Stader Labs is one of the world’s leading multi-chain liquid staking platforms offering non-custodial services. It offers higher levels of protection against slashing and audited security while ensuring the same freedom to use liquid staking tokens across numerous DeFi applications on various blockchains like Ethereum, Hedera, Polygon, and BNB.
Recently, Stader rolled out the SD Utility Pool, which is a completely unique and one-of-its-kind solution based on the platform’s governance token SD that massively democratizes ETH liquid staking. Our team has tested this solution and shared their impressions of it in this feature.
Learn more about Stader’s architecture and strong points from our recent overview of their liquid staking ecosystem.
Liquid Staking in Stader
The liquid staking model in Stader is marked by enhanced simplicity and token liquidity, although from the standpoint of sheer mechanics, it is not dissimilar to other liquid staking solutions that require ETH staking in exchange for a liquid staking token—in this case, ETHx. Notably, however, Stader’s solution is often hailed as being among the most secure ones in the entire blockchain industry. It has undergone strict audits from some of the top names in the area, like Certik, Peckshield, and Halborn.
Over 85,000 users have already staked $700m worth of crypto assets with Stader. The solutions’ accessibility is powered by partnerships with some of the most popular and demanded crypto-industry actors like Aave, Compound, Ledger, and MetaMask. As a result, it is not an exaggeration to claim that Stader is among the industry leaders when it comes to liquid staking.
Stader’s Pools
Understanding the uniqueness of the SD Utility Pool requires some knowledge of the pre-existing staking pools on Ethereum offered by Stader.
Users receive Stader’s native liquid staking token ETHx in exchange for their staked ETH. There are two kinds of them: a permissionless and a permissioned ones.
- In permissionless pools, anyone can run a node with just 4 ETH and an equivalent of 0.4 ETH in SD tokens, which are Stader’s native governance and utility tokens used for enhancing the reliability and security of the network operations. They give their owners voting rights and can be staked.
- Permissioned pools consist of validators hand-picked by the Stader team for their top-notch performance, expertise, and history.
In another case, Stader plans to leverage the relatively novel Distributed Validator Technology (DVT), which distributes the validation process across multiple nodes to increase the fault tolerance of staking and, therefore, dramatically lower the chances of slashing while increasing the fee efficiency.
SD Utility Pool
The SD Utility Pool is a novel addition to the family of pools described above, and it has no analogs in any other liquid staking ecosystem.
As node operators need SD tokens to meet the requirements for running ETHx validators, SD holders can now delegate the tokens to the utility pool so that operators can use them for a nominal fee. This way, node operators can reduce their capital requirements to ETH-only exposure while SD holders can enjoy additional rewards and yields amounting to double-digit values by delegating their SD to the Utility Pool. Those rewards are mostly taken from utilization fees that node operators have to pay, with a lesser part sourced from additional SD issuances for early adopters.
In other words, node operators may own zero SD tokens altogether and still run an ETHx validator, which makes this endeavor much more affordable to minor operators.
This model brings together the interests of the two key stakeholders in its ecosystem. As ETHx upscales over time, the Stader team expects more node operators to join the permissionless set, which would spark more interest in SD.
Essentially, the SD Utility Pool model massively enhances decentralization in Ethereum as permissionless node operators gain support from a broad variety of sources, including individual token holders. At the same time, it creates a new source of revenue for the latter and puts their governance tokens to work.
Our Impressions from the SD Utility Pool
Everstake staking experts could not let such a glorious opportunity pass them by and tried their hand at the SD Utility Pool’s very lucrative offering. We are pleased to report that they called their experience “superb.”
They tested the system both as delegators and as ETHx node operators. In particular, they found the process of delegation simple and virtually effortless and noted that the same goes when they act as node operators since they could utilize SD with a simple CLI command.
From the technical perspective, the requirements for node operators are quite minimalistic. You must have an active ETHx node with at least one validator to utilize SD from the pool, and those SD tokens must be available for repayment at any time, which is only fair. If an operator can’t ensure the health of the node, it will be liquidated, and the utilized SD will be recovered by exiting all validators from the node.
We could keep on using the SD from the pool until 1 ETH worth of utilized SD per validator has accumulated. This, in the words of our team members, made the entire experience hassle-free. They also noted that the use of the solution did not require some extensive experience in DeFi to be employed to its full potential, which is important since it reduces the chances of human error.
Aside from that, the obvious advantages of the SD Utility Pool include the lack of a lock-up period and a very flexible and efficient reward structure, so the entire solution seems to be sustainable both technologically and economically.
Overall, Everstake’s experience with the SD Utility Pool has been very satisfactory, and we can recommend trying it both for individual delegators and node operators. Its ability to massively reduce capital requirements for node operators while providing an easy and intuitive way of interacting with the system can significantly lower the entry threshold for aspiring operators and thus make the entire Ethereum ecosystem even more diverse, distributed, and resilient.
On a final note, Stader has been steadily delivering highly secure and efficient solutions for the liquid staking scene since 2021, and we can expect that with the addition of the SD Utility Pool, their endeavors to make ETH liquid staking even more accessible and lucrative will only carry on. Way to go, guys!
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