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'Shanghai Upgrade brings great prospects for LSTs', said Stader’s Antonio

At one point, Stader was ranked 3rd in the LSDs sector (according to blockchain market researcher Messari), why is it only now knocking on Ethereum’s door? What is the predicted price trajectory of ETH after the Shanghai Upgrade?
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writer.c98
12 min read
Published Mar 01 2023
Updated Apr 05 2024
stader antonio

The Spotlight is a Coin98 Insights exclusive interview series with industry builders on hot market topics. In our first episode, Coin98 Insights talked with Antonio Morales, Head of Community at Stader, a project specializing in Liquid Staking Tokens - LSTs (also called LSDs) that will soon launch on the Ethereum Liquid Staking platform.

Stader is a multi-chain liquid staking platform where users can stake and profit. The protocol is currently in use on BNB Chain, Hedera, Fantom, Polygon, Near, and Terra 2.0, and will soon be available on Ethereum. Pantera Capital, Coinbase Ventures, True Ventures, Jump Capital, Ledgerprime are among many reputable investors who are backing Stader. The project's three co-founders attended Ivy League schools such as Harvard and Columbia and have worked for major corporations such as McKinsey, BCG and Kearney.

Whoever (LSDs) wins in Ethereum wins big

- Hello, Antonio. With the upcoming Ethereum Shanghai Upgrade event, Liquid Staking Tokens (LSTs) are becoming a hot topic. Can you explain why people are so interested in LSTs from the perspective of someone working on the project?

Antonio: Previously, not many people knew about LSTs, but with the upcoming Shanghai Upgrade, people are starting to realize its significance.

Currently, approximately $50 billion is locked across all different chains in DeFi, whereas the aggregate staking market capitalization of the top 10 chains amounts to roughly $70 billion (according to stakingrewards). This implies that in DeFi, more funds are staked than are in circulation.

In DeFi, liquidity is king! That's why protocols are ranked by their importance based on Total Value Locked (TVL), as liquidity is the key to any project's success. However, as I mentioned earlier, a massive amount of money is being locked up in various staking platforms.

antoni

This is why LSTs have such potential because it could help unlock the $70 billion that is being staked and bring it into DeFi. And DeFi really really needs all this money. Because the market now is not as efficient as it was during bull market with $200 billion in circulation.

- Is Stader's interest in LSTs motivated by the fact that they are considered highly promising?

Antonio: Exactly. We recognized the importance of LSTs early on as Proof-of-Stake (PoS) became increasingly popular.

Currently, any project that launches a blockchain uses PoS. As a result, we began building on chains that lacked LSTs.

Stader currently has nearly $200 million in total value locked (TVL) with over 70,000 stakeholders. We are Hedera's only LSTs platform and the first to launch LSTs on Phantom, Polygon, and Terra 2.0. This demonstrates our ability to create everything from scratch without any copy-pasting.

And now we are targeting the “very big beast” Ethereum. The current staking market cap of Ethereum is around $28 billion - more than BNB Chain, Solana, Avalanche, and Polygon all put together.

Let's do a quick calculation: 1% of $28 billion is $280 million. This means that for every 1% of marketshare we capture on Ethereum, we could double our TVL.

Do you see how crazy the Ethereum market is?

tvl defi
About 50 billion USD is locked in DeFi (as of February 28th, 2023).

- So why have you chosen to launch LSTs on Ethereum only now?

Antonio: The key to building a successful LSDs platform is not in making smart contracts. Anyone can do that, as evidenced by the many LSTs protocols out there.

So the thing here is: First is to get people to trust their money on your protocol, and second is to get other projects to integrate your assets.

However, we have been successful in gaining the trust of over 70,000 users and partnering with Aave, Balancer, QuickSwap, and 35 other DeFi protocols. This is difficult to achieve and not every LSTs platform has these partnerships.

And that's why initially we focused on chains that didn't have LSTs instead of Ethereum. We wanted to build our reputation first, have a good Total Value Locked (TVL), and gain many stakers. As a result, now that we have entered the Ethereum market, we are already the third-largest LSTs platform on the market. We have gained user trust and are confident in integrating well with Aave, Balancer, and other platforms.

With the upcoming Shanghai Upgrade, more ETH will be staked on Ethereum. Therefore, launching LSTs on our platform at this time is the right choice at the right time.

- However, on Ethereum, there are already established LSTs platforms such as Lido and Rocket Pool. What makes Stader stand out from these platforms?

Antonio: To participate in staking on Ethereum, you need 32 ETH, or 16 ETH if you use Rocket Pool. However, at the current price, 16 ETH is equivalent to about $25,000, which is a large amount of money. Additionally, you need to buy a large amount of RPL tokens to run a node with Rocket Pool.

