Liquid Staking and Institutional Participation - TOKEN2049 London 2022

hi everyone my name is Curtis uh I'm at stake handle business development gear uh we are a staking service provider and the reason we're both on stage today is um both staked and figment are part of liquid Collective which is a liquid staking service um similar to Lido so that will be the overarching topic today uh thank you so much yeah happy to be here today with uh with Curtis uh representing figment so my name is Ben spiegelman I lead the corporate development effort for us uh figment is a infrastructure company which helps institutions earn reward on their digital assets and so yeah really excited to talk to you a little bit today about staking uh what we're doing in the liquid staking side and how we're partnering together and uh yeah happy to answer any questions as well so Ben um you want to start us off with maybe you know there's different types of staking out there it kind of gets used to mean different things can you for the audience maybe describe what what you and stake focuses on from a mistaking perspective yeah for sure uh so I think you've been going back a little bit when people think about okay what is my crypto Journey the first thing is okay how do I buy it and is it how do I protect it how do I trade it and then eventually it's like how do I earn rewards on that crypto how do I make this investment uh grow over time and one of that pieces is appreciating on the price and the other one is the rewards that you can earn some people call it yield we try to stay away from that terminology based on what we do but when you think about that there's sort of two options you can either lend the assets out whether that's in C5 or traditional lending mechanisms or in D5 pools when liquidity pools and yield farming and then last but not least is the staking category in which steak and figment both fall under and so this is really at the core or the infrastructure layer to be able to secure the protocols and so if you are a holder of any of a any of the proof-of-stake assets like ethereum Cardona Avalanche and many others if you are willing to delegate your assets to a provider like ours you can actually participate in the consensus mechanism that helps improve and secure these networks and for doing so as a reward you actually receive more tokens in the native token that you that you stake it in and so it's similar in the mining industry where you put more electricity and you get more Bitcoin very different in staking where the bar is much lower to enter into that market and so you can work with a provider like ours as long as you are a token holder so for ethereum for example if you have 32ef you can delegate those those assets to us or to State and you can participate in the consensus and earn rewards and so it's a really really great way to do so and um comes with a lot of different risks that are associated with lending and obviously there's been a lot of risks over the last couple of days we've seen starting to unfold in The Lending Market in the over collateralization Market that we've seen with Celsius and Voyager and it's totally different with staking and so when you actually do stake your assets it is one for one collateralized to the protocol so if you hold ethereum you stake that asset it is locked up and then you receive those rewards and when doing so you're not able to then have more margin or other things that that obviously are where a lot of the issues and risks come in that have happened in traditional finance and and now in crypto yeah I just add to that you know that another way the risk profile is different from say like lending or even like D5 protocols is um it's a non-custodial service right so um you know everyone use the term you know not your keys not your Bitcoin or not your crypto um you know a lot of the you know recent tragedies we've we've been seeing this year in crypto a lot of that has to do with giving up assets um in a custodial manner um to a counterparty that then doesn't you know use it responsibly right so um I I would just point out that's the other risk um but yeah you know it doesn't mean it doesn't come with any risk right um You have to run validators properly uh that requires um you know being able to manage the keys properly being able to avoid getting slashed or having downtime so that's primarily a reason why you would use a professional service is uh you know you want to avoid making those mistakes by running it yourself yeah exactly I think that's a good point right so when you think about where do we come into the fold versus your custodian or your exchange where you're trading those assets and so uh figment specifically right we work with a lot of the largest institutional service providers in the space to be able to help power their staking infrastructure for them so uh fire blocks bitco Anchorage blockchain.com A lot of these large firms where they are distribution points for folks both retail and institutional to manage buy sell trade and hold right they're the ones that are the experts in that and then a firm like figment is the ones that are actually running the validator nodes doing all the performance the governance the validating of the transactions and doing it embedded in those actual Channel Partners whether they be custodians exchanges wallets and so we don't actually manage the keys on your behalf but you're a trusted third party who is going to be a regulated entity and hopefully uh depending on what jurisdiction you are to be able