Over the last 9 months, competition for liquid staking solutions has increased significantly in the Cosmos ecosystem. In 2021, when pSTAKE launched liquid staking for $ATOM using ERC-20 tokens, competition was limited. However, that began to change once superfluid staking was introduced in Osmosis in February 2022. The last 2 months have heralded StaFi Hub, Stride, Prism and Kava. Many more are on the precipice of launch including pSTAKE (in Cosmos), Quicksilver, Lido on Neutron, Supernova and Evmos!
The solutions analysed today are Quicksilver, Stride and pSTAKE. It is interesting to note that not all solutions are created equal with some implementing innovations that greatly improve user experience across governance, airdrops and instant unbonding .
When holders liquid stake their tokens, they usually surrender their governance rights to validators.
However, Quicksilver, which is yet to launch, will be introducing a governance by proxy feature that addresses this limitation. Similar to Stride and pSTAKE, Quicksilver will use interchain queries to request and retrieve data (e.g. account balances) from another network interconnected through IBC. However, the innovation lies in how it is used.
Quicksilver’s approach is to simulate governance proposals. Stakers can place a vote on this proposal which will then be mirrored on the native chain. This means that if there is an upcoming proposal on the Cosmos Hub, Quicksilver will put forward the vote to holders of $qATOM on the Quicksilver zone. They will cast their ballots, and then Quicksilver will reflect this choice on the Cosmos Hub.
This effectively enables users to vote on governance proposals while participating in DeFi — a feature that’s not even possible with native staking! Governance by proxy will be shipped soon after launch, in the first chain upgrade.
Stride, which launched in September 2022, has a similar proposal. Their FAQ page mentions that users will be able to use their $stTokens to vote in governance on native chains - a feature that will be available in the first post-launch upgrade. However, there are no details on how this will be implemented.
On the other hand, this feature doesn’t appear on pSTAKE’s roadmap here, here or here. pSTAKE is due to launch on Cosmos on 8th November.
Quicksilver is the first liquid staking protocol with an unrestricted validator choice thereby promoting network security and decentralisation. Through a permissionless validator set, Quicksilver will allow anyone to become a validator, or enable users to stake with any validator of their choosing — a feature that will now be available at launch. Users will be rewarded with the $QCK native token for using Quicksilver, including bonuses for choosing performing and decentralized validators. In contrast, Stride and pSTAKE have a pre-selected list of initial validators, with the validator set governed by the respective communities.
Quicksilver confirmed that it can provide users access to airdrops from external chains as if they were staking natively. While details on how this will occur are unclear, the solution will likely leverage its “governance by proxy” feature to provide this.
At Stride, for airdrops on staked tokens, it comes down to the willingness of the project to work with Stride to recognise the staked token holders. This is because airdrops generally have a whale cap and all of Stride’s staked $ATOM is in one address that most likely exceeds this cap.
There is no mention of how this will be done at pSTAKE. However, noting that pSTAKE will use two accounts — one to stake assets delegated by users on the native chain and the other to collect rewards, it is likely that these wallets will also be excluded in airdrops due to a whale cap. Similar to Stride, they will need to work together with projects to secure airdrops for users.
At Stride and Quicksilver, there is a 21 day unlock period to swap liquid staking tokens for native assets. However, pSTAKE will allow users to skip the 21 day unbonding period by instantly redeeming $ATOM for $stkATOM provided there is enough balance in the daily deposit pool. A key benefit is that staking rewards are not lost and any volatile periods can be effectively managed.
Unbonding to liquid stake on a newly onboarded chain
Quicksilver will provide liquid staking on any Cosmos SDK zones that the community votes to onboard. Leveraging Iqlusion’s Liquidity Staking Module (LSM), users staking on these zones will be able to switch to a liquid staking model without having to unbond their assets. LSM is an open-source module being developed by the Cosmos community and is currently not available. Likewise, Stride mentioned they will add LSM when it comes available and it is likely that pSTAKE will follow suit.
Five liquid staking solutions are currently available in the Cosmos ecosystem and another five are already on the way. Across the three analysed here, Quicksilver has the most innovative solution with user friendly additions across governance and airdrops. Unfortunately, its still unclear when it is due to launch. pSTAKE, will be launching in Cosmos in the next few days and its instant redemption feature will be viewed favourably by those prone to speculation. In contrast, Stride is quite minimalist in nature. In fact, the Stride blockchain is like Bitcoin and Cosmos Hub: it just does one single thing — liquid staking. With many more liquid staking solutions on the way, the initial high yields and incentives will only go so far in bringing in new users; innovation and new features are critical to ensuring the long term sustainability of the solutions.