The Evolution of Staking Patterns and Emerging Solutions

Since 2020, the staking market has undergone significant changes. The demand for staking from institutional investors has been continuously growing, while regulatory and compliance considerations have become more stringent. Although many institutions have staked through existing platforms, some institutions still face internal restrictions.

Ethereum and its vast protocol ecosystem have been working to address scalability and stake centralization issues. Meanwhile, advanced users are seeking more customized solutions in the reward structure.

To meet these demands, a new generation of staking solutions has emerged. These solutions introduce the concept of staking vaults, providing tailored, customizable, and modular new options for Ethereum staking, staying at the forefront of the industry.

New Generation Stake Infrastructure

The latest staking protocol expands the existing functionalities on Ethereum, introducing a staking vault designed to provide tailored solutions for various use cases.

The stake insurance vault supports access to liquidity tokens in personalized settings, allowing users to configure verification, fee structures, risk-return profiles, and other parameters to meet the needs of various stakers.

Institution Friendly: Institutional stakers can:

1. Use liquidity tokens
2. At the same time, keep the funds in non-custodial contracts to help ensure compliance with regulatory and risk management requirements.

Flexible Nodes: Allow nodes to act as curators, customizing solutions for high TVL clients to achieve higher revenue and more TVL.

Yield Enhancement: Asset managers can quickly adapt to market dynamics by leveraging the universal collateral properties of liquidity tokens to formulate innovative strategies, optimize capital efficiency, and combine with emerging DeFi opportunities.

Ultimately, all parties should have long-term incentive mechanisms to establish predictable, future-oriented, and value-based sources of rewards within the Ethereum ecosystem.

Technical Foundation: Stake Insurance Vault

The stake insurance vault is a key smart contract that enables non-custodial delegated liquid staking through a single node operator (or DVT NO cluster) and connects to existing infrastructure, thus being able to mint liquidity tokens on behalf of this vault.

The goals of the stake insurance vault are as follows:

1. Allow users to customize the risk and return allocation of liquidity staking without affecting the stability and substitutability of existing liquidity tokens.
2. Allow institutional stakers and node operators to designate each other.
3. Improve the integration of liquidity tokens

Institutional stakers can complete staking in a non-custodial manner and receive a certain proportion of liquidity tokens. When minting liquidity tokens, the corresponding amount will be locked to withdraw from the vault. The locked amount is specified in terms of liquidity token shares, and the share balance increases daily with re-basing. To unlock ETH withdrawals, the vault must burn the necessary amount of liquidity tokens.

To bear the risk of maintaining custom stake settings for liquidity token holders, the minting ratio of the liquidity tokens differs from the 1:1 allowed by existing protocols, and instead has some reserve margin (referred to as reserve ratio or RR, for example, 80%), determined by risk parameters and restrictions.

This ensures that the liquidity tokens minted through the staking vault maintain reasonable over-collateralization. Over-collateralization enhances their economic security by increasing the liquidity tokens' resilience against possible slashing events and penalties. Additionally, it allows for dynamic adjustments of public node operators' reputation and collateral requirements at the protocol level, ensuring network stability and supporting advanced integrations.

Overall, the staking vault is a non-custodial staking platform that operates alongside existing protocols. Any user can securely stake ETH through their chosen node operator.

By connecting with existing protocols, the stake vault can mint liquidity tokens supported by personalized verification settings, thereby obtaining high liquidity and integration provided by the market.

The biggest difference between using a stake insurance vault and existing protocols is that the stake insurance vault is an independent smart contract used by each institution, while the ETH custody address of existing protocols is equivalent to a public pool.

Customizable vaults to meet various needs

The staking vault offers flexible configuration options, allowing different builders to customize staking settings, optimize rewards, and develop tailored product lines, all while benefiting from the security and liquidity of liquidity tokens.

Institutional Staking: Institutional staking requires higher flexibility and control. The staking vault meets these needs by allowing institutional users to create dedicated vaults that connect to specific node operators, configure integrations, and manage deposit and withdrawal access.

