If you were asked to deposit $10,000 and receive $1 a day, would you be willing to do it?
Many people would be reluctant to do so because it is not a good deal.
On the one hand, due to inflation and the discount rate, the current value of currency depreciates at a rate of 3% per year. For example, 100 yuan today, taking into account the interest rate, will be worth about 103.5 yuan in one year. In other words, 100 yuan in one year will be worth about 97 yuan today.
Receiving $1 per day means it will take nearly 28 years to recover the principal, which is unfair to users. Users give up the purchasing power of the current currency, but are passed on the cost of currency depreciation and inflation.
On the other hand, the reason is even simpler. Depositing $10,000 means a huge gap in liquidity in one's hands, which is not conducive to the reinvestment and appreciation of wealth.
The above assumptions are a brief discussion of the issue of staking and liquidity. We explore this topic because the LSD concept is currently a hot topic in the industry, and it offers a solution to this problem. The veDAO Research Institute also elaborated on the LSD concept in a previous article.
Related Link: https://www.binance.com/zh-CN/feed/post/388079
Now let's ask the question another way: If you were asked to deposit $10,000 and receive a lump sum advance of $365 in interest for a year, would you be willing to do so? This isn't a hypothetical scenario; it's based on Flashstake, one of the most promising financial products in the LSD sector. Along with Pendle Network, Gearbox, and eigenLayer, Flashstake has recently received significant attention from industry experts and is considered a key wealth amplifier for the LSD sector.
What is Flashstake?
Flashstake is a novel financial infrastructure that allows users to instantly earn returns on their deposited assets at a fixed interest rate over a set period. For example, if a user chooses to stake 100 stETH for 180 days, the Flashstake protocol will immediately give you 2.82 wstETH, which yields an annualized return of approximately 5.8%.
Official website: https://flashstake.io/
Twitter：https://twitter.com/Flashstake
More information: https://app.vedao.com/projects/e8aa342d9446679d363c7321c9539bf05783f2074aa76df2ba909e5b9305b149
According to the white paper, FlashStake consists of three main components:
FlashStake Protocol (FSP): Facilitates the creation and activity of Time Vault policies. FSP is the core of FlashStake and has three main responsibilities:
Stores balances for all Flashstaking activities
Deploy and register Time Vault Strategies (TVS)
Creating and minting time-based derivatives (TBD)
Time Vault Strategies (TVS): A custom smart contract that allows users to buy, sell, and earn TBD.
With nearly unlimited possibilities, Time Vaults provide the flexibility to make important Flashstaking decisions. Ultimately, Time Vault Strategies are where the complex logic of Flashstake occurs.
Below are examples of three different people using three different Time Vault strategies.
Vitalik uses Lido Time Vault to generate upfront returns on his stETH
Stani uses Aave v2 Time Vault to generate upfront yield on his USDC
Hayden uses Uniswap v3 Time Vault to generate upfront returns on his ETH/DAI LP tokens
Time-based derivative: (TBD): Represents the time value of money of any digital asset
When people invest in a Time Vault strategy, time-based tokens are generated. Each individual Time Vault strategy has a uniquely assigned TBD.
Example: Staking USDC into the Aave v2 Time Vault strategy to generate fUSDC TBD
Example: Pledge stETH into the Lido Time Vault strategy to generate fstETH TBD
Example: Pledge ETH/DAI LP into Uniswap Time Vault to generate ETH/DAI TBD
TBD is an ERC-20 token created by the Flash Protocol whenever a new strategy is registered. TBD is specific to a given strategy and represents a yield pool. This means that 100% of the total TBD supply can be redeemed for 100% of the total yield in the yield pool within a given strategy.
Token Economics
Flashstake's official token is FLASH, with a total supply of 150 million. No further tokens can be minted, and no FLASH has been released externally through fundraising, public offerings, or private placements. Flashstake builds on the foundation of previous versions and is driven by Blockzero Labs and its community. Approximately one-third (33.83%) of the tokens have been allocated back to the Blockzero ecosystem to enable the development of Flashstake: 15.17% to the DAO Treasury and 18.66% to DAO Members.
The remaining two-thirds (66.17%) are allocated to the Flashstake Treasury for various project activities: 38.84% for protocol growth; 12.34% for Flash staking; and 15% for core contributors.
