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LiquidStake set to unlock liquidity for Ethereum 2.0 Phase 0 stakers

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As the launch date of Ethereum 2.0 approaches, an important issue in the staking mechanism is starting to be discussed in the community: the one-way nature of stake deposits.

Prospective stakers in Ethereum 2.0 Phase 0 will not be able to withdraw or transfer their stake until after the rollout of Phase 1, which could take years. Ahead of this difficult choice, Darma Capital is one of several companies planning to offer intermediated staking that would let users have access to their capital.

Through its LiquidStake initiative, both retail and institutional stakers can delegate their capital and maintain the ability to use it as collateral to receive USD Coin (USDC) loans.

Unlike other staking derivative proposals, LiquidStake will not create new tokens to represent the bonded Ether (ETH). James Slazas, CEO of LiquidStake, told Cointelegraph that this is due to the temporary nature of the service:

“The time window for Phase 1.5 — we can all flip a coin on this — is 18 months, 36 months, somewhere in that realm. So it’s a relatively short time frame with an end date. And so when you start to tokenize assets where you only have a short [life span], the difficulty there becomes what kind of liquidity would be there for that type of token.”

Using Ether only as a form of collateral for dollar-denominated loans allows LiquidStake to offer a more immediate service. “With LiquidStake you can have your stake and eat it too,” added Andrew Keys, co-founder of Darma Capital. “And in that regard, [stakers] probably are looking for fiat to maintain their life expenses. So that’s the problem we’re trying to solve.”

The company partnered with staking providers including Bison Trails, ConsenSys Codefi and Figment to handle the actual validation process, while OpenLaw and Lukka helped with the legal and tax management of the system. There are no minimum staking amounts, and the lending system works through the familiar mechanism of margin calls and liquidation — at least on paper, as the ETH cannot be moved.

A notable caveat is that prospective customers must go through LiquidStake to join Ethereum 2.0, or otherwise, they will become ineligible for the lending service. Slazas explained that this is required to have “perfected interest on the collateral,” meaning that no other party has a claim to it. In practice, this is necessary to make sure that there are no copies of the private keys holding the staked Ether.

Slazas said that LiquidStake simultaneously solves another major issue: the tax implications of Ethereum staking. Especially on the institutional side, going through LiquidStake simplifies the tax treatment, as they are simply entering into a swap agreement with Darma, a fully licensed and regulated commodity trading and swap company.

“The only difference [for institutions] is that when you enter into a swap, you have a lot more regulatory and tax clarity. […] We already know that this is a non-security swap and there’s 30 plus years of tax history of how to treat this.”

Though Darma will make money out of this arrangement by charging interest and a “performance fee” on the staking yield, Keys said that “We are here to help in the decentralization and growth of Ethereum 2.0.”

Progress for the Ethereum deposit contract has been slow so far, at least partially due to the inability to access the money locked in the deposit contract. LiquidStake helps solve this issue, but its solution is highly centralized.

At least in part, that seems to have been necessary to make it in time for the Ethereum 2.0 launch, as Keys noted that the team will look into ways of decentralizing the service in the future.



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Ethereum

Bitcoin hits $35K after Biden reveals infrastructure deal, Paraguay proposes BTC bill

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Bitcoin (BTC)  price received a boost as news that lawmakers in Paraguay plan to present a bill to make BTC legal tender spread across Twitter. Shortly after the unconfirmed news surfaced on Twitter, Bitcoin price rallied to $35,289 before slightly pulling back below the key short-term resistance level. 

While the cryptocurrency Fear and Greed Index still indicates a sentiment of Extreme Fear, it’s worth noting that the measure has risen from 14 on June 23 to 22 on June 24 as traders begin to view the drop below $29,000 and Bitcoin’s rising open interest as signs that the current corrective phase may have ended. 

Cryptocurrency fear and greed index. Source: Alternative

While traders’ sentiment may have improved slightly, Cointelegraph analyst Marcel Pechman suggested that investors could be waiting for the $6 billion in Bitcoin and Ether (ETH) quarterly futures and options to expire on June 25 before making a more decisive move.

Stocks reach new record highs, altcoins rally

The crypto market wasn’t the only market to rally today. Traditional markets also rose to new highs after U.S. President Joe Biden revealed that he had reached an agreement on a $953 billion bipartisan infrastructure spending plan with the Senate.

Following the announcement, the S&P 500 and Nasdaq each rallied to new record intraday highs and closed the day up 24.65 points and 97.98 points respectively, while the Dow gained more than 322 points on the day. 

Daily cryptocurrency market performance. Source: Coin360

As one would expect, altcoins also surged higher as Bitcoin price and traditional markets moved higher. Ether (ETH) rallied back above the psychologically important $2,000 level, while Tron (TRX) and Celo gained 26% and 28% respectively. CELO’s move appears to be driven by the listing of its Celo Euro (cEUR) stablecoin on KuCoin exchange. 

Prior to the recent price rise, VORTECS™ data from Cointelegraph Markets Pro began to detect a bullish outlook for CELO on June 22.

The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. CELO price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ Score for CELO climbed into the green and reached a high of 73 on June 22, one hour before its price began to spike 56% over the next day. The VORTECS™ Score turned green again on June 24, reaching a high of 74 as CELO began to rally another 25%.

The overall cryptocurrency market cap now stands at $1.4 trillion and Bitcoin’s dominance rate is 46.6%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.