LiquidStake set to unlock liquidity for Ethereum 2.0 Phase 0 stakers

As the launch date of Ethereum 2.0 approaches, an important issue in the staking mechanism is starting to be discussed in the community: the one-way nature of stake deposits.

Prospective stakers in Ethereum 2.0 Phase 0 will not be able to withdraw or transfer their stake until after the rollout of Phase 1, which could take years.

Through its LiquidStake initiative, both retail and institutional stakers can delegate their capital and maintain the ability to use it as collateral to receive USD Coin loans.

Unlike other staking derivative proposals, LiquidStake will not create new tokens to represent the bonded Ether.

"With LiquidStake you can have your stake and eat it too," added Andrew Keys, co-founder of Darma Capital.

The company partnered with staking providers including Bison Trails, ConsenSys Codefi and Figment to handle the actual validation process, while OpenLaw and Lukka helped with the legal and tax management of the system.

There are no minimum staking amounts, and the lending system works through the familiar mechanism of margin calls and liquidation - at least on paper, as the ETH cannot be moved.

A notable caveat is that prospective customers must go through LiquidStake to join Ethereum 2.0, or otherwise, they will become ineligible for the lending service.

Slazas said that LiquidStake simultaneously solves another major issue: the tax implications of Ethereum staking.

Though Darma will make money out of this arrangement by charging interest and a "Performance fee" on the staking yield, Keys said that "We are here to help in the decentralization and growth of Ethereum 2.0.".