Interviewer: Zhuling Chen, Founder of Bedrock
Interview and author: Shaofaye123, Foresight News
As a hot field, pledge and re-pledge have always attracted much attention. With the emergence of many emerging projects on major public chains, the market has become more and more enthusiastic about the liquidity of digital assets. Is it a panacea for market prosperity or a mirage of a false ecology? How to balance asset security and systemic risks? How to break the liquidity dilemma of BTC?
From the Bedrock project, we found a solution to unlock Babylon's liquidity, and we also saw the potential of the re-pledge industry after logical abstraction. Bedrock has been stepping into the pledge and re-pledge industry since Rock X, and has been deeply involved in it for many years. So far, it has not only received financing from OKX Venture and LongHash, but has also been recognized by Babylon's co-founders. The recent "BNB Incubation Alliance (BIA)" won the championship under fierce competition. How does it solve the common systemic risks of re-pledge? How does it balance returns and security? In response to these questions, we had an in-depth conversation with the founder of Bedrock.
Start with industry insights
Foresight News: Pledge and re-pledge have always been hot topics. As an industry participant, how do you view the impact of this area on the market?
Zhuling Chen: Let's talk about staking first. In fact, staking has existed for about five years, and we have been in this industry for almost five years. First of all, from the perspective of Token Holder, the impact of staking is very positive. In the traditional Proof of Work (PoW) model, holders are only custodians of assets and cannot obtain any benefits from holding. In the PoS model, staking can obtain additional benefits for holders, thereby providing motivation for long-term holding of assets and effectively reducing the selling pressure in the market. From the institutional dimension, many institutions are currently entering the market and regard staking as a risk-free asset allocation method to improve the utilization rate of capital costs. Now the scale of the staking market has reached nearly 100 billion US dollars. At the same time, staking also has a guiding effect on market interest rates, so it also has a positive impact on lending. If the lending rate is lower than the staking income, people will be more inclined to borrow and pledge to obtain the profit difference. I believe that after BTC goes online on Babylon, the lending rate will also increase.
As a new hot topic, re-staking has attracted much attention since last year. Its core charm lies in its ability to transform large-scale blockchain assets into a secure economic guarantee for emerging services. It is somewhat similar to the joint mining model that emerged in 2014 during the Proof of Work (PoW) era. In joint mining, participants contribute resources to innovate and protect network security, while re-staking introduces a penalty mechanism on this basis to balance and protect node security through multi-party gaming. This allows service and application developers to focus more on product development, which not only brings economic incentives to pledgers, but also provides support for the security and sustainability of the entire blockchain ecosystem.
Foresight News: At present, many people are questioning the risks of re-staking. What do you think? Do you think re-staking has the potential to cause systemic risks?
Zhuling Chen: When it comes to risks, whether it is staking or re-staking, it can be discussed from three aspects. First, the security of the principal. In the field of staking, although many projects are in the trial and exploration stage, the security of the principal is still controllable. For example, the non-custodial form of Babylon and EigenLayer can ensure that no external organization or individual can take away funds without authorization, which guarantees the security of the principal to a certain extent.
Secondly, we need to consider the risk of the pledge mechanism. In the pledge process, there are inevitably certain risks. However, the risks brought by the penalty mechanism are also guarantees, ensuring that the pledged nodes do not do evil, and ensuring the security and anti-attack capabilities of the nodes. When choosing a node provider with a good reputation and a solid foundation, especially one that provides insurance to protect the network, these risks can be reduced to a great extent.
Third, we need to pay attention to the liquidation that may be caused by excessive leverage. During the process of staking and re-staking, if the leverage is too high, it may trigger a chain reaction when the market fluctuates, leading to systemic liquidation. For example, if the risk exposure of each node is small, but the number is large, the accumulation may lead to huge losses. Therefore, controlling the leverage ratio and avoiding excessive leverage are important risk control points in the design of economic models. As a service provider, we have the responsibility to educate and guide users so that they fully understand the risks of participating in staking activities and take appropriate risk control measures. We will also establish our own risk control mechanism to ensure that no unnecessary risks are brought about by high leverage. While constantly exploring and increasing staking opportunities, we need to balance risk and safety.
