May 04 2023
- Liquid Collective is a decentralized protocol that offers a resilient, composable, and innovative liquid staking solution with deep liquidity, by leveraging a collaborative approach that unites trusted industry experts.
- Increased composability is achieved through a decentralized, collaboratively-built protocol that fosters interoperability across different platforms.
- Collaboration encourages innovation by tapping into diverse expertise and perspectives, driving the development of new use cases, efficient financial primitives, and integration of proven solutions.
Liquid Collective is a decentralized protocol that aims to provide an enterprise-grade liquid staking standard for the entire web3 ecosystem, starting with ETH liquid staking. Liquid Collective offers a resilient, secure, composable, and innovative liquid staking solution with deep liquidity by leveraging a collaborative approach that unites pillars of the ecosystem.
This collaborative approach, key to achieving the mission of collectively building the most trusted and secure liquid staking standard, is one of the protocol's defining features. Built and run by a collective of leading web3 teams, Liquid Collective will be governed in a decentralized manner by a broad and dispersed community of industry participants.
By bringing the industry's leading participants, including trading venues, custodians, tech providers, node operators, and users, together into stakeholder-managed governance instead of operating alone in liquid staking silos, Liquid Collective aims to truly empower global participation in securing the decentralized internet.
This unique approach of industry leaders building collaboratively has the power to offer a non-custodial liquid staking solution that can be widely adopted, increasing liquidity and composability for the web3 economy.
Promoting security and transparency
Collaboration helps to promote security and compliance. By working with proven and vetted experts, Liquid Collective can work to ensure that the protocol meets the highest standards for stakers. This is critical for enterprise investors, who have strict regulatory requirements and need to comply with due diligence standards to protect themselves from reputational harm and business disruptions.
In addition to being built and governed by a broad and dispersed group of trusted, industry-leading web3 teams, the protocol implements features that cater to the needs of mature businesses, such as KYC/AML checks, enterprise-grade security, and robust monitoring and reporting.
“The level of confidence for stakeholders is stronger in a multi-provider liquid staking network. Liquid Collective unites the leaders in protocol staking to deliver the highest quality solution that represents the best interests of the community.”
There is a lack of transparency around validator counterparties in current liquid staking offerings, while centralized liquid staking offerings are often non-interoperable and increase fragmentation in the market. A decentralized approach, with the protocol secured by a distributed network of node operators and validator nodes, helps to ensure the security and integrity of the liquid staking system by making it more resistant to attacks or failures. With Liquid Collective's enterprise-grade validator set stake is distributed across operators in a round-robin manner—further helping to distribute stakers' risk across the top operators in the ecosystem.
From the start, Liquid Collective has aimed to align on operational standards that will encourage a more reliable and secure protocol designed to meet the requirements of enterprise stakers, including a non-custodial staking framework to reduce counterparty risk, engaging in multiple code audits, and engaging in a DAO governance and decision making process alongside industry leaders. The protocol's stakeholder governance also provides additional transparency and accountability, which can increase trust and confidence in the staking system.
Innovative applications of battle-tested code
Collaboration is essential for driving innovation and progress in any industry, and Liquid Collective aims to continually experiment and iterate to remain at the forefront of liquid staking. To achieve this goal Liquid Collective relies on the participation of veteran technology providers who provide ecosystem expertise and battle-tested software solutions.
Aside from increasing the protocol's resilience, this collaborative effort is important for several reasons. Collaboration helps to promote innovation. By bringing together a diverse range of stakeholders, Liquid Collective is able to tap into a broad range of expertise and perspectives. By providing a forum for a group of expert participants to contribute to the development and evolution of a shared solution new and exciting use cases, and more efficient and secure financial primitives, can be developed.
Liquid Collective's LsETH slashing coverage offers a great example of how leveraging proven solutions can benefit all of the protocol's participants. Nexus Mutual is the leading provider of decentralized crypto-native insurance protection, having secured billions of dollars in value held in smart contracts. Experts from the Liquid Collective and Nexus Mutual worked together to design the protocol's bespoke slashing coverage.
Together, the teams were able to produce dynamic coverage that scales with the Liquid Collective's needs and provides the flexibility required for the protocol's active set to continue to expand over time. Node operators supporting Liquid Collective's active set provide coverage for deductibles, up to a cap, against slashing incidents and missed rewards incurred due to the fault of their infrastructure, further promoting the buy-in of all stakeholders to operate the protocol in a safe and secure manner.
This slashing coverage is accessible by all LsETH holders via the LsETH User Agreement, which itself represents the potential for the protocol's technological solutions to innovate on digital participation via smart contract solutions.
“With Liquid Collective, token holders gain seamless access to enterprise-grade liquid staking. We're proud to be collaborating with some of the best teams in web3 to launch Liquid Collective, advancing our mission to collectively build the most trusted and secure liquid staking standard.”
Establishing an industry-wide standard
As participation in liquid staking continues to grow, a need for standardization is arising to combat fragmentation and increase security and capital efficiency in the ecosystem. Standardization is also important for interoperability, critical for the success of any decentralized system. Building a standard requires the insight and collaboration of industry stakeholders and subject matter experts with diverse perspectives.
Liquid Collective's collaborative approach helps to promote standardization. By working with industry leaders to develop a standard liquid staking protocol, Liquid Collective is promoting interoperability across staking venues, increasing liquidity by making it easier for different systems to work together.
We believe that this collaborative approach will improve the availability of Liquid Collective's liquid staking tokens. When participation solutions are controlled by a single entity, it can create a closed ecosystem that limits the potential for innovation and integration with other platforms in the DeFi ecosystem. Alternatively, a decentralized, collaboratively-built solution has the power to create a commonality between different platforms and protocols, which should increase liquidity and composability in the market.
The protocol's stakeholder-managed governance will offer an incentive-aligned and scalable path to making decisions and creating buy-in across a broad and growing set of industry participants. This will work to ensure that Liquid Collective's protocol design choices have incorporated the interests of various stakeholder groups.
Collaboration also helps the protocol become more inclusive and widely adopted. By involving a diverse range of stakeholders in the design and development process Liquid Collective can ensure that the protocol meets the needs of the entire ecosystem, rather than just a subset of participants. This inclusivity is critical for driving adoption and for ensuring that the protocol is sustainable over the long term.
Building a resilient future
Liquid Collective aims to grow the pie for participants big and small through collaboration, shared purpose, and inclusivity. Having a broad set of stakeholders involved in building and governing Liquid Collective will ensure that the liquid staking protocol can effectively scale beyond dependence on any single entity, reducing the risk of interest-capture and critical dependence.
We believe this collaborative approach of stakeholders that contribute to the protocol and shape its future trajectory will create a flywheel of participation and network effects, creating superior liquidity, utility and user experiences for LsTokens.
Bringing this standard to stakers across multiple chains requires a community of technology providers, node operators, and other ecosystem participants. From integrators that provide KYC/AML checks and seamless on-ramps to web3 builders to scale the model to other protocols, and leading validators including Figment, Staked, and Coinbase Cloud, Liquid Collective is succeeding in bringing the top players from the DeFi ecosystem into one collective to build this standard together.
Interested in joining the Liquid Collective as an Integrator, Tech Provider, or Node Operator? Reach out here.