BIT launches LsETH/USDT trading pair for the first time: Compliant Ethereum pledge service brings opportunities to Ethereum pledge ETF

Cryptocurrency exchange BIT (bit.com) first launched the LsETH/USDT trading pair. It is currently the second exchange to launch LsETH besides Coinbase among the centralized exchanges. It is also the only exchange that supports the LsETH/USDT trading pair. Coinbase currently supports LsETH/USD and LsETH/ETH trading pairs. BIT Exchange’s recent series of moves in the market have attracted widespread attention. Launching small currency option products, launching financial innovative product squared options, launching Eigenlayerpoints spot trading market, and launching the first LsETH/USDT trading pair. These actions are all actions that respond to user needs, actively carry out financial innovation, and provide rapid feedback. manifestations of market changes. The launch of LsETH means that investors can more conveniently participate in staking activities on the Ethereum network, and it also provides a simpler and more efficient option for users who want to gain income through staking.

Ethereum ETF vs Ethereum Staking ETF

In this bull market started by Bitcoin Inscription and led by Bitcoin ETF through relay, the performance of ETH has always been unsatisfactory. On May 21, 2024, affected by the news that the SEC might approve a spot Ethereum ETF, the price of Ethereum jumped in response, soaring from around US$3,150 to over US$3,600 in 3 hours, and touched US$3,942.24 in the following days. Highest price in 2024.

Due to regulatory uncertainty and the SEC’s stance on staking activities in such funds, the current SEC application for a spot Ethereum ETF excludes staking functionality. However, on June 17, Canada’s Purpose Investments announced the conversion of its Ethereum Capital Corporation into a staked Ethereum ETF. The switch shows Canada is the first to embrace Ethereum staking after the U.S. Securities and Exchange Commission expressed unease with the concept.

On June 13, cryptocurrency derivatives trader Gordon Grant said in an interview with TheBlock that for institutional investors, the spot Ethereum exchange-traded fund (ETF) will not support the staking function. Attraction may wane, and institutional funds may wait until pledges are approved before investing in such funds. Grant noted that unlike Bitcoin, holding Ethereum directly may have meaningful performance advantages for institutional investors over spot Ethereum ETFs. Until the staking feature of the spot Ethereum ETF is enabled, institutional traders will use on-chain solutions.

Grant is not the first to make this claim. JPMorgan said in a recent report that the lack of staking features in approved spot Ethereum ETFs makes these products less attractive as investment products. Analysts believe that because ETFs have removed the staking feature from their applications, this makes them “less attractive than platforms that offer staking yields.” JPMorgan expects spot Ethereum ETFs to attract up to $3 billion in net inflows over the remainder of the year. If staking is allowed, that number could rise to $6 billion.

The compliance pain of cryptocurrency staking

Cryptocurrency staking refers to staking digital assets to help protect the blockchain or provide verification and other services, thereby contributing to the system and obtaining corresponding benefits. In August 2022, the U.S. Securities and Exchange Commission (SEC) launched an investigation into the cryptocurrency staking services provided by Coinbase. The services involved include Coinbase’s staking plan, asset listing process, asset classification and stablecoin products. In February 2023, the SEC conducted a review of Kraken, noting that investors would lose control of their tokens when providing them to Kraken’s “staking-as-a-service” platforms and incur liability associated with these platforms. Risks with little to no protection. At the same time, Kraken announced the termination of its staking-as-a-service program for US users.

SEC Chairman Gary Gensler said that staking-as-a-service providers must register and provide comprehensive, fair and true disclosure and investor protection. On July 15, 2023, Coinbase announced that users in California, New Jersey, South Carolina, and Wisconsin in the United States will temporarily be unable to use its staking services.

So, why is the SEC’s scrutiny of cryptocurrency staking services so harsh? The root cause is that, in addition to native staking, the staking services provided by centralized exchanges and staking service providers often have low thresholds and it is impossible to identify whether there is black money; these institutions may also have black box operations, and users do not know the specific flow of funds. It is more likely to absorb savings and earn interest. In addition, there is no way to verify whether encrypted assets are actually pledged into the network, let alone whether network security is guaranteed. This opacity and potentially high risks have prompted the SEC to conduct strict scrutiny of these pledge services to ensure that the interests of investors are not violated and to promote the healthy development of the industry.

