault Score by taking risk-reducing measures.
As experienced node operators, we have established both our public pool (Chorus One - MEV Max) in StakeWise V3, providing individuals access to liquid staking while benefiting from our network expertise and proven MEV strategies. Our institutional clients also have the option of launching private, ring-fenced pools operated by Chorus One. For more details, refer to the final section of this article.
Chorus One is expanding the possibilities of V3’s Vaults by extending our MEV optimization strategies beyond a select group of customers to encompass ALL ETH stakers. We hold decentralization as a core value, and through our partnership with Stakewise, take immense pride in making our enterprise staking infrastructure to everyone - all without any minimum requirements to stake ETH.
Below, we provide a brief breakdown of the various methods available for staking ETH and minting osETH with Chorus One. For a comprehensive understanding of the benefits associated with staking your ETH on Chorus One's liquid staking pools, we've covered all the details here. Check it out!
Chorus One's public vault invites users to stake any amount of ETH and mint osETH, enjoying the benefits of our enterprise-grade staking infrastructure, proven MEV strategies, world-class security measures, and network expertise. Access Chorus One’s Public Vault here.
We will also have private, tailor-made vaults for clients seeking individual, personalized agreements for their staked capital. With these private pools, user assets stay separate and are not commingled with other Vaults, thus offering the perks of liquid staking with enhanced security and all the other benefits Chorus One has to offer—higher MEV yields, top-notch security, network expertise, and more. To launch Private Vault with Chorus One, please reach out to us at staking@chorus.one.
In addition, we're making liquid staking more accessible to both our existing and new OPUS customers.
Soon, our public pool will be seamlessly integrated into our Staking Dashboard, allowing OPUS users to dive into liquid staking, mint osETH, and leverage it in DeFi or hold it—all with just a few clicks! Stay tuned for more updates coming your way soon!
You can also get a glimpse of how it will work, and more insights into Stakewise v3 from Jordan Sutcliffe’s speech at the staking summit, here.
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 45+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures.
