pSTAKE’s stkBNB product has been going strong since the launch last year with USD 4 M+ in TVL and deep liquidity on Thena (USD 5.9 M) and Wombat (USD 1.8 M). A new stkBNB/BNB stable pool went live on PancakeSwap this week. The next step in the growth of stkBNB utility is enabling stkBNB as collateral for borrowing. Venus is the largest borrowing lending platform on the BNB chain and the pSTAKE team is excited to be working with the Venus team to enable an isolated pool for using stkBNB as collateral to borrow BNB. The pSTAKE team will bootstrap the pool with USD 100k worth of stkBNB and add USD 10k worth of BNB incentives for the first month (5k each for borrowing and lending BNB). This post summarises the background for pSTAKE and our excitement to be a part of the Venus ecosystem.
Background on Liquid Staking
Users in Delegated Proof of Stake (DPoS) chains stake their assets to ensure the security of the network. The economic security of the chain is defined by the total value of the assets staked, which depends on the staking ratio of the chain. Users face the tradeoff between staking their assets to ensure the security of the underlying chain, and using the native asset of the blockchain in DeFi which usually presents better reward generating opportunities, albeit at a higher risk. Liquid staking solves this dilemma for users by issuing them a staked representative (stkBNB) of the native token (BNB) that can be used in DeFi while earning staking rewards in the background. The Liquid staking protocol stakes the assets deposited by users to a set of validators to optimise user rewards and security of the delegated assets. Liquid staking protocols ensure the growth of the staking ratio of the underlying chain resulting in increased security for the protocol while enabling more efficient use of users’ native assets.
Background on pSTAKE
pSTAKE is a liquid staking protocol that unlocks liquidity for assets staked on proof of stake networks such as the BNB Chain. pSTAKE provides a simple and secure way for users to earn staking rewards on their Proof-of-Stake (PoS) assets. Users receive underlying representative tokens (such as stkBNB) that keeps earning staking rewards in the background and can simultaneously be used to explore additional yield opportunities across DeFi.
At present, pSTAKE supports BNB Chain (BNB), Cosmos (ATOM), and Ethereum (ETH) networks’ native tokens
stkBNB is a BEP20 token issued as a liquid staked representative for staked BNB. The value of stkBNB increases over time as it accrues staking rewards. stkBNB has USD 4 M+ in TVL and USD 7.5 M+ in liquidity across the major DEXs in the BNB ecosystem - Thena, Wombat, PancakeSwap.
The pSTAKE team always puts security as the first priority. The BNB chain contracts have been audited by Halborn and Peckshield and the most important contracts have been formally verified using Certora rules. The contracts also have a live bug bounty on Immunefi and are monitored continuously through Forta bots.
Benefits of stkBNB to Venus users
BNB staking is a necessary step to ensure the security of the BNB chain. Like other DeFi projects, Venus does not get access to the BNB staked on the chain, losing out on potentially billions of dollars in collateral. Liquid staking products like stkBNB solve this and bring additional collateral to Venus which was not accessible earlier.
Liquid staking enables multiple other use cases based on the risk appetite of users. The ability for users to use staked assets (stkBNB) as collateral on Venus enables leveraged liquid staking. Users will be able to deposit stkBNB as collateral and borrow BNB. The BNB can then be liquid staked using the pSTAKE protocol to mint stkBNB, which can again be used as collateral to borrow more BNB. This creates an iterative loop through which users can earn 2-3x higher returns than by simple staking.
Other interesting use cases around leveraged liquid staking include borrowing BNB against stablecoins and performing leveraged liquid staking to reduce exposure to price movements in BNB. Alternatively, users who wish to generate staking rewards against BNB and also have BNB to be used for other purposes can do so by borrowing BNB against stkBNB collateral.
Besides, having yield-bearing assets as collateral opens up the door to self-repaying loans. The value of the stkBNB token used as collateral keeps on increasing with time and automatically reduces the loan-to-value ratio.
stkBNB enables access to new capital and efficient use of available capital on Venus with minimal additional risks as BNB unstaking can easily be done on BSC.
Support from pSTAKE in bootstrapping the pool
The pSTAKE team is totally committed to enabling the borrowing use case for stkBNB. To facilitate the bootstrapping of the isolated lending pool, pSTAKE will provide a seed liquidity of USD 100k in stkBNB that will allow users to borrow at low rates at the start. The pool will also be incentivised for the first month with USD 5k worth of BNB each for both BNB lenders and BNB borrowers. The incentivisation numbers will be updated in future based on the size of the pool
pSTAKE team is also partnering with multiple protocols to enable single click leverage liquid staking strategies for stkBNB
The pSTAKE team is working with the Venus team to enable the best user experience as we add another use case to the stkBNB token. We look forward to a positive response from the Venus community