By requiring staking service providers to register and make full disclosures, the SEC hopes to increase market transparency and protect investors while preventing money laundering and other illegal activities.

LiquidCollective - Establishing industry liquidity staking standards

LiquidCollective is a multi-chain liquidity staking protocol designed to provide institutions with a non-custodial decentralized liquidity staking solution. LiquidCollective attaches great importance to compliance and security, requiring users and node operators to complete KYC/AML (Anti-Money Laundering) certification. The core component of

LiquidCollective is the smart contract. Users can deposit any amount of ETH into the smart contract, with no limit of 32 ETH. When the balance of the smart contract reaches 32 ETH, the ETH in the contract will be pledged to the node operator in a circular manner. Node operators include CoinbaseCloud and Figment, etc. They run verification node infrastructure on LiquidCollective and receive network rewards. LiquidCollective itself does not run verification nodes.

When users deposit ETH to the LiquidCollective protocol, they receive LsETH. LsETH (LiquidStakedETH) is a token generated when Ethereum (ETH) is pledged through LiquidCollective’s liquidity staking protocol. It represents staked ETH and its accumulated network rewards, as well as proof of ownership minus fees or penalties. The total amount of LsETH will not change with the changes in the number of protocol layer pledge rewards and network penalties, but will be balanced by the "exchange rate" between LsETH and ETH.

For example, when we staked 100 ETH through LiquidCollective, we got 100 LsETH at a 1:1 ratio, and the staking reward was 20 ETH one month later, assuming there was no network penalty fee in the middle, then The total amount of ETH at the protocol layer is 120. At this time, if you want to exchange 100 LsETH into 120 ETH, you need to multiply the "exchange rate" of 1.2. In the same way, according to the exchange rate of 1.2 at this time, only 120 ETH can be pledged to obtain 100 LsETH.

Here, the exchange rate is calculated as the total balance of staked ETH divided by the total supply of LsETH. The oracle will report data from the consensus layer to the execution layer every 24 hours, and report the balance of the pledged tokens, the accrued staking rewards, and the penalty fees that should be deducted to the core contract of LiquidCollective to calculate the new exchange rate .

Exchange Ratio = LsETH is based on the Ethereum ERC-20 token model and its exchange rate fluctuates to reflect the value of accumulated rewards and penalties. The advantage of using ERC20-based cToken contracts is that user pledge income, compound interest, etc. are fully automated without manual operations, minimizing gas consumption. At the same time, due to the real-time changes in the exchange rate, LsETH is actually no different from other tokens. Users can use LsETH for transactions, mortgage lending, and even re-pledge it to Ethereum through EigenLayer.

LiquidCollective achieves non-custodial and decentralization while ensuring compliance, increasing the security of the Ethereum network. For institutions, using the staking service of LiquidCollective can, on the one hand, cope with regulatory scrutiny and avoid sanctions screening; on the other hand, unlike other Ethereum pledges, LiquidCollective releases the liquidity of pledged assets, LsETH Can be used for both exchange and integration with DeFi.

In the view of LiquidCollective, the multiple liquidity staking products currently on the market can easily lead to fragmentation. Different protocols are competing for DeFi resources. LST tokens of different standards will limit liquidity and lack compliance. and composability. Therefore, LiquidCollective establishes an industry alliance for decentralized management by gathering major players in the DeFi ecosystem. This alliance includes The Liquid Foundation, Alluvial, Coinbase, Figment, Kiln, Acala, RomeBlockchainLabs, Kraken, Staked, Bit coinSuisse with other Web3 organizations involving integrators , cross-chain builders, node operators, etc.

For LiquidCollective, a decentralized and compliant liquidity staking solution is not the end point. The ultimate goal is to develop a liquidity staking standard for the industry based on this solution.

Conclusion

BIT Exchange is committed to providing users with more diverse trading options and more flexible trading pairs to meet the needs of different investors. By continuously launching new products and new trading pairs, BIT Exchange has demonstrated its leadership in innovation and adapting to market needs.

Secondly, LsETH

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