Following the recent posts by @cateatpeanut and the core Mantle team detailing Mantle’s plans to enter the LSD market and its proposed collaboration with Lido (Mantle LSD and Collaboration), I implore the core team and wider Mantle community to consider an alternative route for Mantle to enter this market. One that streamlines the go-to-market of Mantle LSD whilst also providing better terms for Mantle and its partners to stake their ETH assets. This would come from a strategic collaboration with StakeWise, a partnership that would also benefit the Ethereum ecosystem via the improved diversification of staked ETH.
What is StakeWise?
StakeWise is one of the original liquid staking protocols on Ethereum, launching alongside Lido in early 2021. Despite StakeWise’s growth not matching that of Lido’s, the development team is highly regarded for its innovations in Ethereum staking, such as being the first to offer non-custodial staking, and its track record for security, such as identifying and safely reporting critical vulnerabilities in both Lido and Rocket Pool. StakeWise’s latest protocol upgrade allows any entity to launch its own liquid staking protocol leveraging StakeWise’s trusted architecture, providing the fastest and safest route for Mantle to launch its own LSD. StakeWise would also provide Mantle with a bespoke staking solution to optimise its treasury deployment. The details of both are provided below.
Mantle Liquid Staked ETH (mntETH)
The proposal for Mantle to launch Mantle ETH (mntETH) highlights the benefits of an L2 deploying its own LSD and utilising the token across the L2 network, DeFi and governance. The proposal also highlights the significant costs associated with developing an LSD and the potential savings should Mantle leverage existing tooling. Enter StakeWise V3.
To showcase how comprehensive the StakeWise V3 solution is for solving the technical elements of Mantle LSD, I have indicated in purple the parts of the Mantle LSD schematic that StakeWise V3 solves out of the box. The sections in blue could then be easily built onto the solution, with the StakeWise core team willing to assist with this work.
To showcase how StakeWise V3 would streamline Mantle LSD’s go-to market, I have already set up this entire solution on testnet (it took a couple of minutes to create using the StakeWise UI). Mantle can then focus development work on creating its own front-end for the solution and leveraging the StakeWise architecture under the hood.
Specifications of Mantle LSD via StakeWise V3
Economics
The economics for Mantle LSD, as described by @cateatpeanut, remain intact. Mantle has control over its staking fee, including the revenue fee split across all stakeholders. For example, set the staking fee to 10% of staking rewards split 50/50 between the Mantle treasury and its partner operators. This fee split is handled automatically by the V3 smart contracts and the distribution can be updated by the LST Administrator if necessary. StakeWise does not charge at the Vaults level, meaning this architecture would be free for Mantle.
Control
Mantle retains full control over the solution. The proposed LST Administrator would deploy the staking solution and consequently control the smart contract upgradeability. The Administrator can be a multi-sig, the Mantle Security Council, or an on-chain Mantle DAO controller.
mntETH
mntETH uses the value accumulating model, following the standard ERC-20 format. As highlighted by @cateatpeanut, this model is easy to integrate across DeFi and quickly becoming the token standard for LSTs. Mantle would then have full flexibility on the ecosystem it builds around mntETH.
Users stake by holding mntETH, this can be obtained by either minting the token directly by staking into the Mantle Smart Contract, or buying mntETH from the secondary markets. Unstaking can be achieved by either selling mntETH in the secondary markets or redeeming it natively via the Mantle Smart Contract (may require validator withdrawals). mntETH can always be redeemed for its fair value directly via Mantle and the protocol will automatically wind down validators to accommodate redemptions.
The mntETH:ETH exchange rate is determined by the number of rewards accumulated within Validators. This rate is handled by the StakeWise Oracle network, a group of 11 leading and well-known entities in the space, all acting under SLAs. The exchange rate is updated whenever the Staking Contract experiences an event (such as deposit, redeem, etc…) or can be manually updated in a fully permissionless fashion, allowing the exchange rate to be updated on-demand.
Node Operators and Staking Setup
Mantle has the ability to partner with its preferred node operators, easily add and remove operators at any point (force closing validators to force exit operators if necessary), and have the ability to go fully permissionless with its operator set should it desire (with embedded collateral requirements etc…).
StakeWise V3 would allow the operators to run whatever staking configuration Mantle desires, for example custom MEV relays and DVT technology, all are compatible with the V3 architecture.
Deposits into the Mantle Staking Contract are tokenised, pooled, and automatically submitted to the Beacon Chain to create validators for every 32 ETH that is accumulated. A separate Rewards contract exists where all tips and MEV accrue, these are then compounded via the Staking Contract.
Node Management is also handled by the StakeWise Oracles. Once a mntETH redemption request is made, the Oracles will automatically close the necessary number of validators to facilitate the redemption.
Others Elements
Stake Limits can be implemented by limiting the number of validator keys available for the Staking Contract to use. The LST Administrator has full control over the number of validators and which node operator(s) they are assigned to. The role of validator key management can be delegated to a third-party address if required.
The Initiator role is handled by the StakeWise Oracles - they monitor when the pool has 32 ETH ready for a validator, pulls the next pre-signed validator key and automatically spins up the next validator without requiring any input from node operators.
The rewards and withdrawal address will be the Mantle Smart Contract at the time of validator creation, ensuring the node operators (validators) do not have control over the staked ETH. StakeWise V3 will also require operators to sign exit signatures for all validators, ensuring validators can be force closed on demand.
Mantle Treasury Deployment
StakeWise V3 provides Mantle and its partners with various ways to stake its ETH capital in a manner that provides benefits over the proposal by Lido. Either:
- Invest directly into osETH, the overcollateralised liquid staking token from the StakeWise ecosystem which provides in-built slashing protection and yield from a highly diverse node operator set.
- Create a bespoke staking solution via partner node operators.
Both solutions would allow Mantle to access the value of its staked capital to use across DeFi, such as providing liquidity and enhancing Mantle’s yield.
Bespoke Staking Solution
Just as Mantle can deploy a unique staking solution for mantle LSD, it can also deploy a unique solution for staking the assets of the Mantle treasury. This staking pool can be private for Mantle and its partners, removing the need to commingle assets with other entities.
Mantle can partner with its preferred node operators and negotiate bespoke commercial agreements with each. This has the potential to save Mantle significant costs vs the Lido proposal.
As Mantle will have full control over its staked assets, it can decide the exact staking configuration, from EL/CL clients to MEV relays. This highly bespoke and targeted staking strategy has the potential to provide outsized returns for Mantle’s staked capital, something that Lido also cannot provide.
Via this bespoke solution, Mantle would be able to mint osETH, the main liquid staking token of the V3 ecosystem, to deploy capital across DeFi, just as it planned to do with Lido’s stETH.
The concerns highlighted by @DrDoofus and @crzl around Lido’s dominance are not unique, with this view shared across key ecosystem participants, including members of the EF. Mantle should seriously consider deploying capital into a protocol that could potentially destabilise the fundamental ecosystem Mantle is built upon.
Conclusion
To conclude, it is clear that Mantle has the opportunity to form a highly synergistic collaboration for its entire ETH staking strategy, across both Mantle LSD and the deployment of treasury funds. This improves upon the previous collaboration proposed by Lido in terms of both economics and control. I encourage the core team and Mantle community to discuss.