Written by: Echo, Meta Era
"Full chain, pledge, liquidity, TVL", these words have become the hottest topics in the DeFi world this year. However, in the current DeFi market, users are increasingly confused about: Which interest-bearing assets have real value? And what kind of TVL can still represent value? In order to find the answer, MetaEra had an in-depth conversation with Charles K, the founder of StakeStone, the earliest founder of the full-chain liquidity asset protocol, and talked about "StakeStone's original intention", "interest-bearing and liquidity issues", "what kind of interest-bearing assets have real value" and "what kind of TVL represents value" and other topics.
MetaEra: Can you briefly introduce what StakeStone is in a few sentences?
Charles K: StakeStone was born in the context of a diversified era. First, with the completion of the Shanghai upgrade in 2023, Ethereum's Proof of Stake (PoS) mechanism has achieved two-way access to deposits and withdrawals of pledged assets. This change has officially ushered in the era of risk-free returns for Ethereum assets.
The second major background is that around August 2023, after the ETHCC conference, Linea, MANTLE, Base and other projects released their mainnets one after another, marking the official entry of the entire industry into a new era of Layer 2 flourishing. We have officially entered the era of multi-chain or full-chain. This means that assets and applications must be deployed and applied in a full-chain manner to adapt to this new industry trend.
In this era, StakeStone came into being, committed to building full-chain interest-bearing liquidity ETH and full-chain liquidity distribution infrastructure.
MetaEra: Why did you create StakeStone? What was your original intention for creating StakeStone?
Charles K: The original intention of our founding StakeStone was to solve the huge pain point that when ETH has a risk-free rate of return based on ETH, Native ETH will become a liquid asset whose opportunity cost cannot be afforded by the L2 ecosystem, thus requiring a new interest-bearing ETH asset with full-chain liquidity. In order to solve this problem, we need to solve problems at three levels:
Able to continuously optimize underlying returns to cover opportunity costs as much as possible.
Transform interest-bearing ETH (STONE) from a single-chain ledger asset into an L2 ecosystem protocol-friendly full-chain ledger asset.
Provide full-chain liquidity for the supported public chain ecosystem, so that assets can be fully utilized by the public chain ecosystem.
To this end, we spent more than a year to finally build the world's first and only full-chain interest-bearing ETH asset that can continuously optimize the underlying income without affecting the STONE in circulation. At the same time, after strategic cooperation with Native.org, we built the first full-chain liquid asset that can have equal liquidity on every supported chain.
MetaEra: The market has always believed that StakeStone is an LRT protocol. Can you tell us the difference between StakeStone and LRT protocols?
Charles K: LRT is a Restaking Pool protocol, and its core service is based on a specific restaking protocol such as Eigenlayerâs restaking service. StakeStone is a full-chain liquidity asset protocol. We want to be more like the ETH version of MakerDao. Our core service is asset issuance and full-chain management services. Covering as many ETH risk-free interest-earning opportunities as possible is a necessary component of asset management.
When a new underlying yield layer emerges, StakeStone can optimize the underlying yield without affecting the STONE already circulating in the market, while LRT needs to re-issue a staking pool and a staking certificate to achieve this.
At the same time, the main customers of LRT are institutional-level pledgers, so these institutions need to clarify the destination of funds at the beginning of the deposit. LRT is easier to obtain TVL because it can meet the directional pledge needs of super institutions, but on the other hand, it also shows that the TVL of these directional pledge needs is static and will not participate in the TVL of ecological construction.
Since LRT is oriented to a specific underlying pledge agreement and cannot optimize and adjust the underlying returns, when new underlying assets arrive, it will be like today's LRT to LST. Funds will flow to the new underlying pledge agreement.
Moreover, it is difficult for LRT to build full-chain liquidity. An asset without liquidity on L2 has no ecological construction significance except as a TVL number. In the next Q4, more L2 and new public chain ecosystems will realize this.
Therefore, there are essential differences between StakeStone and LRT.
MetaEra: You just mentioned that starting from Q4, L2 and new public chains will pay more and more attention to the significance of asset liquidity for ecological construction. What specific changes do you think will happen in the future?