The staking vault can support both custodial and non-custodial setups to meet various operational requirements, while providing access to liquidity tokens.

Leverage Stake: For advanced stakers, the staking vault provides tools for implementing leverage staking strategies, supporting both manual and automated smart contracts.

Potential methods include:

Primary Market: Obtain ETH directly from existing protocols.

Secondary market: Utilize ETH provided by DeFi lending platforms.

Re-Staking Risk Control: The staking insurance vault introduces a selective participation method for shared security, allowing participants to explore customized strategies and engage in re-staking without imposing socialized risks on the broader ecosystem.

Infrastructure for the Future: The staking vault is a modular foundation for builders and developers, supporting the creation of staking products and tools that adapt to the ecosystem. By leveraging the universal collateral properties of liquidity tokens, developers can seamlessly integrate with DeFi applications.

How to Strengthen the Decentralization of Ethereum?

Emerging Markets of Open Coordination and Competition

Ethereum relies on globally distributed nodes, and the next generation of stake solutions introduces staking vaults that provide a modular, customizable staking framework, making Ethereum more decentralized. Each staking vault has independent operators, thus reducing the Matthew effect on ETH nodes.

Balancing liquidity, performance, and security

The staking vault features a mechanism that balances capital efficiency, validator performance, and staking concentration. ETH bonds mitigate the slashing risk, while optional dynamic fees (based on existing protocols) are associated with a subset of validators within the staking router, helping to manage liquidity, assess performance, and support decentralization.

Voluntary Upgrade and Autonomy

The staking vault allows its stakers to choose whether to adopt the upgrade function and when to do so. Minting liquidity tokens means opting into the governance process of the protocol's continuous development, while returning liquidity tokens restores the vault to its native stake under the control of staker upgrade objections. This seamless switch method can maintain autonomy, reduce friction, and respect the openness and decentralization of Ethereum.

Roadmap

The next generation stake solution is designed as a builder-centric product, enabling node operators, asset managers, LRT (Liquid Restaked Tokens), and other DeFi protocols to create optimal solutions for end users by leveraging liquidity from liquidity tokens. This strategy prioritizes the effective provision of necessary tools and building blocks, iterating together with partners and the broader community.

The launch plan is divided into three phases:

Phase 1: Early adopters can use the existing tech stack to build a re-staking vault and launch a pre-deposit and early access program for the staking vault. These initial vaults will transition to full staking vault functionality after the mainnet launch.

Phase 2: The testing network for the staking vault will begin deployment, allowing for rigorous testing and integration development with partners, preparing for the mainnet readiness.

Phase 3: The mainnet launch of the staking vault will enable key use cases, including customized institutional setups, leveraged staking, and shared security configurations.

Summary

The next generation staking solution introduces a modular innovative staking vault, which adds significant flexibility for institutional stakers by enabling customizable staking settings, allowing users to choose node operators and validation infrastructure. Stakers can tailor their Ethereum staking strategies to meet their needs and optimize rewards based on priorities, fully leveraging the liquidity, security, and integration advantages of liquidity tokens.

In a more relaxed regulatory environment, institutional interest in Ethereum staking will further increase. Therefore, the new generation of staking solutions is specifically aimed at institutional stakers, node operators, and asset managers - institutional stakers can use liquidity tokens with fully customized settings that help meet internal compliance requirements while providing the operational control they need.

At the same time, node operators can design personalized stake products for large staking participants, offering features such as customized validators and enhanced reward mechanisms; asset managers can develop future-oriented structured products, using liquidity tokens as the primary collateral in the Ethereum ecosystem.

In addition, the new generation of staking solutions prioritizes the decentralization, liquidity, and security of Ethereum. Its design encourages healthy competition among validators while reducing governance and slashing risks. By balancing performance, liquidity, and risk, the new generation of staking solutions provides a solution that serves both the Ethereum community and its long-term vision.