Our Investment in Ether.Fi, the Leading Liquid Restaking Protocol
White Star Capital Digital Assets Fund - newsletter #164
Announcing our Investment in Ether.Fi
White Star Capital Digital Asset Fund - newsletter #164
By Sep Alavi, General Partner, Marthe Naudts, Associate, Robin De Baets, Associate
Over the past year, a new primitive has taken the Ethereum ecosystem by storm: restaking.
Restaking enables crypto infrastructure such as data availability layers, oracles, and DeFi apps to leverage the value of staked ETH for their economic security in exchange for protocol fees and rewards, giving additional utility to the world’s second-biggest digital asset beyond securing the Ethereum network.
The idea of restaking is similar to traditional staking on Ethereum: node operators pledge their staked ETH to help validate and operate applications called Actively Validated Services (AVS). If they operate by the rules of the AVS, they will be rewarded, if they do not, their pledged stake ETH can be slashed. This is a new paradigm for crypto, and the huge TVL growth of restaking protocol EigenLayer speaks to user enthusiasm.
Restaking protocols help users restake their ETH without the complexity of running nodes - ie. having to choose which AVSs to run nodes for, and potentially running many in parallel with different yields and risk profiles. In contrast to delegated staking protocols, different restaking protocols can implement different strategies with different yields, risks, and liquidity. EigenLayer, an ecosystem of stakers, node operators, and developers building AVSs using this shared security model has over $10bn total value locked (TVL) in its staking contract currently.
However, locked ETH is illiquid, limiting the utility of staking or restaking because stakers cannot quickly enter and exit positions or leverage their stake as collateral in DeFi protocols. Following EigenLayer’s rapid growth, many liquid restaking token protocols have emerged to offer this solution, totalling over $5.4bn in TVL at the time of writing.
But one stood out to us the most - Ether.Fi.
Source: Dune
With over $2.7bn in ETH of TVL at the time of writing this piece, Ether.Fi has the largest adoption rate and TVL growth of any liquid staking token.
This is due to two key features and value propositions that present a fresh approach to staking on Ethereum.
Unlike other protocols, it allows stakers to delegate while keeping control of their keys and encourages the development of additional services on its delegated staking infrastructure.
Typically restaking involves complex server maintenance and locks up ETH, limiting its use. Liquid staking addresses these challenges by enabling ETH delegation to node operators and providing a tokenized representation for use in various protocols. However, existing liquid staking protocols raise concerns about key control, exposing users to risks.
Ideally, a staking solution should allow users to retain custody of their ETH through key control while offering a liquid staking token for use in different apps. Ether.Fi stands out by ensuring stakers maintain control of their keys, offering peace of mind in case of protocol issues or problems with node operators, and allowing users to reclaim their ether when needed, true to the core principles of decentralised finance.
Ether.Fi is run by a team of world-class operators with multiple past successes
Mike, the CEO of Ether.Fi, has already had success in the start-up arena building and exiting TopHat, a market-leading software learning platform used by over 2.5m students in over 750 higher ed institutions in North America and which has raised over $200mn. Even rarer than finding this calibre of operator is finding one who carries the deep crypto-native expertise and distribution that Mike brings, which in large part has driven their early mover advantage. Accompanying Mike is Rok, who previously held enterprise sales leadership roles at TopHat and currently serves as Ether.Fi’s Head of Growth.
We’re so excited to be backing this team as part of their $23m Series A funding round. We look forward to supporting them as they continue to scale and revolutionise the crypto ecosystem. You can follow their progress here.
🔦 White Star & Portfolio Spotlight
XLink has been chosen for Foresight Ventures’ Third Cohort of the Forsight X Accelerator
The accelerator will be distributing $3 million across the 6 project cohort collectively.
Ledn partners with Casa
Casa clients can now borrow against BTC and ETH easily.
Thala is expanding into Movement, a network of Move-based blockchains
The Movement SDK, underlying M2 and compatible with Aptos, allows Thala to deploy. This enables Thala to eventually launch on M2 while retaining all the security, processing speed, and cost-efficiency of the Move Virtual Machine (MoveVM), and at the same time, gaining access to EVM users and capital.
Dfns is thrilled to be a part of moreliquid’s tokenization initiative in partnership with HSBC and Tokeny
The new MMMEUR token, regulated by Luxembourg, mirrors the HSBC Euro Liquidity Fund and provides unique exposure to a curated portfolio of short-term securities. Access to liquidity is efficient, programmatic and hassle-free.
🏦 Enterprises & Institutions
World’s largest pension fund is considering investing in bitcoin
Japan’s government pension fund will explore investments in “illiquidity assets,” including forests, farmland, gold and bitcoin.
Goldman Sachs head of digital assets: The future is on public blockchains
But Goldman’s Mathew McDermott says the bank wants to see public blockchains “mature” before expanding in that arena.
Bitcoin ETF snapshot: Segment’s week net inflows hit record $2.5B
Assets under management in global crypto ETPs broke the $100 billion mark for the first time amid BTC price increases and persistent inflows.
$190B wealth manager greenlights 4 bitcoin ETFs for allocators
Cetera to allow its financial pros to implement BTC products offered by BlackRock, Fidelity, Invesco and Franklin Templeton into client portfolios.
