Introducing ixETH - The Ethereum Liquid Staking Index Token

stake.link is proud to introduce the Ethereum Liquid Staking Index Token ixETH! Backed by a diversified basket of Ethereum Liquid Staking Derivatives (LSDs), ixETH provides users a blended return of the leading ETH Liquid Staking protocols. Deposit a supported LSD and receive ixETH, mitigating the risk of underperformance or losses of any one protocol. Built with flexibility and extensibility in mind, additional ETH LSDs can be added, and additional onramps can be built, like direct ixETH minting using ETH or stablecoins.

What is a Liquid Staking Derivative?

Many mechanisms in the blockchain space rely on some form of staking to enhance their security, enable voting, or enforce some form of lockup for one reason or another.  (But what is staking?) A Liquid Staking Receipt Token, or Liquid Staking Derivative (LSD), allows a user to participate in and receive the benefits of the staking mechanism and to further utilize their underlying capital by making it available to them via a freely transferable and tradeable - or liquid - token representing that underlying capital. That capital is still there doing its job, earning rewards for being made available to its intended primary mechanism, and is still exposed to the risks associated with that mechanism, but can now be sold to frictionlessly exit, or used in additional DeFi applications.

But why an index of LSDs?

With the expansion of the liquid staking ecosystem, selecting the right protocol to stake with becomes increasingly challenging. Do you go with the industry leader or a solution that favors decentralization? How do you mitigate the risk of slashing or a protocol-level exploit? By diversifying across the most reliable, highest returning, and secure liquid ETH staking solutions, ixETH provides the benefits of all while mitigating the risk from each.

How does it work?

Using ixETH is simple. Just deposit a supported ETH LSD, and you’re done! You’ll receive ixETH, the protocol’s rebasing token representing your share of the underlying protocol. Your blended rewards will accrue directly to your ixETH in your wallet.

We’ve open-sourced the ixETH contracts, and are proud to have had them audited by Cyfrin.

ixETH's blended yield with rETH and stETH at target compositions
ixETH's blended yield with rETH and stETH at target compositions

Leveraging configurable composition targets allows the protocol to flexibly receive deposits of a given supported ETH LSD within a target range. For example, upon the launch of stake.link’s Ethereum Liquid Staking protocol and addition of its ETH LSD sdlETH to the Ethereum Index, with a target composition of 20% of the overall liquidity and a composition tolerance of 50%, users will be able to deposit sdlETH until it reaches a 30% of the composition of the overall deposits. Withdrawals issue a blend of tokens - bringing the underlying collateral closer to the target compositions.

ixETH will be launched with initial support for Rocket Pool’s rETH and Lido’s stETH using the cube root of their market caps as their composition targets, with a 50% composition tolerance. In order to permissively enable liquidity at launch, the composition targets will not be enforced until we reach a total liquidity of 500 ETH in the supported LSDs. This amount is referred to as the Enforcement Threshold and is configurable by governance.

There will be no fee to mint ixETH using one of the component LSDs, but there is a 0.25% streaming fee assessed on the earned rewards, which will be used to purchase SDL off the open market and return it to the treasury.

Boosted rewards

ixETH doesn’t just return the average yield of the underlying collateral tokens. While there is a 1% withdrawal fee assessed on the full amount of any withdrawal, this fee is directed entirely back to ixETH holders. At a 5% turnover rate the total returns received by ixETH holders are driven above the mean Ethereum staking yield - beating the returns earned by any one ETH staking protocol.

ixETH yield, assuming a 1% withdrawal fee and a 5% turnover rate
ixETH yield, assuming a 1% withdrawal fee and a 5% turnover rate

How it starts, how it grows

Initially, Lido’s stETH and RocketPool’s rETH will be supported as depositable collateral. Additional tokens can be added by governance - but must meet specific criteria:

  • Must be ETH staking LSDs or ETH index tokens

  • Must be open-source, have public audits, and be reviewed by the stake.link core team

  • Must have a 30-day APR comparable to the mean APR for other Ethereum liquid staking solutions

  • Must have transparent, auditable data regarding participating validators and their underlying clients or the token composition if an index

Suffice it to say, as soon as we launch our Ethereum Liquid Staking protocol, we’ll propose a governance vote to include sdlETH in ixETH as well.

We’re proud to launch this product, and it's just the first in a number of new ones we plan to release throughout the rest of the year. Stay tuned!

stake.link is a diversified liquid staking protocol powered by fifteen of the most experienced and reliable infrastructure providers in the Web3 industry. Following the successful launch of the first-of-its-kind liquid staking solution for Chainlink Staking, the stake.link DAO is rapidly iterating towards its own Ethereum liquid staking platform, with more innovative, high-utility tools like today’s diversified ETH LSD index ixETH on the way.

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