Tenderize is a comprehensive liquid staking infrastructure set to address centralization concerns while enabling access to unified liquidity through their liquid staking tokens. It consists of three products co-living in their ecosystem—TenderVaults, BeefBank, and TenderSwap—which together generate a unified liquidity to all types of stakers through their liquid staking tokens (LSTs). They provide the usual functionality of being used in DeFi applications, all while eradicating centralization and censorship in industry-wide validator sets.
The Tenderize team notes that the realm of liquid staking is plagued by fragmentation, where liquidity is compartmentalized and staked assets are confined. The protocol claims, however, to be the only one to provide actual tools to tackle those issues, which are of concern for stakers, protocols, and validators alike.
In particular, Tenderize adopts an approach that shares liquidity to ensure all staked assets can play their role in the ecosystem to the fullest. Additionally, this provides liquidity to individual validator stake positions through Tenderize’s unified liquidity model.
This article provides an overview of Tenderize V2’s main features and architecture, including its WAGYU token.
Three Components of Tenderize V2
As was said above, Tenderize V2 makes use of three separate protocols, all of which are necessary to produce censorship-resistant LSTs and provide unified liquidity.
- TenderVaults mint ERC20 tokens, known as tTokens, which represent stakes and accrued rewards. Unlike many other similar systems that funnel the stake to a predetermined group of validators, users can choose the individual validator with whom they wish to stake their tokens.
- BeefBank is a place for users to deposit collateral to mint Steaks Dollar (SD), which is an over-collateralized, LST-backed stablecoin. This enables several yield-generation scenarios, all directly linked to the collateralized debt positions in BeefBank.
- TenderSwap is an on-chain liquidity pool for tToken swaps. It prioritizes the liquidity of the unstaked asset and provides lower fees when swapping it.
BeefBank and TenderSwap are both expected to be released in 2024.
Initially, Tenderize V2 is set to be implemented on Polygon, Livepeer, and Graph networks, but an expansion to other blockchains is also on the horizon, most importantly, Ethereum.
Why Tenderize V2?
In their whitepaper, the Tenderize team noted that the key problem with conventional liquid staking solutions is that they often boost the centralization of the network’s validator set. This, in turn, seriously compromises its censorship resistance. They also note that most stakers have a hard time accessing liquid staking, at-home validators cannot enter validator sets, institutional delegators cannot personalize risks, major validators cannot self-delegate, and a big fraction of TVL is in centralized exchanges. The team proposes to solve all those problems through what they call “Liquid Staking 2.0,” which uses two of the three main components described above.
- TenderVault, which tackles decentralization trends by enabling users to make an informed choice of a validator for their stake.
- TenderSwap, which tackles liquidity fragmentation among LSTs. It takes down capital requirements a peg and minimizes slippage by incentivizing only one side of the liquidity pool.
Philosophically, Tenderize V2 is designed as a system with minimum governance and pronounced neutrality. It always prioritizes non-custodial and permissionless access for validators and delegators alike, which excludes any interference with the fundamental decentralization of the network. It also ensures that the validator set is more distributed and that the minting and exchange of LSTs are simple and accessible.
What’s the Beef?
The Tenderize ecosystem will soon launch its own token, named WAGYU in line with the overarching bovine theme of the entire project (wagyu, or 和牛, is a breed of Japanese cows and literally means “Japanese cattle”). It works both as a utility and governance token, and its value is directly linked to the protocol’s performance so that it would bring the incentives of validators, delegators, and token owners into full alignment.
In particular, WAGYU accumulates fees from tTokens and TenderSwap swaps as well as other operations on Tenderize. The amount held within the treasury backs WAGYU with a proportional share that token owners can redeem through inverse bonding. This creates a price floor that directly depends on the treasury’s overall value. The option to redeem against the treasury sets up the token’s base value while ensuring that market-caused price fluctuations still remain to keep the token appealing to the trading community.
WAGYU holders can also stake it in order to take part in governance. The project’s governance model is somewhat minimalistic, so it is concerned only with key decisions like parameter adjustment and strategic voting. When WAGYU is staked, the protocol uses fee revenues in yield-generating strategies rather than distributing them among WAGYU stakers. As these strategies seek to enhance liquidity, this approach creates a productive cycle of revenue generation and application.
Everstake and Tenderize
Everstake acts as a validator in Tenderize V2, which boils down to maintaining the network’s decentralization and enabling liquid staking.
When users stake their digital assets, such as MATIC, Tenderize gives them a choice of validators rather than allocating the stake automatically. The team, continuing their meaty references, compares it to “marinating,” which imbues the tokens with “the rich flavors of staking yield.” The minted tTokens represent their staked assets and accrue rewards that are specific to the chosen validator, in our case, Everstake.
The ability to choose is a prerequisite to maintaining the network’s decentralization, as validators are competing to provide more lucrative conditions to the delegators and thus create a more diverse environment. To that end, Tenderize V2 is a major step forward in making the liquid staking scene more secure and inclusive.
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