Flashstake gameplay
Flashstake has been jokingly called a time-travel wormhole for interest. For users, Flashstake allows anyone to buy, sell, and earn the potential future value of staked funds today. Users only need to complete three steps: select the desired stake amount; select the desired timeframe; and then receive an advance payment for the interest.
In other words, Flashstake can unlock your immediate income, which may be the reason why the project has been valued in the LSD track: for LSD users, it is not enough to liberate the liquidity of pledged funds, and Flashstake is also needed to bring more short-term value to the funds.
There are two staking methods in FLashstake, corresponding to user groups with different emotional profiles.
Among them, the first type of pledge is what we commonly understand as Stake:
Under this staking model, the user experience is consistent with other staking products. Users invest their principal into Flashstake, which then invests the user's funds into the staking pool, helping users earn more returns through protocol strategies.
Another staking model is Flash Stake, which is also the feature of this product: after users invest their principal in Flash Stake, they will immediately receive a guaranteed return for a certain period of time.
It's worth noting that the guaranteed interest earned by users isn't generated out of thin air. Instead, it's paid to users based on the actual profits they would have earned over a certain period of time using standard staking. This profit comes from other standard staking users themselves. As compensation, stakers receive the same returns as Flashstake users during the staking period.
As Twitter blogger @nanbeiblock said, users who use Flash stake are essentially shorting the yield, while stake users are long the yield.
For some DeFi users, this can bring many benefits. First, users can get higher annualized returns.
Some might ask, "I deposit 100 ETH and only get 2.82 wst ETH immediately." While I don't lose my principal, this still significantly reduces liquidity, and an annualized yield of less than 3% isn't very appealing. However, the math doesn't work that way. For example, if I deposit 100 ETH for one year and earn an 8.9% APY, I'd earn $15,818 USDC. If I were to repeatedly flash stake this asset, I'd earn 8.9% + 8.9% * 8.9% = 9.69%, nearly 10%. By relying on the inherent interest-earning nature of the collateral, the protocol's TVL can grow rapidly, and the best approach is to deposit with limited partners.
Secondly, users earn rewards in the protocol's FLASH token for their Flash Staking activity. Unlike other Ethereum staking protocols like Lido Finance, the payout date and initial amount of rewards are fixed. If users don't immediately sell their FLASH tokens for a profit, they can use them to withdraw their original deposit early. Users also don't have to worry about their deposited tokens being liquidated, as they would on Aave or Compound, as Flashstake is not a lending protocol.
However, the whole thing is not without its drawbacks. Most importantly, the lack of liquidity of FLASH tokens is an economic risk. If you want to exchange or sell them in large quantities on a decentralized exchange, you face the threat of price drops (slippage) when trading.
Many users may decide to sell their tokens after flash staking to realize their returns. Large sales of FLASH tokens can also reduce returns for stakers who still hold or use their tokens in other ways.
Finally, there is the financial Lego effect created by Flashstake and other DeFi products.
For example, Pendle + Flashstake. Pendle Finance brings fixed income to DeFi income, creating an income market that allows users to tokenize and sell future income. Flashstake can unlock your immediate income and provide users with higher annualized returns.
Step 1: Lock GLP on Flashstake and receive a 22.3% spot interest in advance. (Typically, the spot interest rate is lower than the interest earned over the corresponding staking period; 100-day Flashstake is lower than 100-day Stake. This can be considered giving up 100 days of long-term interest to immediately receive a lower spot interest rate.)
Step 2: Purchase YT-GLP (interest warrants) on Pendle, which will protect your YT-GLP from zero-interest losses. (YT-GLP notes on Pendle entitle users to receive a fixed amount of 1 GLP after 364 days. In other words, the current position held by the player is 100% GLP on FlashStake + 22.3% of the expected GLP on Pendle.)
The VeDAO Research Institute will elaborate on the principles of Pendle in the next article.
This arbitrage window exists because Flashstake's fixed APY has always been higher than Pendle's. Pendle has the deepest GLP yield trading market, so new ways to speculate on GLP yield will make this yield arbitrage possible.
Overall, the Flashstake protocol has many use cases. With the advent of ETH upgrades and integration with more staking tokens (such as GLP), FlashStake is likely to become a rising star in the LSD track.
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