Bedrock’s Journey
Foresight News: What other fields did you and your team members try before starting Bedrock? What impact did it have on your subsequent entrepreneurship?
Zhuling Chen: Our team members have diverse previous experiences. Most of them entered the industry in 2016 and 2017, and have accumulated rich experience in different fields. Team members have independently developed PoS public chains and have experience in large wallets and custody services. This has enabled us to have a deeper understanding and intuitive grasp of the economic model, risk mechanism and asset security of the PoS public chain. Our team was also formally established in 2019 and established Rock X, a company focusing on PoS node services. It is committed to ensuring the security of all PoS blockchains and providing users with continuous staking income.
Foresight News: You mentioned that your team previously worked as a node operator. What competitive advantages does Rock X have as a well-known node service provider? What impact will this have on future entrepreneurship?
Zhuling Chen: Currently, the node operators are mainly concentrated in Europe and America, and lack the development of the Asian market. We choose to focus on Asia, and our business scale has reached about 2 billion US dollars. Secondly, as a blockchain native team, we have a deeper understanding of node services. We do not regard it as a simple cloud server management, but analyze the characteristics of each blockchain in more depth, and sometimes modify the client to improve the security and efficiency of the service. Public chains are not necessarily perfect, and we hope to help users deal with the systemic risks that these immature blockchain software may bring. Third, we have service experience in more than 30 public chains, which means that we not only serve a specific ecosystem, but can meet the needs of users in different formats. We have rich experience in public chains such as Solana and Cosmos. We are also the earliest node operator to participate in Babylon. Fourth, our services are more extensive and comprehensive, providing not only block node services, but also information node services. The service objects include not only actual blockchain participants, but also developers. In order to better provide users with one-stop services to meet diverse needs. The team's technology and experience in Rock X node operation have enabled us to consider not only pure financial re-staking when we start a re-staking business, but also pay more attention to fund security, business closed loop, etc. At present, we have gradually developed a capability system that is more closely connected with the blockchain ecosystem.
Foresight News: What ultimately led you to start Bedrock?
Zhuling Chen: In fact, in 2020 and 2021, we officially entered the field of liquidity staking, established partnerships with many asset management companies and custodial wallets, and were also node operators for Lido and others. With our competitive advantage in staking income, we decided to create Bedrock last year after a new idea emerged. Bedrock is not driven by trading or lending, but is committed to bringing blockchain-native staking income to users, bringing these income into the ecosystem, achieving modularity, and ensuring the safe and stable operation of all blockchains.
Bedrock's Competitive Advantage
Foresight News: Why did Bedrock choose to develop a multi-chain LST protocol? What assets does it support now?
Zhuling Chen: The current pledge market usually operates based on specific processes. We hope to abstract the logic of the entire pledge industry, so we chose to enter the multi-chain LST. Bedrock actually started from ETH LST and has been running normally for more than a year. Now it has gradually evolved from a separate ETH LST to an ETH LRT and multi-asset LST protocol. The three major uniTokens currently supported cover ETH, wBTC (other wrap BTC) and IOTEX (DePIN). We believe that in the next 2-5 years, staking will not be limited to a single asset or specific protocol. Therefore, some considerations were taken when selecting assets. First, three types of assets were laid out: ETH, BTC, and IOTEX. As the largest smart contract platform, Ethereum can provide a variety of services through staking. As the largest asset in the market, Bitcoin has significant advantages in terms of pledge security and volume. The DePin track is also in urgent need of staking services, and they need a secure economic model to ensure operation. These assets will become the main direction of staking in a few years, and we hope to enable users to participate together through early layout.
Foresight News: There are many popular projects in the staking and re-staking fields, such as EigenLayer, Babylon and other LRTs. What is the connection between Bedrock and them, and how to achieve differentiated competition?
Zhuling Chen: First of all, like EigenLayer and Babylon, they are not competitors with us at all, but more like partners. We can bring them more economic volume, generate more pledge transactions to achieve mutual benefit and win-win, and we complement each other. Secondly, there are indeed some projects similar to ours in the market. In addition to the advantages of multi-asset re-pledge, they can also be expanded from two points. First of all, from the perspective of pledge income, many teams have taken a more radical approach, mainly by issuing liquidity tokens and trading on DEX to obtain income. And for us, this is only half of the income. In addition to the issuance and trading of liquidity tokens, the final real income still depends on the node operation ability, which is what we are better at. Second, our degree of decentralization is also relatively high. We hope that the entire protocol will run completely on the chain and be implemented through smart contracts to ensure that all operations are transparent and verifiable, avoiding the risks brought by centralization.