to manage those assets on the other side of table stake and figment right we are non-regulated entities except for I guess you guys are bought by Kraken so a little bit different there but as a staking provider we really are truly a technology provider uh we don't hold customer funds we don't hold customers assets if we were to go away tomorrow and blow up and uh then you could go and re-delegate your assets to state or to another provider and so I think uh that really is really key for us to stay sort of in our in our in our area and helps mitigate the risk for both institutions and for retail investors yeah should we talk a little bit about liquid Collective and and what liquid staking is all about next yeah uh happy to do that so staking is sort of like 1.0 of earning rewards on your proof of stake tokens that we talked about the the next iteration of that that's starting to come is what's called liquid staking and so when you when you stake your axis as I mentioned earlier that asset is locked there's a bonding period in which you can't withdraw your assets and that is set by the protocol itself so by ethereum or cardana and it's typically very different there could be one or two days or it could be 30 days and so uh what a lot of institutional investors have started demanding for is I want to be able to be moving in and out of my positions much faster but still earning rewards on that and so about a year ago uh at figment we started working on a liquid staking solution and so this really means that you still stake your assets and then you receive a receipt token which is a representation of your assets that are still staked which you can then use in the secondary Market to trade in and out of the position uh to use as collateral or for other different mechanisms that you want to be able to use your assets for so they're not entirely locked and so we started working on that uh initially we're about to go live without a solution about six months ago and then we met our friends at Kraken and at coinbase and they were like listen we love what you guys have built we think there's a much bigger opportunity here to make this a more web 3 initiative to make this a broader thing than just figment or just another side load pool of liquid staking and having so many fragmented Solutions and so the idea was can we come to together to build one protocol that is then spread across the entire ecosystem where we include Kraken coinbase many of the other institutions the custodians the wallets other validators and this ecosystem to build the most robust liquid staking solution uh that ultimately then has the most liquidity right the more participants the more assets the more liquidity the more safetiness of the overall ecosystem and so that's what we did we spun the company out and a new entity is called the liquid Collective liquid for liquid staking and then obviously the collective of us all coming together and so it was started by figment another validated provider called Kiln Kraken in coinbase and now we're expanding much much further to include a lot of other institutions and uh should go live this quarter and so we're really really excited about that yeah so Ben uh this sounds very similar to Lido yeah um who does liquid Collective Target or you know who would be good for liquid Collective and and why would someone go with liquid Collective over lado yeah it's a great question so for those that don't know light a lighter was probably the first and largest liquid staking solution that was out there specifically for ethereum and so uh the big difference that I think that liquid Collective brings versus Lido is a pure focus on institutions right and being able to be that true Enterprise customer uh that we're going for so what does that mean it means that we have a select group of validators that are trusted that are audited uh that are being very very clear on what they do and have really really clear risk parameters so the three validators that are starting out are staked and cracking coinbase and bison Trails or coinbase cloud and figment and so like three of the largest infrastructure companies in the entire world are coming here and saying that we're doing that uh so working with great Partners on the validator side working with really strong Partners on the tech side and then all of the integrators like the coinbases the Krakens the figments of the world that are distribution points for how you actually participate in the in the protocol they're making sure they're kycing AML checks for every single person that's coming onto this platform um and so we actually know who the users are we're checking oh fact lists all those things that are sort of necessary for an Institutional product that we really want to bring to the market and so that's sort of I'd say the majority of the things we're continuing to make sure it's all about safety uh so we have a security audit that was done by two outside firms on the smart contract protocols it's really as far as we can be an Institutional Enterprise grade product and then we're going to be as transparent as possible and so you'll see over time iterations today it started as a central company but we'll be transitioning over time to being as open and as transparent with the community as we can be yeah I mean I think the general Trend we see today is you know even two three years ago it was this complete Wild West right and I think a lot of the maximalists even today have this vision of like absolutely no regulation um you know complete Freedom