Charles K: This is another big topic. As more and more public chain ecosystems absorb interest-bearing assets LRT/BTC LST, the next problem facing the ecosystem is how to apply these assets. At this time, public chain operators will find that 1) most of the LRT/BTC LST assets do not have liquidity on the chain, so neither lending, CDP, nor derivatives protocols can be integrated and used. 2) LRT/BTC LST seriously splits liquidity. 3) Some BTC assets use the massive amount of false TVL brought by centralized casting. Therefore, the simple TVL numbers become meaningless, not only will they not create value, but they will make it difficult to build the ecosystem. I believe that more and more public chain operators will realize this problem and change their token incentive plans from simply incentivizing passive Numbers to incentivizing TVL that can be applied and active.
MetaEra: We know that in addition to the existing ETH product STONE, StakeStone has also recently released its own BTC product. Can you briefly introduce what kind of entry perspective StakeStone hopes to use to participate in BTCFi?
Charles K: Since BTC does not have smart contracts and native revenue mechanisms, BTC naturally faces two levels of problems: 1) How can native BTC come to the EVM chain and adapt to the current multi-chain environment; 2) BTC earns interest on the chain; corresponding to these two levels of problems, StakeStone will release two BTC assets: SBTC (StakeStone Bitcoin) and STONEBTC.
SBTC focuses on solving how to build the first full-chain liquid BTC asset. Before decentralized off-chain methods such as OP_CAT are implemented, the solution of custodians casting BTC will still be the dominant solution for BTC to arrive on the EVM chain. Therefore, at this stage, our SBTC will adopt the solution of receiving custodial BTC and casting full-chain liquid BTC to solve the first-layer problem. The first phase of SBTC will support receiving custodial BTC such as BTCB and cbBTC for completely decentralized casting.
STONEBTC will be positioned as an interest-bearing BTC that maximizes the BTC income on the chain. Users will have the opportunity to obtain the comprehensive income of BTC pledge agreements such as Babylon, re-pledge agreements such as Symbotic, pledge mining pool agreements such as Lombard, etc.
MetaEra: What do you think is the biggest difference between the Ethereum ecosystem and the Bitcoin ecosystem?
Charles K: The differences between the two ecosystems are very significant, mainly reflected in three aspects:
First, the Bitcoin ecosystem lacks on-chain liquid assets. In Ethereum, Ether (ETH) itself is an on-chain asset with extremely high liquidity, and almost everyone is willing to accept it. In contrast, there is no such asset in Bitcoin (BTC), and the liquidity of WBTC is far less than that of Ethereum.
Second, due to the lack of liquid assets, the application scenarios based on Bitcoin are limited. For example, it is difficult to create a CDP with Bitcoin and make it reach the scale of MakerDAO. Insufficient liquidity limits the development of Bitcoin Finance (BTCFI).
Third, people who hold Bitcoin do not usually participate in DeFi activities. Bitcoin is more like a gold-like reserve asset rather than being used for daily applications. Therefore, the number of users willing to use Bitcoin on the chain is very limited, which also limits the user base behind BTCFI.
Despite this, we still choose to deploy the BTC ecosystem because we see more and more projects and capital working to expand the Bitcoin ecosystem. These efforts may increase BTCFI's user participation several times compared to the past.
MetaEra: We have observed that the market is becoming less and less sensitive to TVL figures. What do you think about the weakening value anchoring ability of TVL?
Charles K: I think for any project, whether it is a pledge agreement or a public chain ecosystem, the valuable TVL is always the available TVL with real users. It is precisely because of the unavailable watered-down TVL that the market loses its value anchor.
At the same time, another connotation of TVL is TVT (Total Value Trusted). Whether the TVL of a protocol is valuable depends on whether it can represent the trust of users. If you only allow deposits but not withdrawals, repeatedly change the incentive promises before deposits, and withhold rewards if you withdraw money, how can you win trust with a high TVL? A protocol that cannot carry trust naturally cannot carry real value.
