The long-awaited launch of Ethereum 2.0, a proof-of-stake (POS) network, is facing a problem; the risk of locking up the holders’ ETH for several months or staying liquid and opening up various options.
In efforts to solve this issue, DARMA Capital rolled out Liquidstake on Wednesday, enabling ETH stakers to acquire USDC stablecoin loans easily. The loans will be issued against staked assets and will allow stakers to earn rewards within the new network.
DARMA, a US licensed investment fund, started by ex ConsenSYS executives James Slazas and Andrew Keys, announced that it would devote about $50 million in value of its own ETH holdings for the new Ethereum deposit contract. The firm explained that this would enable individual and institutional investors to contribute towards Ethereum 2.0 and, at the same time, remain liquid.
Andrew Keys, DARMA Capital co-founder, explained that the initiative comes with economic incentives for those who will take part in Ethereum’s upgrade. Staking will see participants earn 15% of their assets in the course of the many months it might take to finish the network’s upgrades. He explained:
“Participants will not be able to ‘unstake’ those assets. So we’ve created LiquidStake, wherein users can earn staking rewards and have their staked ETH be pledged as collateral to receive a USDC loan. This is very different from BlockFi and Celsius and other lenders because, in those cases, you can’t stake the Ether, and you can’t earn the reward.”
Ethereum 2.0 (phase zero) is forecast to be rolled out on December 1 and will involve around 16,384 validators. The validators are expected to commit at least 32 ETH ($14,768) to a deposit contract. The network seeks to enhance Ethereum’s transactions by migrating from proof-of-work (PoW) to proof-of-stake (PoS) blockchain. Currently, the project is 10% finished, with about 53,000 ETH now deposited.
Although the network might begin validating blocks after being launched, stakers will essentially be locking up their assets for an unforeseeable future. They will not be allowed to withdraw them or utilize them elsewhere.