complete such as resistance and I think a lot of that is very important today right this movement wouldn't happen without some of those principles but it's also very clear today that um there's a lot of money there's a lot of interest there's a lot of I mean really the entire financial sector I think um looking at the sector and wanting to participate but you know whether it's current laws whether it's um International laws right whether it's I mean even just from like a pure security or an infrastructure access perspective um there's just a lot of hurdles for why a party that is interested in participating just can't right and so I think liquid Collective is one of many solutions to get more participation um you know will it look the same as it does today in in four or five years maybe not right maybe laws will catch up maybe as the world becomes more comfortable with digitally or natively digital or crypto Services um you know liquid collectible also look different but I do think in today's environment having these rails of like AML kyc um you know making sure that it's compliant from an Institutional institution perspective is is really important yeah yeah and I think listen we are in London so hopefully no one gets too upset with me but I think like what we've seen in the U.S with really strong regulation not necessarily as clear as we would like it to be and hopefully over time it'll get that way but coinbase and Kraken some of the most regulated entities in our entire space have been really really good stewards of capital right and you've seen that over time the way that they're really preaching security and not going into the risk of your assets and we've seen issues overseas right where where companies haven't followed the same steps that we're seeing that obviously in the last couple of days it's starting to unfold and so I think um there is some type of benefit to going a little bit slower right we can't always be first we want to make sure that we're doing things properly partnering with the right folks and knowing actually who your counterparties are and trusting those counterparties and so you know I give a lot of credit to these guys uh into the coinbases of the worlds who are willing to say okay we see this massive growth and opportunities globally and things we could run out there's always going to be shiny objects but doing things properly and making sure that even if there isn't regulation that's clear from the government that we're following the principles and standards that are traditional um in most asset asset classes in the US and typically uh in Europe and in the UK as well and so I think you know if those types of Institutions that are leading the way and maybe they're not as sexy as they were two three four years ago but they've been tried and true and continue to kind of succeed in in the stepstone followed yeah I mean I think we're almost coming up with time but but lastly um like how does someone get started and you know is liquid Collective live today um can you share a little bit about that yeah it's a really good question so uh as I said they will be launching imminently uh probably in the next couple of weeks they probably would be upset that I shared that but it's okay there's very exciting stuff uh so Q4 for sure uh and so when it is live I would say uh there's gonna be distribution partners that you can buy this through uh and participate in actually staking your Ethan being able to receive this receipt token uh I would think it'd be pretty safe to assume that figment crackhead and coinbase will probably be places where it'll be live I don't want to speak on behalf of them but I think those all three of those venues um will be opportunities for people to come and participate in this in this protocol and uh we will be sure to be very loud and proud when we do announce and so be on the lookout uh in the next couple of weeks awesome awesome thank you so much thanks everyone yeah hold on I got some questions that was excellent by the way great presentation you guys have been dropping value like you wouldn't believe um interested to know when you look at a smart contract audit um how do you approach that and who actually did your smart contractors I think you said to Ben I'd love to know who they were yeah I know halborn did one of them I don't remember who the second one was uh but I think the thought was that you know having redundancy always makes sense so that's why we did a second one and um yeah again I think the plan here is to be as public as possible and so we we remediated a lot of the issues that were there and are going to be publishing a lot of the results and all that type of stuff so as much as we possibly can be kind of following that web3 ecosystem of everything on the table and uh hopefully that uh makes us honest and shows uh what good reactors we are really what sounds very compelling so how can people know more about liquid Collective is there a website or Twitter handle or how can we get connected with that because unfortunately we didn't have anything on the screens but I'd love to know more about it yes there's definitely a liquid Collective website I don't know what it is yeah I think right now okay yeah so just for clarity alluvial was like the the initial company and now liquid Collective is going to be the The Entity that actually represents the protocol so that's great yeah Ben spiegelman and uh my boy uh curtiso thank you so much gentlemen thank you for coming over great fiery side chat well done thanks so much thank you