Cosmos staking protocol Stride announced the closing of a $6.7 million seed round co-led by investors North Island VC, Distributed Global and Pantera Capital.
Vishal Talasani only set up Stride with the help of Riley Edmunds and Aidan Salzmann in March of this year. They aim to bring liquid staking — the process of staking tokens to secure a network without losing access to the funds for a set period of time — to the Cosmos ecosystem.
Cosmos is a layer 1 blockchain on which apps and services are connected by the inter-blockchain communication protocol (IBC). There are over 30 blockchains within the Cosmos ecosystem, such as Osmosis and Juno, according to the announcement.
App chains in the Cosmos ecosystem offer high yields across the board, often to incentivize engagement with the ecosystem, Talasani told The Block.
However, users typically have to make a choice between either earning rewards from staking, or earning yield from participating in protocols, Talasani said. Stride will try to give them a way to do both through liquid staking.
Cosmos recently launched Interchain Accounts (ICA), which enable blockchains to control accounts on other chains, paving the way for liquid staking between chains.
“We were really excited by IBC and ICA and wanted to start building and this was the biggest pain point we felt,” Talasani said. “So, we looked into what solution would look like [and] realized we have all the tools we need to build it.”
What is liquid staking?
Liquid staking alleviates the pain point outlined by Talasani, in that users can lock up funds to earn rewards for securing the network while still maintaining access to the funds through a derivative of the token.
Staked derivative tokens are often identified by having “st” prefixed to the token name, for example “stETH”.
Lido popularized liquid staking on the Ethereum network by offering participants a derivative of ether in return for their tokens for staking.
Stride is planning to bring a similar mechanism to the Cosmos ecosystem. The protocol already offers liquid staking support for Cosmos Hub, which was the first blockchain to be launched on Cosmos and is powered by the ATOM token.
Participants using Stride for liquid staking on Cosmos Hub will receive stATOM tokens in return, which can then be used on other apps within the ecosystem or sold immediately for liquidity.
Stride is aiming to support multiple IBC-compatible assets by the end of the year, according to the announcement.
What makes Stride different?
The team has experience in derivatives. Talasani previously founded a hedge fund that was later acquired by Dark Forest Technologies. He also worked at Bridgewater Associates as a quant researcher alongside his co-founder Edmunds, who worked within the crypto division as a machine learning and macroeconomic researcher. Co-founder Salzmann previously led product and engineering teams at Humu.
Other players like pStake and Quicksilver are also launching liquid staking services on Cosmos. To compete, Stride aims to have differentiated features like redemptions from the outset.
“I think a lot of the players are planning to be these DeFi hubs from day one, which is really exciting and really good for innovation,” Talasani said. “And I think we operate in a slightly separate niche, which is people who just want liquid staking and want it done well.”
Other investors in the seed round include 1Confirmation, Cerulean Ventures, Node V as well as Cosmos ecosystem validators Imperator, Cosmostation and Everstake.
“A safe liquid staking solution will be crucial to the future of Cosmos and IBC,” said Paul Veradittakit, partner at Pantera Capital, in a statement. “Stride’s focus on safety and UX is addressing real user needs, and we believe this will make them the ecosystem-defining liquid staking product.”
Certik and Oak Security provides audits for Stride, per the release.
Liquid staking in a bear market
The current bear market environment hasn’t fazed the Stride team even as risk appetites shift. The 6-person team aims to use the funds to continue to grow the operation.
They anticipate that Cosmos IBC will support over 200 blockchains by the end of the year, which will create a significant addressable market for the protocol.
“Staking I don't think is going anywhere,” Talasani said. “We are definitely in a bear market, but I think the staking market is so large and everyone has to stake that I don’t think we will see a lack of demand.”
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