Coinbase, a leading crypto exchange, is working with Alluvial to establish a first-ever enterprise-grade liquid staking protocol. This will bring the know-your-customer (KYC) checks to the world of DeFi. Alluvial, a development firm made up of people with experience from various DeFi-related projects, is helping develop this protocol.
Coinbase highlighted that liquidity is a critical component of a maturing Web3 economy and liquid staking is a nascent segment but is the most rapidly growing. The crypto exchange outlined that liquid staking involves using staked assets as collateral for things like trading and lending. It works by giving stakers receipt tokens in exchange for their staked tokens. This can be used to pursue other activities within the Web3 and DeFi economy.
Alluvial’s vision, as per Coinbase, is to grow the protocol through an open and transparent process. The protocol will move towards community governance with a decentralized autonomous organization (DAO) with broader industry participation. The official statement said that liquidity staking on Ethereum has improved. In January 2021, it was representing less than 1%, but today, it represents over 30%. More companies are keen to participate in liquid staking. However, current solutions don’t meet their needs in terms of security and KYC, and anti-money laundering (AML) regulations. Coinbase said Alluvial is working towards closing the gap between existing liquid staking solutions and what companies need by requiring contributors to enable embedded KYC and AML checks.
Community members believe this project will bring more DeFi activity into the space that regulators can control. A user tweeted that through this, Coinbase may be planning to make the USDC of staking derivatives – a compliant centralized alternative to stETH.