StakeStone Founder Charles K Deeply Analyzes: What Kind of Yield-Generating Assets Can Truly Create Value for Public Chain Ecosystems? What Factors in the Market Are Confusing the Narrative? Why Is TVL Losing Its Effectiveness as a Value Anchor Indicator?
Written by: Echo, Meta Era
"Full chain, staking, liquidity, TVL," these terms have become the hottest topics in the DeFi world this year. However, in the current DeFi market, users are increasingly confused about: which yield-generating assets have real value? And what kind of TVL can still represent value? To find answers, MetaEra engaged in an in-depth conversation with Charles K, the founder of StakeStone, who was among the first to establish a full-chain liquidity asset protocol. They discussed several topics, including "the original intention of StakeStone," "yield and liquidity issues," "what kind of yield-generating assets have real value," and "what kind of TVL represents value."
MetaEra: Can you briefly introduce what StakeStone is?
Charles K: StakeStone was born in the context of a diversified era. First, with the completion of the Shanghai upgrade in 2023, Ethereum's Proof of Stake (PoS) mechanism achieved two-way access for staking assets. This change officially ushered in the era of risk-free yield for Ethereum assets.
The second significant background is that after the ETHCC conference in August 2023, projects like Linea, MANTLE, and Base successively launched their mainnets, marking the official entry of the entire industry into a new era of Layer 2 flourishing. We have officially entered the era of multi-chain or full-chain. This means that assets and applications must be deployed and utilized in a full-chain manner to adapt to this new industry trend.
In this context, StakeStone emerged, dedicated to creating full-chain yield liquidity ETH and full-chain liquidity distribution infrastructure.
MetaEra: Why create StakeStone? What was the original intention behind it?
Charles K: Our original intention in founding StakeStone was to address the significant pain point that arises when ETH has a risk-free yield based on ETH itself, making Native ETH a liquidity asset that cannot bear its opportunity cost in an L2 ecosystem. To solve this problem, we need to address three levels of issues:
- Continuously optimize the underlying yield to cover opportunity costs as much as possible.
- Transform yield ETH (STONE) from a single-chain ledger asset into a full-chain ledger asset that is friendly to L2 ecosystem protocols.
- Provide full-chain liquidity for supported public chain ecosystems, allowing assets to be fully utilized within the public chain ecosystem.
To this end, we spent over a year to finally build the world's first and only full-chain yield ETH asset that can continuously optimize underlying yields without affecting the circulating STONE. Additionally, after a strategic partnership with Native.org, we built the first full-chain liquidity asset that has equal liquidity on every supported chain.
MetaEra: The market has always regarded StakeStone as an LRT protocol. Can you explain the differences between StakeStone and the LRT protocol?
Charles K: LRT is a Restaking Pool protocol, primarily providing core services based on a specific restaking protocol like Eigenlayer. In contrast, StakeStone is a full-chain liquidity asset protocol; we aim to be more like the ETH version of MakerDao. Our core services are asset issuance and full-chain operational services, covering as many risk-free yield opportunities for ETH as possible, which is a necessary component of asset management.
When a new yield underlying appears, StakeStone can optimize the underlying yield without affecting the STONE already circulating in the market, while LRT needs to create a new staking pool and issue a new staking certificate to achieve this.
Moreover, LRT's main clients are institutional-level staking large holders, so these institutions need to clarify the destination of funds from the outset. LRT can more easily obtain TVL numbers because it meets the directional staking needs of super institutions, but conversely, this indicates that the TVL from these directional staking needs is static and does not contribute to ecosystem building.
Since LRT is directed towards a specific underlying staking protocol, it cannot optimize or adjust the underlying yield. Therefore, when new underlying assets arrive, funds will flow towards the new underlying staking protocol, similar to how LRT relates to LST today.
Additionally, LRT struggles to build full-chain liquidity; an asset without liquidity on L2 has no ecological construction significance apart from its TVL number. This point will become clearer in the upcoming Q4, as more L2s and new public chain ecosystems realize this.
Thus, there is an essential difference between StakeStone and LRT.
