Tangle Liquid Staking

Tangle's liquid staking system is a multi-chain operation specific liquid staking protocol. We currently have liquid staking protocols for Ethereum and Polkadot, through our Ethereum smart contracts protocol and Polkadot parachain (opens in a new tab).

Operation Specific Liquid Staking

Operation specific liquid staking is a generalization of most liquid staking protocols that usually has a dedicated staking pool users deposit into to mint a single liquid staking token. In our case, we generalize the liquid staking system to support minting an LST for each specific staking operation. Users can effecitvely define their own pools, as is allowed by the underlying protocol, and mint a specific LST for that operation. They are not limited by the protocol itself as to what LST will be minted.

This allows us to create many more LSTs in a single protocol implementation. For validator/operator staking protocols, such as Polkadot or Chainlink, each unique staking operation yields a unique liquid staking token. Minting an LST for validator A is different than minting an LST for validator B; if we replace validators with pools or dApps or any staking operation, we get unique LSTs for these operations.

Benefits of Operation Specific LSTs

The benefits of this design are that it allows the user full customizability over what choice of staking operations they want to liquid stake with instead of being forced into a default pool. This additionally allows the operators, validators, and governance systems themselves to participate with finer grained controls and create liquid assets over their own operations. A validator can liquid stake on themselves to receive a liquid asset that can be used in other DeFi or restaking protocols. This affords the validator a way to specifically open up their own operation to new yield opportunities, resting assured that they won't be slashed at the base layer protocol.

Downsides of Operation Specific LSTs

The downsides of this design are the plethora of new tokens created and the lack of liquidity between these tokens in a DeFi ecosystem. Since there could be exponentially many LSTs minted for each given protocol, trading between any pair would suffer from lacking the liquidity a unified LST protocol could provide.

In Tangle, we will leverage these LSTs for restaking collateral where users re-lock these assets in new service offerings. This allows us to avoid dealing with this problem, as the collateral is as good as any other and still provides the basis for outsourced security and slashing. We do however, hope to see integrations built on top of Tangle to support trading between LSTs minted from the same underlying protocol.