Written by: Echo, MetaEra
In the rapidly evolving world of decentralized finance (DeFi) and blockchain technology, yield-generating assets have become a critical component of public chain ecosystems. However, not all yield-bearing assets contribute equally to the long-term health and value of these ecosystems. Terms like 'cross-chain,' 'staking,' 'liquidity,' and 'TVL' have become the hottest topics in the DeFi world this year. However, in today’s DeFi market, users are increasingly confused: which yield-generating assets truly hold value, and what kind of TVL can still represent value?
In search of answers, Echo from MetaEra sits down with Charles K, founder of StakeStone, the first in the market to establish a cross-chain liquidity asset protocol, as they deep dive into several topics, including 'StakeStone's original intention,' 'issues surrounding yield and liquidity,' 'what types of yield-generating assets truly have value,' and 'what kind of TVL represents value.'
Echo, MetaEra: Could you briefly introduce what StakeStone is in just a few sentences?
Charles K, StakeStone: StakeStone was born in the context of a diversified era. First, with the completion of Ethereum’s Shanghai upgrade in 2023, the Proof of Stake (PoS) mechanism of Ethereum enabled the two-way flow of staked assets. This change officially ushered in the era of risk-free yields for Ethereum assets.
The second major background is that after the ETHCC conference in August 2023, projects like Linea, MANTLE, and Base successively launched their mainnets, marking the beginning of a new era of Layer 2 expansion. We have officially entered the era of multi-chain or cross-chain ecosystems. This means that assets and applications must be deployed and utilized in a cross-chain manner to adapt to this new industry trend.
Under this context, StakeStone emerged, dedicated to creating cross-chain yield-generating ETH liquidity and a cross-chain liquidity distribution infrastructure.
Echo: Why create StakeStone? What was the original intention behind it?
Charles K: Our original intention in founding StakeStone was to address a major pain point: as ETH gains a risk-free yield in ETH terms, native ETH will become a liquidity asset whose opportunity cost Layer 2 ecosystems cannot afford. Therefore, a new cross-chain liquidity yield-generating ETH asset was needed. To solve this, we needed to address three key issues:
Continuously optimize the underlying yield to cover as much opportunity cost as possible.
Transform yield-bearing ETH (STONE) from a single-chain ledger asset into a cross-chain ledger asset that is friendly to Layer 2 ecosystems.
Provide cross-chain liquidity for supported public chain ecosystems so that assets can be fully utilized by the public chain ecosystem.
For this, we spent more than a year constructing the world’s first and only cross-chain yield-generating ETH asset, capable of optimizing the underlying yield without affecting circulating STONE. Additionally, after forming a strategic partnership with Native.org, we built the first cross-chain liquidity asset that can maintain equal liquidity on every supported chain.
Echo: The market has always considered StakeStone as an LRT protocol. Could you explain the difference between StakeStone and the LRT protocol?
Charles K: LRT is a Restaking Pool protocol, primarily offering restaking services based on a specific restaking protocol such as Eigenlayer. StakeStone, on the other hand, is a cross-chain liquidity asset protocol. We are more like the ETH version of MakerDao. Our core services focus on asset issuance and cross-chain operational services. Covering as many ETH risk-free yield opportunities as possible is a key component of asset management.
When a new underlying yield opportunity arises, StakeStone can optimize the underlying yield without affecting the already circulating STONE in the market. LRT, however, would need to reissue a staking pool and staking certificate to achieve this.
Moreover, LRT’s primary clients are institutional-level staking whales. These institutions need to specify the direction of their funds at the time of deposit. Because LRT can meet the targeted staking needs of large institutions, it can easily acquire large amounts of TVL. However, this also means that the TVL from these targeted staking demands is static and does not contribute to ecosystem building.
Since LRT is directed at a specific underlying staking protocol, it cannot optimize or adjust the underlying yield. When a new underlying asset emerges, funds will flow toward the new staking protocol, as we see with LRT compared to LST today.
Furthermore, LRT finds it difficult to establish cross-chain liquidity. An asset without liquidity on Layer 2, apart from being a TVL figure, has no meaningful contribution to ecosystem building. This will become more apparent to Layer 2 and new public chains in Q4. Thus, StakeStone and LRT are fundamentally different.
Echo: You mentioned earlier that starting from Q4, Layer 2 and new public chains will increasingly emphasize the importance of asset liquidity for ecosystem building. What specific changes do you foresee in the future?
Charles K: This is another big topic. As more public chain ecosystems adopt yield-bearing assets like LRT/BTC LST, the next problem the ecosystem will face is how to apply these assets. At that point, public chain operators will realize that 1) most LRT/BTC LST assets do not have liquidity on the chain, making them difficult to integrate into lending, CDP, or derivatives protocols; 2) LRT/BTC LST severely fragments liquidity; 3) certain BTC assets, created through centralized minting, result in large amounts of fake TVL. Consequently, simply looking at TVL numbers becomes meaningless—it not only fails to create value but also hinders ecosystem development. I believe more public chain operators will recognize this issue and shift their token incentive programs from purely incentivizing passive numbers to incentivizing TVL that is applicable and active.
