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Coinbase Backs First Enterprise-Grade Liquid Staking Protocol

2 mins
18 May 2022, 08:00 GMT+0000
Updated by Levy Prata
27 May 2022, 15:04 GMT+0000
In Brief
  • Coinbase Cloud is working with Figment and Alluvial.
  • The company sees an "industry gap" for institutional staking.
  • Liquid staking allows the collateral to be used elsewhere in Web3.
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Coinbase, America’s largest crypto exchange, is venturing deeper into the realm of digital asset staking with its latest pledge of support.

The exchange published a company blog post stating that its cloud division would be supporting the development of the first-ever enterprise-grade liquid staking protocol.  

Coinbase Cloud is collaborating with staking platform Figment and software development firm Alluvial Finance to support a group of experienced founders and operators building the institutional-grade protocol.

Alluvial already operates a staking platform that it intends to expand and become decentralized through DAO governance.

Coinbase says liquid staking is growing  

Coinbase stated that liquid staking is a niche market and an “industry gap.” While there are already existing platforms such as Lido offering Ethereum staking, one for financial institutions has yet to be launched.

Traditional staking methods require tokens to be locked up or bonded for a set period in order to be eligible for yields. This is the case with the Ethereum consensus layer which began staking operations in December 2020, with ETH remaining locked in the smart contract. It will not be released until several months after the Merge which is slated for this summer.

Liquid staking opens up opportunities to efficiently utilize staked assets as collateral to trade, lend, and provision quickly and strategically, the blog post stated. Stakers receive equivalent tokens representing their collateral that can be used elsewhere.

“They can stake their tokens, receive back receipt tokens that evidence ownership of their staked tokens and use those receipt tokens to participate in the broader Web3 economy,” says the company.

According to Dune Analytics, liquid staking penetration has gone from less than 1% penetration in January 2020 to more than 35% today. Dune also reports that Lido staking represents almost a third of all ETH staked on the Beacon Chain with 4.1 million ETH staked.

Coinbase stated that these staking solutions do not meet the needs of institutions or mature regulated businesses which require enterprise-grade reliability, security, and KYC/AML processes.

“As part of the initial validator set, Coinbase Cloud and Figment intend to each perform staking services on the network, and run validators with distinct clients in different regions and cloud providers, with other industry-leading operators joining soon,” it added.

This week internet security giant Cloudflare announced that it would be staking ETH and running validator nodes.

Staking opportunities beyond Ethereum

Although the blog post mentioned Ethereum, which is currently the industry standard for staking, DeFi, and smart contracts, there are several other crypto assets that can be staked, many offering more than the 4.6% APY from staking ETH.

Ethereum is also the leading asset by staked value at almost $25 billion, but it is closely followed by Solana which has a staked value of $21 billion and offers 5.3% APY according to Stakingrewards.

Cardano has a staked value of $13.8 billion with a 5% yield on staked ADA, and Avalanche is fourth with $8 billion in staked AVAX and a higher 9% yield available. Polkadot’s 14% is one of the best staking yields at the moment according to the platform.


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