Coinbase Bets On ‘Enterprise-Grade’ Liquid Staking Business

Coinbase DAO DeFi Ethereum Regulation Security

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Fredrik Vold

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Fredrik Vold

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October 23, 2023 09:01 EDT

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Major US-based crypto exchange Coinbase is backing the development of the “first-ever” enterprise-grade liquid staking protocol, bringing know-your-customer (KYC) checks to the world of decentralized finance (DeFi).

According to an announcement from Coinbase on Tuesday, the new liquid staking protocol is being developed by Alluvial, a development firm made up of people with experience from various DeFi-related projects.

Liquidity is “a critical component of a maturing web3 economy,” and liquid staking is “one of the most rapidly growing yet nascent segments of the market,” the announcement said.

Liquid staking involves using staked assets as collateral for things like trading and lending instead of having to lock them up. This works by giving stakers receipt tokens in exchange for their staked tokens, which in turn can be used to pursue other activities within the Web 3 and DeFi economy.

Coinbase further said that Alluvial’s vision is to grow the protocol through an open and transparent process. The protocol will eventually move towards community governance with a decentralized autonomous organization (DAO) “with broad industry participation,” it added.

According to the post, liquid staking on Ethereum (ETH) has gone from representing less than 1% of staking in January 2021, to over 30% today. And while more and more companies also want to participate in liquid staking, current solutions don’t meet their needs with regard to security and KYC/anti-money laundering (AML) regulations, Coinbase said.

As the developer of the new liquid staking protocol, Alluvial seeks to bridge the gap between existing liquid staking solutions and what companies need by requiring contributors to enable embedded KYC and AML checks, the announcement stated.

Reactions to the news were mixed, with some community members suggesting that the project is an attempt at bringing more DeFi activity into the sphere that regulators can control:

https://www.twitter.com/cobie/status/1526803052132302854

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