Ryze Labs' Ryze Up E03 - Persistence Labs CSO Mikhil
Diving Deep into the Cosmos Ecosystem: Discussing the Charm of Persistence's Liquidity Staking
1. Introduction
Welcome to the Ryze Up segment brought to you by Ryze Labs. Ryze Labs serves as a bridge between the East and the West, aiming to accelerate the development of Web3 in emerging markets and influence the global Web3 world. Local Insights, Global Impact – let's embark on this journey together. Time to Ryze Up.
Ryze Labs has successfully invested in high-growth potential projects like Polygon, Sui, Solana, LayerZero, and Wintermute.
Host: Joven, Head of Business Development at Ryze Labs, focuses on expanding the fund's outreach to global developer communities and helping portfolio companies with go-to market strategies.
Special Guest: Mikhil, Chief Strategy Officer (CSO) at Persistence Labs. Persistence Labs is committed to providing liquidity to assets in the cosmos ecosystem through services such as liquidity staking.
2. Persistence's Roots in the Cosmos Ecosystem
Mikhil, a graduate of the University of Mumbai, entered the crypto industry in 2019. With a keen interest in finance-related sectors, he was captivated by the founder's passion for the Cosmos ecosystem and the vision of bringing real-world assets onto the blockchain, leading him to join the team as an early member. Currently, he is responsible for the overall company strategy and the development direction of product business.
The biggest issue in the Cosmos ecosystem at present is liquidity. Therefore, Persistence Labs aims to build a dedicated Layer 1 in the Cosmos ecosystem to serve asset liquidity. Persistence Chain is also one of the earliest five or six chains in the many Cosmos chains. On Persistence Chain, you can lend, trade, and issue your liquid collateral assets.
Persistence chose the Cosmos ecosystem because of the significant differences it saw between Cosmos and Ethereum. Compared to Ethereum, Cosmos is more like a diverse universe. Cosmos interconnects multiple blockchains through blockchain communication, allowing each application to be built on its chain using Cosmos's stack, rather than constructing all applications on the same Layer 1 and competing for block space.
Furthermore, Cosmos's IBC (Inter-Blockchain Communication) protocol allows users to trust-minimize the transfer of assets from one Cosmos chain to another. This is unlike other cross-chain bridges, where you have to lock your assets on one side of the bridge and use custody on the other side to facilitate the transfer. IBC is trustless and non-custodial, representing its unique value.
3. Application Chains Capture More Value and Offer Higher Customization
There is an increasing trend of chains opting to use Cosmos’s SDK to build their own application chains. Discussing the reasons for choosing to create their own application chains, Mikhil highlighted that the key point is the ability of application chains to accomplish what cannot be done on Layer 1. For example, dYdX, initially deployed on Ethereum, had its product and amassed a significant user base. However, it later started transitioning to the Cosmos tech stack to build its application chain.
The core reason for this is the loss of MEV (Maximal Extractable Value) to Layer 1 in DeFi, rather than to the holders of the dYdX token. Simply put, when dYdX was deployed on Ethereum, the benefits of MEV were captured by participants of Ethereum. Transitioning to their own application chain meant that validators holding dYdX tokens could capture more profits from MEV.
Moreover, owning their application chain allows for sovereignty over the chain. The chain’s operational rules and benefit distribution can be set independently, including aspects such as the operation of certain parameters and block generation mechanisms. Additionally, Cosmos abstracts cross-chain communication and consensus, allowing applications built on Cosmos to focus on the application itself.
Persistence's decision in 2019 to build an application chain was also driven by the desire for customization. Deciding on aspects like whether KYC is needed and how to integrate the application's KYC with the chain itself are factors that the project team can determine. This approach allows for the maximum level of customization in the operation of both the chain and the application.
4. Persistence's Liquid Staking Brings Liquidity to Cosmos
A significant challenge previously faced in the Cosmos ecosystem was the lack of liquidity, forcing users to choose between staking and participating in DeFi. In Cosmos staking, when users stake their Atom, they start earning staking rewards, but unbonding requires 21 days, meaning the liquidity is locked for that period.
On the other hand, the increasing number of DeFi projects on Cosmos also offers users more ways to earn profits. Once users stake their Atom, they cannot participate in DeFi earnings, leading to a division and competition for liquidity.
With the background of an increasing number of application chains in Cosmos, liquid staking of Atom becomes increasingly crucial, similar to the emergence of staking services like Lido on ETH. The Cosmos ecosystem needs liquid staking services to provide liquidity.
Although Cosmos later introduced its liquid staking solution to address this issue, Persistence was one of the first in the Cosmos ecosystem to identify this pain point and offer a solution, launching the liquid staking product pSTAKE. After users stake their Atom, they receive a liquid token stkAtom, which can be traded on Persistence’s DEX product Dexter and can participate in various DeFi earnings. This allows Cosmos ecosystem users to enjoy both staking and DeFi profits, greatly enhancing Atom's liquidity.
Compared to competitors, Persistence's core advantages include: 1) being the first liquid staking solution on Cosmos, giving it a first-mover advantage and brand reputation; 2) high security, with significant investment in security audits; 3) prioritizing user experience, making it one of the most user-friendly products in its category.
Additionally, Persistence's focus on decentralization is noteworthy. Currently, Persistence is vigorously promoting validator decentralization. With over 60 validators in pSTAKE, which is twice the number of its competitors, Persistence continually explores better validator selection and evaluation mechanisms.
In terms of liquidity provision, the current focus is on providing liquid staking services to other application chains in the Cosmos ecosystem. As all application chains in the Cosmos ecosystem are built using the same SDK and use the liquid staking model, pSTAKE's services can be easily applied to other chains. Beyond the Cosmos ecosystem, Persistence also explores providing services to other Layer 1 ecosystems, having already expanded into BNB and ETH ecosystems, with plans to continue expanding into others.
5. Ensuring Asset Security is Paramount
In 2020, while developing pSTAKE, most people were not concerned about cross-chain bridges being hacked. However, Persistence was very attentive to cross-chain security, dedicating a lot of time and effort to auditing the cross-chain transfer of funds (including the process of setting up stkAtom), as well as the security of validators.
Additionally, they ran a bug bounty program to ensure all content had been thoroughly tested and audited. Before launching any new product, extensive testing was conducted to ensure security. While there is always inherent risk, the aim is to minimize all possible risks.
6. Conclusion
Looking to the future, Persistence Labs believes that liquid tokens will become a foundational asset in DeFi and that liquid staking will be the next major driver in the development of DeFi.
In the future, Persistence hopes to see more Cosmos applications collaborating with pSTAKE and Dexter, bringing more support to pSTAKE. Furthermore, they will continue to focus on user experience, as well as market education and the shift in thinking, to attract more users from simple asset staking to liquid staking, thereby enhancing the utilization rate of the tokens.
Finally, teams with a shared vision are warmly invited to build applications on the Persistence Chain. Any team wanting to build applications related to liquid staking is highly welcome to collaborate and contribute to the growth of the industry.