Bitcoin Suisse to offer Ethereum liquid staking within its native Swiss market as it takes its seat in joining Liquid Collective.
The Swiss cryptocurrency firm Bitcoin Suisse forms the latest addition to Liquid Collective, a liquid staking protocol built and operated by an independent collective of web3 companies.
Its incorporation into the protocol will enable its clients across the Swiss market to engage in liquid staking of Ethereum cryptocurrency. Stakes are made through Liquid Collective, which then produces a receipt token through the protocol, turning ETH into LsETH.
Participants can then leverage this receipt as collateral to participate in web3 and wider decentralised finance (DeFi) projects.
Locked capital to liquid capital
While their decentralised nature is viewed as one of the main benefits of cryptocurrencies, this defining feature lacks a central authority figure responsible for verifying transactions.
Proof of work
To overcome this, Bitcoin, the world’s most popular cryptocurrency, has adopted a mechanism called proof of work (PoW).
This sees network participants deciding which new block of transactions to add to the blockchain, and to achieve this, they must expend their computational energy to generate, or mine, new valid blocks.
In this way, various players on the network are competing to ‘prove their work’, and those that are successful are allowed to add the latest batch of transactions to the blockchain and earn a proportion of cryptocurrency in the process.
PoW creates new blocks and validates new transactions in a scalable manner, but it has faced criticism for its energy-intensive process and the e-waste it produces.
Proof of stake
For these reasons, Ethereum, the focus of this article, switched to an alternative mechanism called proof of stake (PoS) last year.
While PoS sees the same end goal as PoW in validating transactions and adding new blocks to the blockchain, how it achieves this is very different.
In PoS, participants called ‘validators’ vote on which transactions they consider legitimate. Validators vote for the accuracy of new blocks by staking ETH for their chosen block or by delegating other users to do so.
Stakers do this for the economic benefits of PoS, as they receive rewards in cryptocurrency over time.
While PoS does overcome the energy barriers associated with PoW, while supporting greater transaction throughput and capacity, the mechanism can lead to centralisation by depending on validators with the most money. Becoming a validator on the Ethereum network requires 32 ETH.
And where Liquid Collective’s concerned, another major downside of staking is the exit period. When you stake ETH, you lock it in, so while your staked tokens earn rewards, you cannot use them for trading or other activities at the same time.
However, Bitcoin Suisse’s participation in Liquid Collective seeks to overcome this dilemma.
Liquid staking offers a different approach to traditional staking mechanisms and allows users to lock up their tokens for a period of time to secure PoS blockchains and receive network rewards.
Whereas traditional methods of staking are subject to bonding and unbonding periods, ranging from a number of days to several weeks, in liquid staking, token holders stake their token and receive a receipt token, which evidences ownership of the underlying staked token plus the staking rewards it has accrued, minus any penalties and fees.
“Institutional and private clients are increasingly looking to participate in staking to earn network rewards,” comments Bitcoin Suisse chief product officer, Michael Gauckler.
“Staking also involves blockers of participation, the largest two being illiquidity windows and the lock-up of staked tokens – mechanisms that primarily exist to preserve network security and integrity,” continues Gauckler.
”Liquid staking is an innovation that addresses these blockers of participation, providing users with higher capital efficiency and liquidity, while preserving the network’s security features.”
The web3 and DeFi community collaborated to develop the Liquid Collective decentralised protocol to open access to a multi-chain liquid staking standard. Aiming to increase mass adoption of liquid staking, the protocol also intends to increase liquidity and composability for the web3 economy.
The protocol, which will launch with Ethereum staking, aims to meet institutional compliance needs while setting the standard for performance and security.
Liquid Collective integrator
“Bitcoin Suisse joining Liquid Collective will expand the protocol’s access to the Swiss market, furthering our vision to empower global participation in securing the decentralised internet,” comments Matt Leisinger, co-founder and CEO of Alluvial, the company supporting the Liquid Collective protocol’s development.
“We are thrilled to collaborate with the Bitcoin Suisse team to unlock more participation in liquid staking with European institutions.”
Bitcoin Suisse is the first Swiss-incorporated Liquid Collective integrator to focus on the Swiss market. Integrators, including trading venues and custodians, provide an on-ramp for Liquid Collective’s stakers to participate.
An integrator’s services allow users who pass the know-your-customer (KYC) standards to deposit funds to Liquid Collective and mint LsTokens.