[IDEA] Liquid Staking Token Collateralization

Proposals
1

Rationale

If an underlying token can already be deposited on Venus, the staking representative token should also be accepted as collateral to maximize Venus’ total addressable market.

References

Summary

Leveraging staked tokens is vital to DeFi. Traditional financial markets already offer leveraged products and derivatives with notional values many multiples more than the market value of the underlying assets. DeFi needs to catch up to this capital efficiency to be a competitor in the global economy. Locked value in staked native tokens need to be able to tap the additional layers of DeFi as collateral:

BNB liquid staking providers like StaFi and Ankr currently carry tens of millions in staked native tokens, with rapidly expanding liquidity pools. Leading liquid staking providers like Lido hold liquidity in the billions, and while many are Ethereum-focused, Venus accepts ETH as collateral and can participate in the leveraging of validator-staked native tokens to provide capital efficiency to the DeFi ecosystem.

Liquid staking will boost borrowing demand for BNB, MATIC, ETH, DOT, etc. because as long as borrowing interest of these tokens is below liquid staking rewards, users will be incentivized to borrow BNB or ETH at a lower rate than its staking rewards. If ETH or BNB borrowing interest is higher on Venus than other lending platforms, users will be incentivized to provide ETH/BNB lending supply on Venus instead of other lending platforms.

Motivations

Validator staking is a large market, with over $13 billion already staked and needing additional DeFi use cases to increase capital efficiency. TVL gains from this market could be $2 billion or more.

DeFi Protocol Market Cap ($MM) TVL ($MM) Market Cap / TVL Ratio ($MM)
Aave (Current*) 2,675 12,870 0.21
Compound Finance (Current*) 1,150 8,140 0.14
Venus (Current*) 155 1,830 0.08
Venus (Improved Ratio) 280-420 4,000+ 0.14-0.21
Venus Gains +180-270%

*Updated Jan 10, 2022

Risk Analysis

[SECTION ONGOING]

The Collateralization Ratio for staked tokens should be adjusted depending on the risk assessment of the chain and validator represented as well as the duration of the unstake waiting period (if applicable).

  • Risk of unlockable tokens
    • Ankr: unlockable until Phase 1.5 of Eth2
    • Lido: unlockable until Eth2
  • Market liquidity

Discussion

What additional security / risks do liquid staking tokens create exposure to? Which Liquid Staking providers are you interested in seeing collateralized on Venus?

4 Likes
2

BNB MATIC DOT LUNA ETH should be safe to be included in liquid staking on Venus. It just is a no brainer at this point. The market liquidity of these assets are more than sufficient to offset risks involved.

3 Likes
3

Cream runs a BNB validator, Venus should too.

2 Likes
4

I agree with what Bnb_bull and Norm121 said. BNB, MATIC, DOT, LUNA, ETH should be no brainers. I would also add ADA, SOL and AVAX as also on the list of no-brainers.

I do think Venus should be a contributor in help secure BSC. It’s an obvious choice considering that as long as BSC remains secure and fast, people will come, which will benefit Venus.

2 Likes
5