With Stader, you only need 4 ETH. Therefore, we are providing a big incentive for people to run nodes with Stader and earn as much profit as possible.

Specifically, there are three staking groups at Stader. Even if you don't have 4 ETH, you can still participate in Liquid Staking with a minimum amount of 0.1 ETH. You receive ETHx and participate in other activities in DeFi.

The amount of money you stake here will be transferred to two types of nodes: permissioned - professional node runners; and permissionless - people who only need 4 ETH to run nodes. And we share revenue between node runners, liquid stakers, and Stader.

As you can see, we are providing the cheapest and most free option for users to run nodes on Ethereum!

- However, those who stake 4 ETH, they need to wait for the remaining 28 ETH before they can start earning profits. Do you think this is a disadvantage?

Antonio: We are confident that those who invest 4 ETH will always have 28 ETH left to match. For example, during the bull market season, Stader raised a total of $40 million, and we now have over $25 million in our treasury. Therefore, we are not worried about not having enough 28 ETH prepared. What we are concerned about is not having enough people to operate those permissionless nodes.

That's why we have permissioned staking pools with professional node operators as a backup to ensure that your money is always used efficiently. Because if you give money to Stader but we don't have nodes to run, you may be disappointed.

This is our "hybrid" approach. However, Stader will always prioritize permissionless node operators because we truly want to help decentralize Ethereum.

- What’s the role of DVT (Distributed Validator Technology) in Stader's design?

Antonio: As soon as Obol and SSV Network finish testing DVT technology, we will work with them, and at that time, Stader's new permissionless nodes will be created using DVT technology. In other words, the permissionless pool will become a DVT pool.

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In fact, we have carried out a lot of simulations and security analyses with SSV to ensure that the DVT technology is secure enough to protect the network.

Who Will Replace Lido?

- Let's talk about the Ethereum Shanghai Upgrade, how do you think this event will impact LSTs platforms?

Antonio: The Shanghai Upgrade, in my opinion, will be extremely beneficial to LSTs platforms. As I previously stated, the staking rate on Ethereum is currently around 15%, which is very low when compared to other platforms. The reason for this is that those with a lot of money, whether they are organizations, treasuries, DAOs, or whales, want certainty. They do not want to contribute $10 million or $100 million and then not know when they will be able to withdraw it. But not so with the Shanghai Upgrade! They have the option to withdraw at any time.

As a result, once the upgrade process is complete, I believe a huge amount of cash will pour into LSTs.

top 10 crypto
The current staking rate on Ethereum is around 15%. Photo: Stakingrewards.

- So you're confident on the future of LSTs. However, some believe that following the Shanghai Upgrade, people will want to withdraw the money they staked on the Beacon Chain two years ago, causing the value of ETH to fall. What are your thoughts on this?

Antonio: This is a million-dollar question. People currently believe that there will be a large withdrawal, causing ETH to plummet dramatically, but I believe they are overly pessimistic.

In fact, the staking rate on Ethereum was only about 5% at the start of this year. However, after project developers became confident that the Shanghai Upgrade would take place in March, Ethereum staking increased to 15%. Everything is currently trending in this direction, so I believe there will be a small drop after the upgrade, followed by a massive increase.

Furthermore, in order to withdraw money from Ethereum, you must have the most recent software update. With the Shanghai Upgrade happening in less than a month, if you want to withdraw ETH, you should be prepared to wait in line. However, not even half of the nodes have the most recent software update.

This indicates that ETH will be unstaked, but not as much as people believe. And I am confident that after this "speed bump," the price of ETH will rise.

- So what opportunities will Shanghai Upgrade bring to Stader in particular?

Antonio: Lido currently has the highest staking ratio on Ethereum, at 30%, followed by Kraken at 9%, Binance at 7%, and the remainder is very small and distributed among other protocols. Many people are uneasy about this staking landscape because the combined staking ratio of the three titans is already close to 50%.

However, because the withdrawal feature has not been activated, the amount of money staked on these protocols remains. However, I believe that as a result of the Shanghai Upgrade, people will withdraw their funds from these organizations and join StakeWise, Rocket Pool, and, of course, Stader. Because you want as much of this staking pie to be shared as possible.

As for Stader, as previously stated, we can double our TVL for every 1% market share on Ethereum. Looking at our performance on other blockchains and the current staking landscape, I am confident that Stader will capture more than 1% of the market. It would make no sense for a protocol like Lido to have up to 30% and Stader to have 0%!

Therefore, this is the reason why I think Shanghai Upgrade will be very bullish for all the small players in the LSTs sector, including Stader.

top beacon chain
Lido now leads in staked ETH on Ethereum. Photo: CoinDesk.

