Catalysts for ETH Liquid Staking
White Star Capital Digital Asset Fund - newsletter #110
Happy new year to all our readers! There’s lots to look forward to this year, one of which being the future of ETH liquid staking after the expected Ethereum Shanghai upgrade in March. This upgrade will include the unlocking of staked Ether, which will be a huge catalyst for liquidity staking protocols like Lido and Rocket Pool. The governance tokens of some of these protocols have already jumped since the start of the new year as bullish momentum builds.
What is the Shanghai Upgrade?
As explained in our December newsletter, the Shanghai upgrade includes the Ethereum Improvement Proposal (EIP) 4895. EIP 4895 allows those who have Beacon Chain staked ether (ETH) to withdraw funds and staking rewards.
When Ethereum transitioned to proof-of-stake, Ethereum holders can ‘stake’ their ETH, meaning they deposit it with the network to generate new ETH. However, at this point, this ETH is locked.
Shanghai will enable the withdrawal of staked Eth, of which there is currently over 15.9m (worth around $17.5bn), according to Dune Analytics. Amongst other components of the Shanghai upgrade, developers chose to prioritise EIP 4895, scheduling it for March 2023.
What are liquid staking protocols?
Liquid staking protocols developed to reduce barriers to entry as they let Ether holders stake without running a validator node. Users can stake fractions of Ether, and this is then pooled so a single user does not need to meet the minimum threshold of 32 ETH for staking. These protocols allow users to stake their tokens with validators in exchange for a portion of the interest yield they earn. The protocols give derivative tokens (e.g. Lido’s stETH) in exchange for staked Ether on the proof of stake network, and the user can trade with stETH while earning yields from the staking contract.
The leader in the liquid staking space is Lido DAO, which commands nearly 90% of total staked Ether in these protocols. Rocket Pool, Frax Finance, Ankr, and Stakewise are the other major players.
So why is 2023 bullish for ETH liquid staking?
Because staked Ether is locked in its current state, only about 13% of Ether’s total supply is staked on the Beacon Chain. This is very low compared to other proof of stake chains that have been de-risked on that front, like Cosmos Hub (62.5%), Cardano (71.8%), and Solana (71.4%).
The Ether staking ratio should reach parity with other PoS leaders eventually, after the Shanghai upgrade which allows 1:1 exchange of staked Ether for Ether. The Merge boosted staking participation slightly, but withdrawals should have an even larger impact on liquid staking protocols and their tokenomics. We have already seen the governance tokens of some of these protocols jumping since the start of the new year, and expect this to continue as we approach the upgrade in March. We recommend this Nansen deep dive if you’re interested in learning more.
🔦 White Star & Portfolio Spotlight
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Haruko is nominated for ‘Best Portfolio Management Software’ and ‘Best Data and Research Solution’ respectively.
Index Coop are working on two new products to offer sustainable advantages over the long term
Diversified Staked ETH token and a Diversified Stablecoin Yield token are the two new products in the pipeline.
🏦 Enterprises & Institutions
MEXC Global Officially Launches MEXC Mastercard to Support Global Payment
MEXC Mastercard will allow cryptocurrency holders to use digital assets in daily payments.
OpenSea adds support for Arbitrum Nova
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Huobi Korea seeks to split from parent company, change its name
Chairman Cho Kook-bong will also take over a majority of shares previously held by co-founder Leon Li.
Crypto.com Will Delist Tether in Canada to Comply With Ontario Regulator
The exchange said it will no longer facilitate transactions associated with the stablecoin at the end of the month.
⚖️ Government & Regulation
UK MP says stablecoin is a gateway to CBDC, only crypto can ‘disrupt’ settlements
The United Kingdom remains committed to becoming a world crypto industry hub in spite of the recent negative events that have occurred on the market.
Russia to begin work on CBDC settlement system as sanctions endure
The country’s central bank will begin studying two possible cross-border CBDC settlement models this quarter.
Judge Allows Binance US Bid to Buy Voyager Assets to Advance
The exchange agreed in December to purchase the company after Voyager's deal with Sam Bankman-Fried's FTX fizzled.
💰 Funding & Exits
DeBox raise $2M Strategic Partnership and Seed investment from ABCDE Capital
DeBox will build a complete DAO open governance platform, and open API to third-party community developers to create more DAO governance tools.
MSafe Raises $5 Million Seed for Developing Multi-Signature Wallet Solutions
This financing round was led by Jump Crypto with participation from Circle Ventures, Coinbase Ventures, Superscrypt (founded by Temasek), Redpoint Ventures, SV Angel, Shima Capital, Spartan Group and more.
Leading Digital Collectible Platform Candy Digital Announces Series A1 Fundraise
The Series A1 financing round led by Galaxy and ConsenSys Mesh, with participation from 10T Holdings and ConsenSys, among others.
Web3 Wallet Assure Wallet Closed $1.4 Million Pre-A Funding Round
The funds raised will be used to further optimize the product and improve the user experience.
Ondefy Raises $1M to Foster DeFi Adoption
The funding will mainly be used to grow the team and foster the upcoming roadmap.
The Easy Company raised $14.2M to build an easy-to-use ‘social’ crypto wallet
Easy aims to combine user-curated profiles with engaging social features so that people can search, navigate and discover the world of web3 on their own.
Blockchain Gaming Platform Rainmaker Games Secures $4.7M Funding
The funding round was co-led by Placeholder and Hivemind Capital, with participation from a range of other firms including Shima Capital, Peer Ventures, Coinfund, Side Door Ventures, Blockwall Capital, Placeholder, and Tokenbay Capital.
C14 launches fiat-to-crypto onramp with $2.5M in funding
C14, a New York-based wed3 payments firm, is coming to market having raised $2.5 million in seed funding led by General Catalyst.
🚀 Project Launches & Updates
Mastercard launches web3-focused artist incubator with Polygon
Mastercard ]is launching a web3-focused incubator to help artists connect with fans through a new medium.
Cointelegraph’s Accelerator Program launches and is seeking Web3 startups
The program aims to help Web3 companies boost their media presence, community growth and brand awareness.
🔥 Other Bits We're Excited About
DEX Trader Joe is live on Arbitrum amid trend to move to multiple chains
This move signifies a new trend in crypto protocols launching on multiple chains in the hopes of growing their user bases.
Gala Games is working on a movie with The Rock and Mark Wahlberg
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Blur is launching its $BLUR token
$BLUR will launch towards the end of January.