Foresight News: You mentioned your relationship with Babylon before. Will you continue to work on BTC staking? What is the current focus of the team?
Zhuling Chen: Our recent work focus is on the BTC staking field. We are very honored to have established contact with the Babylon team very early, and have been involved in technical feedback and testing support since the early stage of their project. In some more important meetings, we have also maintained a close cooperative relationship to jointly discuss and solve key technical problems. Especially about the security of funds. We have in-depth exchanges with their technical team every week to discuss how to ensure the safety of the principal and develop a reasonable economic model. The investment of the co-founder of Babylon is a great recognition for us. Recently, with the upcoming launch of the Babylon mainnet, our work focus has also shifted more towards BTC staking. It has been running for about a month and has attracted a large number of users. At the same time, we have also established cooperative relationships with many wallets. We hope to cooperate with the launch of Babylon to guide users to establish a new way of using BTC and achieve further development in the staking field.
Foresight News: Asset security is always the top concern for stakers. How do you ensure the security of user assets?
Zhuling Chen: Currently, BTC cannot fully realize asset custody through smart contracts, so more stringent security measures need to be taken. In order to ensure the security of assets, we chose to cooperate with the largest and most trusted BTC custody solution in the market. This means that we do not have the transfer authority of users' BTC. Users' BTC have been deposited in third-party custodians that are recognized and verified by the market. We are only responsible for helping users to pledge and generate income. This separation of authority design ensures asset security, and we cannot directly control users' assets. Secondly, when performing pledge operations, we also take a variety of security measures. For example, the risk of single point failure is eliminated in the internal process to ensure that the operation cannot be completed by a single individual. At the same time, an external verification mechanism is introduced to prevent risks caused by human errors or system vulnerabilities.
Foresight News: In addition to security considerations, revenue is also a topic of concern to many users. How do you balance and design it?
Zhuling Chen: We hope that more real users can participate in it. We also hope to lower the threshold for user participation and give users higher returns during the design. We do not set a threshold for staking funds. No matter how big or small the funds are, everyone can participate. In terms of profit distribution, we will not distribute airdrops completely according to the size of funds, but will find a balance between the number of participants. At present, Bedrock is in its infancy, and participation will bring more potential benefits. Our final profit distribution will depend on the overall distribution of users. In this way, we hope to provide fair participation opportunities for users of different sizes and allow more real users to participate.
Conclusion from the future development
Foresight News: What stage has the project reached at present? Can you share some current cooperation projects, industry activities and ecological landscape?
Zhuling Chen: We are currently in the user growth stage and hope to attract more users and projects to participate in our ecosystem. The current funding scale is about 200 million US dollars. We plan to launch more features to meet user needs. In order to provide users with more DeFi application scenarios, we have started to build some Dex liquidity and assets of lending platforms. We have launched an interest rate trading market similar to Pendle to allow users to lock in profits in advance. We are more happy that we recently won the championship in the BNB Chain hackathon. We have also received investments from Babylon Lianchuang, OKX Venture and LongHash.
Foresight News: You have not only received financing from OKX Venture, LongHash and other institutions, but also investments from c98 Community, Amber Group, and Babylon Lianchuang. What kind of future do you think they are investing in? How do you attract and select investors?
Zhuling Chen: Their investment in the future is first of all a recognition of the market size. The blue ocean market of BTC is still not fully developed at this stage, and the market needs to release BTC liquidity. Secondly, it is a recognition of our node operation and technical capabilities. We are more in line with these institutions in the pursuit of security and decentralization. In addition, angel investors have a more realistic perception of the team's strength in their daily cooperation with our project and believe that the team has the ability to survive bull and bear markets. The community usually pays more attention to decentralized construction and ecological sustainability. I believe that they also invest in us because BedRock has such future potential for development. When we choose investors, we hope that they not only have a wide range of knowledge in the industry, but also need to attach great importance to security, reduce the problems caused by radical and high risks, and hope to jointly build a sustainable ecosystem.