MetaEra: You mentioned that starting from Q4, L2s and new public chains will increasingly value the significance of asset liquidity for ecosystem building. What specific changes do you foresee in the future?
Charles K: This is another significant topic. As more public chain ecosystems absorb yield assets like LRT/BTC LST, the next issue they face is how to utilize these assets. At this point, public chain operators will discover that 1) Most LRT/BTC LST assets lack liquidity on that chain, making it impossible to integrate them into lending, CDP, or derivative protocols. 2) LRT/BTC LST severely fragments liquidity. 3) Some BTC assets utilize centralized minting, leading to massive false TVL. Therefore, mere TVL numbers become meaningless; they not only fail to create value but also hinder ecosystem construction. I believe that more and more public chain operators will recognize this issue and change their token incentive plans from purely incentivizing passive numbers to incentivizing usable and active TVL.
MetaEra: We know that besides the existing ETH product STONE, StakeStone has recently also been launching its BTC product. Can you briefly introduce how StakeStone intends to participate in BTCFi?
Charles K: Since BTC lacks smart contracts and native yield mechanisms, it inherently faces two levels of issues: 1) How to bring native BTC to EVM chains and adapt to the current multi-chain environment; 2) Yield generation on the BTC chain. To address these two levels of issues, StakeStone will launch two BTC assets: SBTC (StakeStone Bitcoin) and STONEBTC.
SBTC focuses on solving how to construct the first full-chain liquidity BTC asset. Until decentralized off-chain methods like OP_CAT are realized, custodial institutions minting BTC will remain the dominant solution for BTC to arrive at EVM chains. Therefore, at this stage, our SBTC will adopt a solution that receives custodial BTC and mints full-chain liquidity BTC to address the first-level issue. The initial phase of SBTC will support receiving custodial BTC like BTCB and cbBTC for completely decentralized minting.
STONEBTC will be positioned to maximize on-chain BTC yield. Users will have the opportunity to obtain comprehensive yields from BTC staking protocols like Babylon, restaking protocols like Symbotic, and staking pool protocols like Lombard.
MetaEra: What do you think is the biggest difference between the Ethereum ecosystem and the Bitcoin ecosystem?
Charles K: The differences between these two ecosystems are very significant, mainly reflected in three aspects:
First, the Bitcoin ecosystem lacks on-chain liquidity assets. In Ethereum, Ether (ETH) itself is an on-chain asset with extremely high liquidity, which almost everyone is willing to accept. In contrast, Bitcoin (BTC) does not have such an asset, and the liquidity of WBTC is far less than that of Ether.
Second, due to the lack of liquidity assets, the application scenarios based on Bitcoin are limited. For example, it is challenging to create a CDP with Bitcoin and scale it to the level of MakerDAO. Insufficient liquidity restricts the development of Bitcoin finance (BTCFI).
Third, Bitcoin holders typically do not participate in DeFi activities. Bitcoin is more like a reserve asset similar to gold rather than something used for daily applications. Therefore, the number of users willing to use Bitcoin on-chain is very limited, which also restricts the user base behind BTCFI.
Nevertheless, we still choose to lay out in the BTC ecosystem because we see that more and more projects and capital are working to expand the Bitcoin ecosystem. These efforts may lead to several times the user participation in BTCFI compared to the past.
MetaEra: We observe that the market is becoming increasingly insensitive to TVL numbers, and the value anchoring ability of TVL is weakening. What are your thoughts on this?
Charles K: I believe that for any project, whether it is a staking protocol or a public chain ecosystem, valuable TVL is always usable TVL that has real users. It is precisely because of unusable inflated TVL that the market has lost its value anchor.
At the same time, another layer of meaning of TVL is essentially TVT (Total Value Trusted). Whether a protocol's TVL is valuable depends on whether it can represent user trust. If it only allows deposits but not withdrawals, or if it repeatedly changes the incentive promises before deposits, such as withholding rewards upon withdrawal, how can even the highest TVL win trust? A protocol that cannot bear trust naturally cannot bear true value.
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