ClayStack’s Novel Liquid Staking Architecture Will Bring New Users to the Staking Economy

CoinFund’s Investment Thesis for ClayStack

Proof of stake assets represent a pool of assets currently valued over $300B¹. Base layers such as Ethereum (ETH2), Polkadot, Kusama, Solana, Flow, BSC, Terra, Polygon, and Fantom all have some varying form of proof of stake as their consensus mechanism. This has been the trend for smart contracting platforms and as more and more applications are built on these foundational protocols, the value of these networks will grow, with growth likely outpacing store of value networks increasing their market cap dominance. Other resource networks such as The Graph (indexing) and API3 (oracle), DeFi networks such as Sushiswap, Synthetix, and Perpetual Protocol, or NFT protocols such as Rarible (upon its DAO implementation), will employ token staking to drive governance, economic incentives, and other forms of network participation. However, a large percentage of token holders often leave these assets unstaked due to staking complexity and reduced liquidity when staking. As a consequence, these token holders forgo yields regularly in excess of 10%. This segment of unstaked proof of stake assets is an enormous addressable market of capital, valued in the tens of billions and growing, and not earning any yield. ClayStack is building the ideal solution to target this growing segment of the crypto economy by providing a liquid staking asset that is decentralized, cross chain interoperable, and can be rehypothecated². By driving incremental revenue to new stakers this activity would in turn increase network security and user participation as more users begin to stake their assets. CoinFund is thrilled to lead ClayStack’s $5.2MM seed round and to support the team as they further build out and develop the network.

ClayStack is building a liquid staking derivative solution to address the largely unmet need of POS token holders who forgo staking rewards in favor of increased liquidity. One of the key pain points for potential stakers on the multitude of networks that support staking is there is often an unbonding (lock-up) period during which tokens are inaccessible for users as they offboard from staking. The time frames can range from several days to nearly a month (or in the case of ETH2 until the merge). At the present, there are some early solutions that allow users to gain liquidity either through a derivative token of the staked asset or a collateralized loan, however, all of the solutions suffer from some combination of centralization, lack of interoperability, and/or chain specific architecture. Leading solutions are often primarily focused on ETH2, ignoring the needs of other staked assets. Furthermore, existing staking derivative assets often lack DeFi composability and the ability to rehypothecate for additional yield or access to capital. ClayStack’s architecture allows for the creation of a liquid staking token for any asset on any EVM compatible chain along with a growing list of non-EVM compatible chains. The product works by generating a wrapped derivative token in exchange for the original asset (which is then staked with professional proof of stake blockchain validators in a trustless manner). This derivative token accrues staking rewards (distributed daily) and can be sold at any time on a DEX or swapped back for the original asset. ClayStack has also built bridging solutions so that the staked token can move across blockchains to seek out the best yield opportunities. ClayStack is governed by the CLAY token which will make the network community driven from the start. Moreover, the team, led by Mohak Agarwal, is extremely well suited to push the network forward, having extensive experience in blockchain staking -Mohak previously led WolfEdge Capital, one of the earliest staking as a service providers - and broadly at leading technology companies including at PayPal, Cisco, Oracle, and Walmart.

Proof of stake networks, although valued in the hundred of billions, are still early in their evolution and key supporting architecture is needed. ClayStack’s novel liquid staking protocol is poised to empower existing crypto users, bring new entrants into the crypto ecosystem, and drive blockchain adoption forward. We are excited to be one of ClayStack’s earliest backers and to support them in building out this vision.