To date, over 10 million ETH, or close to 40% of all staked Ether, has been staked via liquid staking protocols (LSPs). The advantages to using them are many: simplicity, access to yield enhancement opportunities, and immediate liquidity for staked assets are just a few on the list. Yet amid all the positives there is a trade-off: stakers in LSPs do not control the relationship with the node operators to whom they delegate ETH.
Instead, the rules of engagement between the stakers and the operators are set by the protocols and their DAOs. LSPs prefer to streamline the relationship by pooling all staked assets together before distributing them among the operators, charging a flat staking fee, and socializing the rewards and losses among users. This means that instead of enjoying the top-notch performance and leveraging their unique situation to get a good offer from staking providers, stakers receive aggregated performance and pay a fee that doesn’t consider their unique circumstances.
Settling for the average rather than the best is an implicit cost of using liquid staking protocols, tacitly accepted by every staker in LSPs. Is this the best we can do?
Fortunately, we can offer a different approach to liquid staking that addresses these shortcomings. Pioneered by StakeWise V3, it offers stakers both control over the terms on which their ETH is being staked and the familiar benefits like simplicity, liquidity and access to DeFi. We call it bespoke staking, and believe it is superior to the existing liquid staking model because it grows users’ capital faster, safer and cheaper. Let’s see how.
Choose your own staking terms
StakeWise V3 introduces the concept of a staking marketplace where users browse offers made up of different node operators, fees, infrastructure, and MEV strategies, or negotiate custom terms with the operators of their liking. Once they select or negotiate the best terms, stakers can deploy capital with a single click, earn staking rewards, use stake in DeFi and unstake at any moment. In other words, they enjoy all of the benefits of liquid staking while staking on the terms tailored to them.
More specifically, customized terms can feature:
- substantially lower fees (e.g. from 5% of rewards down to 3% for larger stakes),
- a better-performing node operator set (e.g. using top-5 operators by efficiency),
- a more robust setup (e.g. usage of DVT from Obol or SSV to improve redundancy),
- slashing insurance (e.g. coverage by Nexus Mutual or a traditional insurer),
- geographic focus (e.g. servers located only in Europe or Middle East)
- self-custodial arrangements (e.g. self-hosted nodes with access to liquid staking)
- private staking pools (e.g. where every staker has their own pool of assets to avoid commingling funds with others)
- custom MEV strategy (e.g. vertical integration between searchers, builders and proposers while keeping staked capital liquid)
The ability to choose custom staking terms is unique to StakeWise V3 and offers stakers unparalleled flexibility and control over their capital. It helps optimize for performance, stability and safety while keeping your stake available to use for farming, borrowing and trading.
Save fees when not using stake in DeFi
StakeWise V3 features a liquid staking token, osETH, that any staker can mint to access DeFi. However, minting osETH is optional and can be done on-demand, for times when a liquid staking token is actually needed (e.g. to participate in a farm, borrow stables against staked ETH, or sell a portion of staked ETH opportunistically).
If you are someone who is after a safe & simple staking process, then always having a liquid staking token is not necessary, and can in fact just be more expensive. StakeWise V3 helps you avoid the extra costs thanks to a pricing structure that is different from other liquid staking protocols.
In StakeWise V3, you pay a staking fee to the node operators, and a liquid staking token (LST) fee to the StakeWise DAO. The total fee is the staking fee plus the LST fee, applied automatically to the rewards generated by your stake.
The staking fee can be anything you agree with the operators (even 0 when you stake ETH on your own hardware) and is applied for as long as your stake is earning rewards. This is the baseline fee you pay to participate in staking.
The liquid staking fee charged by the StakeWise DAO is a flat 5% applied to the staking rewards, only on the amount of osETH you have minted. If you don’t have osETH minted, you don’t pay this fee. This allows you to keep more staking rewards to yourself during times when your stake is not liquid, saving you a substantial amount of fees in the process.
In contrast to StakeWise’s pricing model, other staking protocols always charge a flat 10–20% staking fee on your rewards, no matter if you need their liquid staking token or not. As the size of your stake grows, this ends up being significantly more expensive in $ terms, even as you receive only the average performance. Take a look for yourself:
Staking through other protocols and always having an LST in your wallet results in up to 4x extra cost when compared to staking through a bespoke arrangement on StakeWise V3 and only minting osETH when it is needed. Note that we use 5% as the staking fee, while bespoke arrangements often feature a lower fee for larger stakes.
Optimized for safety & efficiency
Users of StakeWise V3 benefit from a unique approach to making their stake liquid, and can avoid paying a capital gains tax on Ether upon staking if they use Tokenless Vaults.
In StakeWise V3, the minting of osETH — the platform’s liquid staking token — does not require swapping ETH for the LST; instead, the LST is minted against the underlying stake in the Vault, which becomes locked as form of collateral. When osETH is burned, the stake in the Vault is unlocked. Such mechanics ensure that the user continues to benefit from performance and terms that are specific to their Vault, never letting go of their original ETH. This is especially true for Private Vaults that introduce tight controls on who can deposit and withdraw ETH from the Vault at any given moment.
Tokenless Vaults further augment the liquid staking process because they don’t produce an intermediate receipt token for depositors in the Vault, relying instead on a tokenless internal accounting system. This means that liquid staking no longer triggers a capital gains tax for the user, as there is never an exchange of one asset for another. The only token the user can receive is osETH, but minting it is the result of a borrowing transaction, not an exchange.
Conclusion
StakeWise V3 packages the usual benefits of liquid staking with a unique ability to set bespoke staking terms to produce better performance and safety for users. We are excited to be working with the leading operators, custodians, and protocols in the space to help users get the most out of their ETH, and are always ready to work with stakers personally to help them set up their Vaults. Reach out to the StakeWise team to learn more!
About StakeWise
Staking made simple. StakeWise is a liquid staking service on Ethereum that allows you to earn a passive yield on ETH without entrusting funds to StakeWise. Our platform provides stakers with pooled and solo liquid staking options, taking security and self-custody to the next level.
Enjoy some of the best staking terms on Ethereum: https://stakewise.io
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