Evan Weiss, COO at Alluvial, on Liquid Staking, the ETH ETF, and the Future of DeFi and Staking | Ep. 357

In a compelling episode of the Cryptonews Podcast , Evan Weiss, COO of Alluvial and a key member of Liquid Collective, sat down with Matt Zahab to explore the intricacies of staking within the Ethereum ecosystem and the future of DeFi.

Weiss provided an in-depth look at liquid staking, the innovative concept of restaking, and the broader implications for decentralized finance (DeFi).

Liquid staking, a method that allows users to stake their ETH while retaining liquidity through derivative tokens, has been a game-changer in the DeFi space. These derivative tokens can be used within DeFi ecosystems to offer flexibility and additional earning opportunities.

Restaking, on the other hand, is a newer concept introduced by protocols like EigenLayer. This protocol leverages the security of the Ethereum blockchain to secure multiple protocols and enhance yield for stakers without the need for separate validator networks.

Liquid Staking: A Game Changer in DeFi

Evan Weiss has long believed in the transformative potential of liquid staking in the DeFi space. He noted its role in providing liquidity while maintaining the benefits of staking, which initially sounds too innovative to be true.

To simplify the explanation, liquid staking is all about allowing users to earn staking rewards while utilizing derivative tokens in various DeFi protocols, directly facilitating capital efficiency more than before.

Weiss further highlighted the significance of this development, particularly in fostering greater participation from retail and institutional investors.

He explained that by offering a way to stake assets without locking them up, liquid staking addresses one of the main barriers to entry into the staking ecosystem.

“If you stake and your assets are locked up, you’re about 93% less likely to stake. Whereas if you have liquidity, now I don’t need to think about when I need to sell.”

This innovation democratizes access to staking rewards and integrates more seamlessly with existing DeFi protocols, creating a more interconnected and efficient financial ecosystem.

He elaborated on how platforms like Liquid Collective drive this change by providing a robust infrastructure for liquid staking.

“We’re going to build this product through that large enterprises, whether that’s a crypto exchange, an asset manager, get integrated this into their solution, and be able to bring a really great and liquid and scalable product to their end users.”

A Step Further in the Staking Paradigm: Restaking

Restaking, as introduced by EigenLayer, represents a significant advancement in the staking paradigm. It allows the security of staked ETH to be leveraged across multiple protocols, directly multiplying the yield potential.

Restaking maximizes the utility of staked assets by enabling stakers to secure additional protocols without the need for separate validator networks.

Weiss also discussed how restaking could lead to higher yields for participants, as they can earn rewards from multiple protocols.

He emphasized that this innovation benefits individual stakers and contributes to the robustness of the broader Ethereum ecosystem in terms of security and network efficiency.

“The nice thing with restaking is now if you have ETH, I can restake my ETH and I earn nice staking rewards, like we’ve talked about, that yield right there, but also I can also earn additional rewards or yield from those different ABSs. And so it’s a way to really kind of continue to increase you helping secure blockchains, but also increasing the yield you can earn on your Ethereum.”

If we can provide a more flexible and efficient way to secure networks, restacking could play a crucial role in the growth and sustainability of DeFi projects.

Moreover, Weiss pointed out the importance of trust and security in this new model. He emphasized that for staking to gain widespread adoption, it’s essential that users trust the security measures in place.

“I think with products that we’re building that we can satisfy very large enterprises, compliance and security requirements, and some of this new technology improvements, that’s the thing that I think getting mainstream users to be able to participate in DeFi.”

Institutional Adoption of DeFi and “Regulatory Certainty Coming Through”

One of the key themes in Weiss’s discussion was also the growing interest from institutional players in the DeFi space.

The regulatory landscape is changing fast, with developments such as ETH ETFs and legislative progress in the U.S. paving the way for greater institutional involvement.

“I expect that, you know, crypto is just becoming more of a political, you know, hopefully bipartisan political issue. And with that, we’ll have regulatory certainty coming through whether Congress or a new change in regime at the SEC. But, you know, I’d say hold on to your seats if that happens, because I think these big players are kind of itching to get in and start innovating a little bit.”

While some speculated on the motive behind these moves, Weiss suggested that these changes are crucial in providing regulatory clarity for traditional financial institutions to enter the crypto space confidently.

Weiss emphasized that improved regulatory frameworks could unlock substantial capital inflows from institutional investors, restoring the legitimacy and stability that seemed to have been lost in the DeFi ecosystem.

Notably, he also addressed the potential challenges presented by regulatory developments.

He portrayed regulation as a double-edged sword. While it can provide much-needed clarity and security, it also risks stifling innovation if not implemented thoughtfully.

How to Improve Mainstream Adoption of DeFi?

According to Weiss, improving user experience is critical for the mainstream adoption of DeFi. He pointed to innovations like Coinbase’s smart contract wallet, which simplifies interactions with DeFi protocols.

“Normal people like my parents, my friends where they could just click a button and stake. And I think that is kind of what we’ll start to see with restaking as more of these centralized players just make it super easy.”

These innovations lower the barriers to entry by making it easier for users to manage their digital assets and participate in staking.

Weiss envisions a future where interacting with DeFi platforms is as intuitive as traditional online banking. This shift will require ongoing efforts to streamline interfaces, improve security, and educate users about the benefits and risks of DeFi.

If these challenges can be duly addressed, the DeFi community can build a more inclusive and accessible financial system that caters to diverse users.

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That’s Not All: Other Key Takeaways from the Podcast

• Ethereum at the center of staking and its impact.
• Achieving decentralization in staking.
• Blockchain interoperability benefits.
• Managing Staking risks.
• Enhancing smart contract security through staking.
• DeFi’s role in financial inclusion.

You can watch the full podcast episode here.

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About Evan Weiss

Evan Weiss, Chief Operating Officer at Alluvial, is a seasoned expert in the crypto industry. Before Alluvial, he served as the Business Development Lead for Coinbase Cloud at Coinbase, where he played a crucial role in leading business teams for the launch of Coinbase’s Wallet-as-a-Service.

Prior to this, he also served as the Head of Business Operations at Bison Trails, successfully managing sales, business operations, and customer success teams.

Under Evan’s leadership, these teams built the industry’s largest staking provider, overseeing assets totaling over $30 billion by November 2021.

Evan is also the founder of the Proof of Stake Alliance (POSA), a nonprofit industry alliance established in 2019. POSA has been a driving force in advocating forward-thinking public policies to foster innovation in proof-of-stake ecosystems.

Evan’s work with POSA includes contributions to legal frameworks for staking, industry principles for staking-as-a-service, and fair taxation of staking rewards.

His efforts have resulted in the publication of the first legal research addressing staking regulation and tax considerations, particularly in the context of liquid staking in the United States.