- So, do you think that with Shanghai Upgrade, people will switch from centralized protocols to smaller projects in the LSTs field to help make the industry more decentralized? However, what is the motivation for them to do so? For example, Lido has network effects and a reputation. Why should users switch?

Antonio: To be honest, I believe Lido will continue to lead in the LSTs field and that there will not be a large number of users leaving the platform, but there is another market segment that we want to target.

True, most people are uninterested in decentralization. That is why protocols like Solana are growing so quickly because their viewpoint is that people don't care about decentralization and don't want to pay $10 to press a button. They only care about making the most money.

staking market

And this is the group we want to target with appealing profit opportunities. Because of their emphasis on profit, this group may believe: "I shouldn't bet on large platforms that can work together to attack the network. I’d rather pick Rocket Pool, StakeWise, Stader..."

Furthermore, with Stader, we lower the barriers to participation so that anyone can run a node. This means that with the same amount of money, more people can run nodes and more nodes can be created. In a way, this helps the network become more decentralized, right?

This is the story we are using to attract users. From a decentralization perspective, he best case scenario (for the staking market) is you have many parties and all of them secured.

The Fall of Terra, a historic moment for an LSTs project

- As can be seen, Stader's future appears to be bright. However, Stader has released approximately 16% of its token supply, with the remaining 84% to be released over the next few years. Do you believe this will lead to inflation? And what is Stader's strategy?

Antonio: True, there will be inflation in the coming years, but it will not be extreme.

Stader investors have a long-term investment strategy and have invested their TVL in the platform. As a result, they agreed to postpone the token unlock from March 2022 to January 2023.

As you can see, if any investors want to sell tokens at a discount right away, this agreement will be rejected. The token unlock has also been pushed back from October 2022 to June 2023 by the Stader team.

This is what I like about Stader: the team and investors all have the same vision for the platform's long-term viability.

You may be aware that Stader was launched on Terra and quickly reached $1 billion in TVL. However, after the ecosystem collapse, this number fell almost to zero. However, we continued to construct. It's encouraging to see that big investors and the Stader team didn't give up when they saw this.

Stader was released on Terra 2.0, Phantom, Polygon, and BNB Chain just one month after the Terra crash. After this disaster, Stader can be considered the most successful protocol on Terra.

This is also why we are only now entering Ethereum, because if we had built on the platform immediately after the crash, no one would have listened to us. But the story has changed!

10 biggest lsds
Caption: 10 biggest LSDs at the moment. Photo: Messari.

- You stated in an interview that SD is a "farm and dump" token. Is that right?

Antonio: Let’s give the full context for the statement. It used to be true, but it will no longer be true in the future.

The SD token is used to provide users with profits from Stader's revenue. However, following the Terra crash, Stader's revenue dropped to zero overnight, and the token's value dropped from $5 to around $0.20. Stader needed to expand to other blockchains as a result, and we couldn't share revenue until we created it. Stader used the token as a reward to entice users to stay with us.

Of course, the token was worthless at the time because it couldn't be used for anything. People had no choice but to sell, and we couldn't blame them.

But now things have changed. Our TVL is recovering, and the token's value is rising as a result of the announcement that we will launch a new LSTs platform. Those who hold the token now share revenue from multiple blockchains rather than just one.

The token is also no longer completely useless because it can be used for governance. We launched the governance feature two months ago, and you will be able to vote with SD token in the future.

- After the Terra crash, Stader's TVL fell from $1 billion to near bottom. How did Stader overcome this?

Antonio: Personally, I am a fan of the Terra blockchain and am an investor and content creator for several projects on it. As a result, I was disappointed to see these projects gradually deteriorate. Some parties lost morale and were unable to rebuild their products on other chains, or it took months for them to recover, such as Mars Protocol, which took 9-10 months to rebuild on Cosmos.

As previously stated, Stader only took a month to appear on three other chains. We were depressed and felt a little lost. But, in general, it took us about 48 hours to assess the situation and find a solution.

Three things led to our recovery: First, we believed in LSTs' enormous potential. Second, our goal from the start was multichain (at the time, we had completed 50% of the data build on Polygon and Phantom).

Third, as you may be aware, some people have good ideas but aren't very good at business. Some projects do not even consider how they will monetize their product. They only want to make money by selling tokens and raising funds from investors. This is not the case with Stader.

Why was it that a 25-year-old developer new to the industry was able to raise $10 million for their product but couldn't recover when Terra failed, whereas Stader could? Because the project's founders and senior management team have extensive experience building a company from the ground up and transforming it into a unicorn, such as Swiggy.

As a result, when we saw Stader's potential, we recognized that the Terra crash was severe, but we also recognized that Stader could still succeed.