Are you staking your tokens? If yes, then you have probably noticed that you can’t really use them when they are locked. But what if you could? This is where Stride comes in!
Stride, also known by the market ticker STRD, is a Proof-of-Stake, layer-1 blockchain on the Cosmos network that looks to address a specific gap in the market for staked tokens on the platform.
As Stride’s website puts it, “The current state of DeFi in the Cosmos ecosystem is underutilised and inefficient.”
But how exactly is the Cosmos ecosystem underutilised and inefficient, and what does Stride offer to fix it? Today we find out!
What is Stride?
Stride is a layer-1 liquid staking blockchain on the Cosmos network that aims to bring more utility to staked tokens in the Cosmos ecosystem.
Founded by Aidan and Riley in 2022, both of whom hold a degree in Computer Science from the University of California, Berkeley and have specialist knowledge in machine learning.
At its core, Stride wants to remove the choice users are forced to make between staking for a passive yield, or participating in DeFi.
Their solution is simple, allow users to do both.
As they admit, this is not a new solution, as both Ethereum and Solana already have such staking tokens to solve this specific problem on their respective networks, but as Stride’s website notes, “now Cosmos does too!”
But, to be clear, this doesn’t just benefit the user, who gets to increase their yields, it also benefits the network overall.
This is because around 2/3rds of all tokens on the Cosmos network are locked up for staking to receive the staking reward, which in turn removes them from the ecosystem to be used for network applications or smart contacts.
Stride believes this has slowed the development of Decentralised Finance, on the Cosmos network as the high rewards for staking directly compete with the newly-forming DeFi activity on Cosmos.
Their solution? Make staked tokens liquid.
But what exactly is liquid staking?
How does Stride work?
In short, liquid staking allows you to use your staked tokens for an additional purpose.
Staking in crypto involves locking up an amount of cryptocurrency on a blockchain network to support its operations, such as securing the network, and, in return, earns rewards or other staking incentives.
Whereas liquidity in crypto refers to the ease with which a cryptocurrency can be bought or sold.
Ideally, you always want assets to be highly liquid, as a highly liquid asset has a large number of active buyers and sellers creating a stream of quick and efficient trades on the open market.
The problem with staking occurs when you consider the effect on the ecosystem overall, as staked tokens are effectively removed from circulation, and can cause price volatility.
This is because although earning staking rewards, the staked tokens themselves are not liquid as they have been locked up to earn those staking rewards.
This means they cannot be used for other purposes such as trading, lending, or providing liquidity, or at least couldn’t until the arrival of Stride.
But to help illustrate the point of what Stride can solve, let’s imagine there’s a new application on the Cosmos network where ATOM tokens are required for its functionality.
To use this functionality you may need to pay an artificially high price to buy ATOM tokens on the open market as the majority of all ATOM tokens are locked up for staking.
While you think this might be good as the price has gone up, however, once the staking lock-up period has ended if the price has increased too much, users will likely begin to unstake their ATOM and sell it at a higher price, which inevitably causes it to fall back down causing an increase in overall price volatility.
Here is where Stride comes in by turning the staked tokens into liquid tokens giving users the ability to do more on the network while at the same time receiving the staking rewards.
In addition to its function for liquid staking, Stride’s architecture is typical for the Cosmos ecosystem.
By that, I mean it is a Proof-of-Stake network which uses Tendermint for consensus, was built using the Cosmos SDK, and has the IBC protocol enabled.
Now that we know what Stride is and how it works, let’s find out what makes Stride unique!
What makes Stride unique?
In short, what makes Stride unique is liquid staking.
Liquid staking essentially makes it possible to stake already staked tokens.
Stride does this through a simple exchange. Let’s say you want to stake Cosmos’ native ATOM token for the Cosmos staking rewards but also use those tokens for providing liquidity.
Well, you could liquid stake your ATOM on Stride Zone. Then, behind the scenes, your ATOM would be staked on your behalf and in exchange you would receive an equal amount of stATOM, the staked version of ATOM, pegged 1:1.
This stATOM can be used like any other cryptocurrency, effectively allowing you to stake your ATOM and still participate in the network such as through lending, trading, or providing liquidity.
The benefit to the user is twofold, first, they can re-use this value, but also will receive more back than they put in, through the effects of the staking rewards your ATOM has been generating.
This is because stTokens, such as stATOM, are held 1:1, meaning as your staking rewards are generated the value of your stATOM also increases.
But how about the tokenomics?
STRD Tokenomics
Like most Proof-of-Stake tokens, it can be used for the classics like paying for transactions, governance, and, in this case, liquid staking.
In total, there will only ever be 100 million STRD tokens, with around 95% in circulation by the end of 2025.
At launch, the circulating supply of STRD was 9,200,000.
This amount was split 32% towards a strategic reserve, and 68% towards community airdrops which formed the initial circulation on the market.
By the end of the emission schedule, which will be around 2026, the breakdown of the 100 million STRD tokens will be as follows:
2% will be for the initial security budget and another 2% for the Community Reserve. Community Growth will account for 4%, Staking Rewards at 5%, Community Airdrops at 6%, 9% to the Strategic Reserve, 17% for partners, 24% to the Dev team, and finally, 31% towards Community Incentives.
Stride isn’t a unique proposition, but it is a needed proposition for the Cosmos network.
Cosmos’ DeFi is indeed a gap in the market, and Stride looks to be the company that aims to fill that gap with a viable product.
In short, Stride looks to give Cosmos users the same flexibility as they would get if they were on Ethereum or Solana.
The only elephant in the room is Stride’s future not only depends on good management but also the continued success of the Cosmos ecosystem overall.
Luckily, Cosmos is a solid network, so assuming all else remains the same, I believe it is likely Cosmos’ best days should still lay ahead.
Hopefully Stride can capitalise on this, and if they can, their best days should likely still lay ahead too.
Though, as always, nothing is ever guaranteed in crypto, of course.