An Introduction to Geode Finance - The B2B Liquid Staking Infrastructure

What is Geode Finance? How does it work, and how is it able to provide such high revenues for your DAO or protocol? First, let’s look at some blockchain basics that help set the stage and to frame Geode’s development, and necessity for that matter.

The End of an Era

Proof-of-Work based systems, like Bitcoin, reward miners for validating transactions and creating new blocks. However, Proof-of-Work mining relies on expensive hardware and requires a lot of energy to run. This is why we've seen the vast majority of newly-developed blockchains shy away from this outdated, needlessly expensive model.

While PoW was the first iteration and the birth of the environment we know and love today, it's attracted a lot of negative attention due mainly to its grand consumption of power, and thus, its exclusionary environment which prices out smaller competition due to high energy and equipment costs.

What is Proof of Stake?

Naturally, we needed a better, more sustainable option and that's why the Ethereum network recently switched over to the Proof of Stake consensus mechanism. Proof of Stake blockchains operate differently than PoW, and that's where we find ourselves today. In a Proof of Stake environment Ethereum, along with many younger chains, are able to keep transaction costs low and transaction speeds high, as the network is at less risk of being bogged down. And at the same time, the energy consumption comparisons are astoundingly less. In fact, when Ethereum made the switch from Proof of Work to Proof of Stake, its energy usage dropped by over 99%.

Instead of using miners, Proof of Stake networks rely on a network of “validators”. Validators require the owner to commit a fixed number of native tokens (ie $ETH or $AVAX) to be staked in order to take part in consensus. These validators are rewarded for verifying and creating blocks, thereby generating yield. No expensive hardware or high energy costs are required to secure the networks. Again, this is precisely why we're seeing PoS emerge as the dominant consensus mechanism for emerging blockchain networks.

The Elephant in the Room

There is one problem though. As a user, if you're looking to set up validators and stake your tokens, you now have to choose between staking and validating a blockchain for rewards or using your tokens elsewhere in DeFi. Setting up the validators promises a stable return but locking up your assets renders them illiquid, at least until you're able to withdraw them.

Now most people or organizations setting up validators are in this for the long game and tend to let their assets sit there, doing the hard work for them. However, if you're interested in participating in the greater DeFi ecosystem, this is the end of the line and you're crippled from engaging in further yield-generating ventures. Enter LIQUID STAKING!

Liquid staking has solved this issue and allows for once illiquid staked funds to become liquid once more, reopening the entire DeFi ecosystem and putting the power back in the users' hands. You stake your tokens, earn your rewards for securing the network, and in return receive a token that represents your stake and the yield you’re generating. In other words, liquid staking mints an IOU valued at the price of the staked assets PLUS the interest generated from it.

For example, Yield Yak's $yyAVAX token (their liquid staking version of $AVAX), currently sits at a value of 1.0632 to 1. In other words, over its life, the $yyAVAX token's staking yield has averaged over a 6% return over simply holding static $AVAX tokens.

Ultimately, utilizing liquid staking tokens allow the user a stable earning model compared to holding static assets. One that typically wouldn't be available to them without a hefty investment. Additionally, Liquid staking not only grants users the ability to realize yield as a validator but allows them to retain the ability to use their tokens in the greater Defi ecosystem. This results in the potential to earn double or triple the amount they might earn just holding the asset. However, this all depends on the available opportunities found in various protocols and the level of risk that the investor is willing to take. Either way, liquid staking has opened up a whole new realm of defi, expanding the investment opportunities for everyone!

MONOPOLY... Our Least Favorite Game

Unfortunately, with innovation comes unintended consequences, and in the world of liquid staking, the demand was actually too high, leading to an interesting development - the problem of Staking-as-a-Service MONOPOLIZATION. Once word got out about the ability for end users to stake, a handful of protocols sprung up to answer the call.

After a few of them faltered, the market options narrowed, leaving one protocol called LIDO as the caretaker and overseeing a MASSIVE amount of staked assets. In fact, at the time of writing this, LIDO currently has a TVL valued at over $9,500,000,000... just in $ETH! While there are other players in the game, they hold a huge amount of power. Should anything go wrong, we could be looking at another crypto collapse all over again. Let's not do that again, please. I think we've all had enough.

Now we've got nothing against the LIDO crew. Far from it. But we do take issue with monopolization of any kind. And when a landscape is monopolized, no matter how it got there, it puts everyone in jeopardy. Consider this for a moment. LIDO currently holds so much power of the Liquid Staking landscape that they hold more than Coinbase, the most well-recognized centralized exchange in the entire industry! How much more? Nearly 6X more! And when it comes to DeFi projects following in their coattails, LIDO holds 8X more than Rocket Pool. In fact, LIDO holds more staked ETH than the entire remaining portion of the market combined. That's not safe.

Again, there's nothing wrong with LIDO. The problem is a lack of diversity. A lack of choices on who to stake with. Most importantly, this centralizes the options for what is supposed to be a DECENTRALIZED environment. So how do we solve this problem and give the network the security in numbers that it must maintain? That's where Geode comes in!

So What is Geode Finance?

Geode Finance gives any organization (public, private, centralized, or decentralized) the ability to deploy its own liquid staking solution and to start earning returns on otherwise static assets. All without giving up control!

The primary goal in developing Geode was to decentralize the liquid staking landscape, increase the number of projects, organizations, and node operators that might profit from PoS, and finally, decrease the entry hurdles for new players looking to take part. Geode's tech eliminates the many significant development and R&D costs for DAOs and organizations, enabling them to operate their own Staking-as-a-Service offering quickly, easily, and most importantly, in a fully trustless capacity.

One of Geode's most intriguing and distinctive characteristics is that it allows organizations and enterprises to establish their own exclusive, private staking pools. In contrast to standard Staking-as-a-Service offerings, these private pools allow their creators access to staked $ETH (or other native assets) while still maintaining control over their risk profile (which node operators to choose), all while avoiding costs typically paid to outsource this task to organizations like LIDO.

Put simply - users earn yield and your protocol earns fees from the yields they generate - all while maintaining full control of their liquid staking solution. Contrary to current liquid staking solutions on the market, Geode allows DAOs, protocols, and institutions to make all the decisions when it comes to how they set up and utilize their liquid staking solution.

This includes how to allocate fees, what validators to use to generate yields, and how they choose to integrate their new staking token into the greater DeFi ecosystem. Or, if the organization is simply looking for an additional source for yield generation but on a private level, they can do that as well using Geode's infrastructure.

In a Proof-of-Stake world, all organizations should benefit from the rewards that come from validating the network. However, capturing these rewards has been difficult in the past, requiring extensive resources, technical knowledge, and time dedicated to node management.

Not Anymore! 

Geode’s liquid staking infrastructure allows protocols & institutional organizations the ability to expand revenue, increase TVL, and provide their communities with new ways to generate yield. Best of all, Geode allows for all of this with just a few simple on-chain steps/transactions. Simple, easy, and largely profitable.... all while ensuring diversification and decentralization of the network!

Learn More About Geode Finance

If you have questions, would like to get involved, or if you are interested in learning more about Geode Finance, I encourage you to join their discord community or follow them on social media via the links found below. You can also check out their official Medium account where they post updates and information of various kinds.