Author: Golden Finance, Climber
On July 11, Alluviall, the developer of Liquid Collective, a liquidity staking protocol for institutional clients, announced the completion of a $12 million Series A financing round, led by Ethereal Ventures and Variant, with participation from Brevan Howard Digital, Avon Ventures under Fidelity, IOBC Capital and other institutions.
In May last year, Alluviall was supported by Coinbase and the cryptocurrency pledge project Figment, and Coinbase Cloud and Figment became verifiers of Alluvial's new protocol. Additionally, Alluvial received $6.2 million in seed funding from strategic players including Coinbase Ventures, Kraken, Figment, and Kiln.
As a project in the LSD track for enterprises and institutions, what exactly does Alluvial and the Liquid Collective protocol it developed do? And why was it able to gain capital favor and receive $12 million in the A round? Golden Finance will explain this potential new star in detail.
Alluvial
Alluviall is a remote software development company incorporated in Delaware, and the Liquid Collective Foundation is registered in the Cayman Islands. The team is mainly located in the United States, Europe and Dubai.
Specifically, Alluvial is a software development company supporting the enterprise-grade liquidity staking protocol Liquid Collective, primarily supporting the adoption of Liquid Collective through an API-first product approach, which simplifies liquidity staking integration for digital asset exchanges, custodians, and other enterprises.
The team aims to enable participants who have been marginalized by existing liquidity staking options to easily access enterprise-grade liquidity staking across multiple blockchains.
There are two major problems in the current liquidity staking market: First, crypto-native decentralized protocols have built innovative solutions, but from the perspective of compliance and security, such protocols cannot meet the needs of institutions. Second, large custodians and exchanges have "liquidity" staking, but capital efficiency is not high, and staking is mostly concentrated in a single entity.
Therefore, Alluvial is working with Web3 builders, enterprise partners, and leading validators to create a new standard for institutional liquid staking to solve the above problems. The Liquid Collective protocol is able to meet the functions required by mature enterprises, such as KYC/AML checks, enterprise-grade security, and strong monitoring and reporting.
Liquid Collective
Liquid Collective is a protocol developed in collaboration with different industry leaders to meet the need for an enterprise-grade liquid staking standard that, once widely adopted, will improve the liquidity and composability of the web3 economy while meeting the needs of enterprises and institutions for the highest levels of security and compliance.
Liquid Collective is managed by an independent industry consortium, with initial members including Liquid Foundation and other web3 industry players. The protocol will eventually provide multi-chain capabilities and will be managed in a decentralized manner by a broad and decentralized community of industry participants.
When users deposit money into the Liquid Collective protocol, they receive an equivalent token, which is used to prove their legal and profitable ownership of the underlying collateral assets and any resulting network rewards, including penalty protocol service fees and network fines.
feature:
Security and compliance: Verification technology from enterprise-level infrastructure supports customer security staking; mandatory KYC/AML for users and operators helps with compliance.
Cross-protocol: Collaborate with top teams on other blockchains to provide native liquidity staking solutions on each network.
Loss protection: Substantial loss protection is provided to each participant through the agreement.
Focus on providing liquidity: Industry-leading aggregators (i.e. exchanges and custodians) to support liquidity.
Ecological composition:
Liquid Collective is an ecosystem of software components and service providers.
1. Software components:
The core component of the protocol is a set of Ethereum-based smart contracts that support institutional liquidity staking, including:
▪ERC20 cToken contract for LsETH.
▪Allowlist contract, which contains the address list of whitelisted users who can make deposit and withdrawal operations.
▪Operator Manager allows node operators to manage validator keys.
▪The Oracle contract allows a quorum of Oracle operators to report consensus layer data.
Off-chain components:
▪ Command line tool CLI that can be used by node operators.
▪Provide guardian services for Oracle operators.
▪Various APIs to facilitate access to whitelisted users to access the protocol, access various data monitoring related to the protocol and notify agents, etc.
2. Service Providers:
▪Node operations that run the validator infrastructure. Liquid Collective does not operate the validator infrastructure, but delegates the task to a group of operators.
▪Oracle operators report data from the consensus layer to the execution layer.
▪Integrators conduct KYC review and submit user whitelist addresses, while providing deposit and withdrawal paths.
operation flow:
1. An approved validator registers a validator key with the protocol.
2. Allowlisters are approved integrators such as trading venues and custodians who perform KYC/AML checks on their users and who submit approved user addresses to the protocol’s allowlist.
3. Approved user addresses that have been allowed to be listed can deposit tokens into the Liquid Collective protocol and receive LsETH in return.
4. The Liquid Collective protocol sends the deposited tokens to the Ethereum deposit contract and assigns the approved validator keys to the bonded tokens.
5. Validators perform validation duties and receive network rewards.
6. The Oracle Operator reports the balance of the underlying staked token plus accumulated staking rewards minus any staking penalties, which informs the deposit and withdrawal conversion rates of the receipt token when post-withdrawal support is enabled on Ethereum.
Token Model:
LsETH is a fungible receipt token based on the Ethereum ERC-20 cToken model. When users deposit ETH into the Liquid Collective protocol, they receive LsETH, proving their legal and beneficial ownership of the staked ETH, as well as any network reward and penalty protocol service fees and network penalties (if any) for the staked ETH.
LsETH implements a cToken model that uses a floating conversion rate (also known as the protocol conversion rate) between receipt tokens and staking tokens to reflect the value of the accumulated network rewards, penalties, and fees associated with staking tokens. The conversion rate refers to the amount of ETH that LsETH can be converted into. The conversion rate has nothing to do with the price at which ETH or LsETH trades on the open market.
The Oracle Network reports new ETH balances from accumulated network rewards or fees at least once every 24 hours. The conversion rate is calculated by dividing the total balance of ETH by the total supply of LsETH. If the accumulated network rewards are greater than the penalties and fees, the protocol conversion rate will increase to reflect the net network rewards collected by the protocol. Due to the design of cTokens, the conversion rate of LsETH may fluctuate.
Conclusion
Due to the collapse of many crypto companies in 2022, trust in CEX and CeFi lending services is at an all-time low. Market participants are becoming more cautious and prefer stable income financial products. Therefore, crypto financial services need to launch more structured products with principal protection to meet these needs and maintain their current operating level.
LSD is a good option, especially with the development and release of more enterprise-level liquidity pledge protocols in 2023. Alluvial, the developer of the enterprise-level LSD protocol, just caters to this demand and was able to obtain a total of US$18.2 million in seed and A rounds to develop the protocol and team.
The rapid growth of cbETH and rETH this year shows that there is huge room for growth in the liquidity staking business, and the new enterprise-level protocol Liquid Collective may also get a piece of the pie from Lido.
