The Transformation of the Staking Landscape

Since 2020, the staking market has undergone significant changes. The demand from institutions for staking has been continuously increasing, accompanied by stricter regulatory and compliance considerations. While many institutions have already participated in staking through a certain liquid staking platform, some other institutions still face internal restrictions.

Ethereum and its vast protocol ecosystem have been striving to address scalability and stake centralization issues. Meanwhile, advanced users are seeking more customized solutions in terms of reward structures.

To meet these demands, a new staking solution has emerged - staking vaults (stVaults). This innovative solution unlocks a tailored, customizable, and modular approach to Ethereum staking, leading the industry forefront.

Next Generation Ethereum Stake Infrastructure

This new staking solution expands the functionality of the original protocol on Ethereum, introducing staking vaults (stVaults) designed to provide tailored solutions for various use cases.

stVaults support access to liquidity of liquid staking tokens in personalized settings, allowing users to configure validation, fee structures, risk-return profiles, and other parameters to meet the needs of various stakers.

Institution Friendly: Institutional stakers can:

1. Use liquid staking tokens for liquidity
2. At the same time, keep 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 income and more TVL.

Yield Enhancement: Asset managers can quickly adapt to market dynamics by utilizing the general collateral properties of liquid staking 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: stVaults

stVault 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 liquid staking tokens on behalf of this vault.

The goals of stVault are as follows: ###

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

Institutional stakers can complete staking in a non-custodial manner and receive a certain proportion of liquid staking tokens.

When minting liquid staking tokens, the corresponding amount will be locked to withdraw from the vault. The locked amount is specified in liquid staking token shares, and the share balance will increase daily as the liquid staking tokens rebase. To unlock ETH withdrawals, the vault must destroy the necessary amount of liquid staking tokens.

In order to bear the risks of maintaining customized staking settings for liquidity staking token holders, the minting ratio of liquidity staking tokens differs from the original protocol's allowed 1:1, and instead has some reserve margin (referred to as the reserve ratio or RR), determined by risk parameters and limits.

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

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

By connecting with existing protocols, stVaults can mint liquid staking tokens supported by personalized verification settings, thus gaining high liquidity and integration provided by the market for LST.

The biggest difference between using stVault and the existing protocol is that stVaults are independent smart contracts used by each institution, while the ETH custody address of the existing protocol is essentially a public pool.

customizable vaults to meet various needs

stVaults have flexible configuration options that allow different builders to customize their stake settings, optimize rewards, and develop tailored product lines, while benefiting from the security and liquidity of liquid staking tokens.

Institutional Staking: Institutional staking requires greater flexibility and control. stVaults meet these needs by allowing institutional users to create dedicated stVaults, which connect to specific node operators, configure integrations, and manage deposit and withdrawal access.

stVaults can support both custodial and non-custodial setups, meeting various operational requirements while providing access to liquidity for staked tokens.

Leverage Stake: For advanced stakers, stVaults provides tools to implement leverage staking strategies, supporting both manual and automated smart contracts.

Potential methods include:

• Primary market: Obtain ETH directly from the original agreement.
• Secondary market: Utilize ETH provided by DeFi lending platforms.

Re-Staking Risk Control: stVaults introduces a selective inclusion method for shared security, allowing participants to explore customized strategies and engage in re-staking without posing socialized risks to the broader ecosystem.

Infrastructure for the Future: stVaults are a modular foundation for builders and developers, supporting the creation of staking products and tools that adapt to the ecosystem. By leveraging the generic collateral attributes of liquid staking tokens, developers can seamlessly integrate with DeFi applications.

How to strengthen the decentralization of Ethereum?

Emerging markets of open coordination and competition

As we all know, Ethereum relies on globally distributed nodes, and this new staking solution introduces stVaults that provide a modular and customizable staking framework, which can make Ethereum more decentralized. Each stVault has its own independent operator, thus reducing the Matthew effect of ETH nodes.

balance liquidity, performance, and security

stVaults have a mechanism that balances capital efficiency, validator performance, and stake concentration. ETH bonds mitigate slashing risks, while optional dynamic fees (based on the original protocol) are associated with a subset of validators within the staking router, helping to manage liquidity, assess performance, and support decentralization.

voluntary upgrade and autonomy

stVault allows its stakers to choose whether and when to adopt the upgrade feature. Minting liquid staking tokens means opting into the evolving governance process of the protocol, while redeeming liquid staking tokens restores the vault to its native staking under the control of stakers' upgrade objections. This seamless switch approach can maintain autonomy, reduce friction, and respect the openness and decentralization of Ethereum.

Roadmap

This new staking 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 utilizing the liquidity of liquid staking tokens. The strategy prioritizes effectively providing the necessary tools and building blocks while iterating 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 re-staked vaults and launch the stVault pre-deposit and early access program. These initial vaults will transition to full stVault functionality after the mainnet launch.

Phase 2: The testnet for stVaults will begin deployment, allowing for rigorous testing and integration development with partners, preparing for mainnet readiness.

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

Summary

This new staking solution introduces modular innovation stVaults, which greatly enhances flexibility for institutional stakers by enabling customizable staking settings, allowing users to choose node operators and validation infrastructure. Stakers can customize their Ethereum staking strategies to meet their needs and optimize rewards based on priorities, fully leveraging the liquidity, security, and integration advantages of liquid staking tokens.

In a more relaxed regulatory environment, institutional interest in Ethereum staking will further increase. Therefore, this new staking solution is specifically aimed at institutional stakers, node operators, and asset managers - institutional stakers can use liquid staking tokens through fully customized setups 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 validator customization and enhanced reward mechanisms; asset managers can develop future-oriented structured products, using liquid staking tokens as the primary collateral in the Ethereum ecosystem.

In addition, this new staking solution 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, this new staking solution provides a solution that serves both the Ethereum community and its long-term vision.