Robinhood’s crypto trade volume rose 10% in February
Last month’s crypto-related trade volumes via the investment app were roughly five times those seen in September 2023.
Coinbase to launch futures trading for dogecoin, litecoin, and bitcoin cash on April 1
The three are derived from bitcoin, which is considered a commodity by the SEC and thus why they may have been chosen.
Following Fidelity's lead, Grayscale looks to add staking for its proposed Ethereum ETF
Grayscale proposed to investors in a "consent solicitation statement" four items, including a creation and redemption process involving cash and the ability to stake Ethereum through the trust.
⚖️ Government & Regulation
The UK is at a turning point in crypto regulation, policymakers say
The comments come as the EU continues to implement its MiCA framework.
Binance says it’s working ‘collaboratively’ with Nigerian authorities
Nigeria and Binance continue to face off, even after Binance pulled support for the naira.
Crypto and lobbying groups file briefs supporting Coinbase's push for SEC to write rules
The U.S. Chamber of Commerce, the Crypto Council for Innovation, among others said the SEC needs to step in and write rules for the crypto industry.
Dubai’s tax-free economic zone DIFC enacts new Digital Assets Law
The legislation aims to ensure the DIFC keeps pace with technological developments and to provide legal clarity for investors and users of digital assets.
💰 Funding & Exits
Immutable and Polygon Labs launch Inevitable Games Fund with hopes of raising $100M
The fund has already secured $30 million from various investors in the Web3 space.
Figure raises $60M in bid to build a ‘differentiated’ crypto exchange
After the capital infusion led by Jump Crypto, Pantera Capital and Lightspeed Faction, Figure also seeks to offer a registered security alternative to stablecoins
Ethereum Layer 2 Morph raises $20 million from Dragonfly, Pantera and others
With fresh funding, Morph said it plans to expand its team and marketing efforts and offer developer incentives.
OpenStamp raises seed round led by Animoca Ventures and with participation from KuCoin Ventures and others
OpenStamp, a comprehensive one-stop service platform built on the STAMP Protocol, which is known for its robust security within the Bitcoin ecosystem, announced today it has completed a seed round capital raise valuing it at approximately US$50 million.
Web 3 Startup Tensorplex Labs Raises $3M Seed Funding to Decentralize AI
Tensorplex said decentralization can help prevent tech giants monopolizing artificial intelligence, making them prone to biases or censorship.
Paradigm leads $55 million round in ZK proofs startup Succinct Labs with participation from Polygon founders
The startup wants to make ZK proofs accessible to all developers.
Espresso Systems Raises $28M in Fresh Funds, Led By A16z Crypto
The leading shared sequencer firm said it would further invest in its products as well as additional hires.
Morph Raises $20M in Seed Funding
The company intends to use the funds for talent acquisition, enhancing developer incentives, expanding marketing efforts to further bolster its visibility within the Layer 2 ecosystem and refining its technical infrastructure.
Keyring Network Raises $6M in Funding
The round was led by gumi Cryptos Capital and Greenfield Capital, with participation from Motier Ventures, Kima Ventures, and early backers including UDHC Finance and Eberg Capital, alongside angel investors.
Crypto exchange Tokenize Xchange to expand Singapore team after raising $15.4 million
The Singapore-headquartered cryptocurrency exchange told The Straits Times that it is on track to expanding its Singapore team from 20 to 100 staff in the next 18 months.
Zone raises $8.5m in Seed Funding to Scale its Decentralized Payment Infrastructure
The deal marks a pivotal moment for Zone as the company continues on its journey to build a Blockchain-based decentralized payment infrastructure for financial services providers across the continent and beyond.
Figure raises $60m for Figure Markets blockchain exchange, lending
Figure is best known for founding the Provenance blockchain and extending more than $6 billion in home equity loans. Co-founder Mike Cagney was also the co-founder of SoFi.
🚀 Project Launches & Updates
Conflux aims for Q2 launch of HKD-pegged stablecoin with AnchorX
Conflux CEO Fan Long said the project is working with AnchorX to launch a Hong Kong dollar-pegged stablecoin as soon as the second quarter of this year.
Kraken's institutional platform debuts custody service named Kraken Custody
Kraken launched custody services for Kraken Institutional, a platform specifically for institutional investors.
Robinhood rolls out crypto wallet to Android users globally
The Android app of Robinhood’s crypto wallet has officially launched.
Polygon-based tokenization platform Libre goes live for Brevan Howard, Hamilton Lane funds
Developed by Nomura’s Laser Digital and WebN Group, institutional heavyweights Brevan Howard and Hamilton Lane are set to be the first to use the platform.
Aavegotchi to launch Layer 3 rollup using Base for settlement in Q2 2024
The team at Aavegotchi is targeting a Q2 launch for its Layer 3 focused on blockchain gaming.
🔥 Other Bits We're Excited About
Former Binance chief Changpeng Zhao announces new educational project involving NFTs
Zhao’s new platform aims to provide underprivileged kids with free education.
Grab’s Singapore Users Can Now Use Crypto to Make Payments
Grab's latest move has been made possible after its tie-up with Triple-A, a firm that enables businesses to pay and get paid in digital currencies, the report added.