In-depth discussion of the first liquid staking derivation protocol StakedICP in the ICP ecosystem

Recently, there have been frequent voices in the Internet Computer community claiming that "the token is dead," reflecting the disappointment and unwillingness of early supporters. Indeed, the performance of the Internet Computer since its independent launch online over the past two years has been astonishing, especially for those supporters who have staked ICP for a long term of 8 years, who feel particularly pained.

Currently, the narrative of liquid staking derivatives based on PoS tokens (LSD) is thriving on mainstream public chains such as Ethereum, Cosmos, and Solana. This wave has now also reached the Internet Computer, as ICP holders can stake their tokens in the governance system NNS to participate in network governance, providing a foundation for the development of LSD. This article will delve into the first LSD protocol in the ICP ecosystem - StakedICP.

Overview of LSD

LSD stands for "Liquid Staking Derivatives," which are one of the hottest tracks in the crypto industry this year. LSD is essentially a substitute for staked PoS tokens, designed to release the liquidity of staked tokens, allowing users to earn staking rewards while also using them for trading, providing liquidity, and lending activities in DeFi, thereby obtaining additional benefits.

According to data platform statistics, the TVL of the LSD track is close to $22 billion, having steadily ranked first in DeFi since surpassing the lending track in early March. LSD not only enhances the security and stability of PoS networks but also maintains users' flexibility in managing tokens, incentivizing more people to participate in stake and DeFi activities, ultimately achieving a win-win situation for multiple parties.

How to Release NNS Liquidity from Staked ICP?

NNS( Network Nervous System ) is the governance system of the Internet Computer, responsible for regulating network upgrades, token economics, and subnet management. Each user who stakes ICP will become a "neuron," participating in on-chain governance and receiving rewards, similar to staking in PoS. Currently, there are 249 million ICP in a staked state, accounting for approximately 49% of the total supply, with a TVL of about $821 million calculated at the current price.

StakedICP is the first LSD protocol designed specifically for NNS neurons, allowing users to stake ICP and immediately receive the liquid token stICP. stICP is the only proof for users to redeem ICP, capturing the daily earnings generated from staked ICP. In short, holding liquid stICP is equivalent to holding ICP that is currently being staked.

The protocol is currently in the testing phase, with only 123 users and 2600 ICP staked, yielding an annualized return of approximately 15.8%.

When users stake ICP through StakedICP, ICP will be staked in the protocol neurons on NNS, and users will receive stICP tokens representing their stake share. This means that holding stICP can also earn NNS reward benefits.

Due to the continuous accumulation of voting rewards by the neurons of StakedICP in the NNS, the value of 1 stICP is always greater than 1 ICP, and the value of stICP relative to ICP will continue to grow.

For example, suppose initially 1 ICP = 1 stICP, a user stakes 10 ICP to obtain 10 stICP. After a few years, due to the voting rewards obtained by the neuron, the amount of ICP in StakedICP will increase. Assume at this point there are 128 ICP staked in StakedICP, while the total amount of ICP in the neuron has reached 160. Then 1 ICP is worth 0.8 stICP (128/160), conversely, 1 stICP is worth 1.25 ICP (160/128). At this time, a user redeeming 10 stICP can obtain 12.5 ICP, which includes the NNS voting rewards.

In-depth analysis reveals that StakedICP is expected to help the IC chain increase the token staking rate to new heights.

Currently, the IC chain is developing its ecology around the project governance system SNS(Service Nervous System). In addition to staking ICP in NNS, ICP can also be used to invest in ecological projects that are launched on SNS. However, the ICP that is staked cannot participate in SNS investments, leading some holders to give up staking. Staked ICP provides a more flexible staking solution, allowing users to stake ICP to obtain stICP, which can be redeemed at any time to participate in SNS investments, achieving both staking and project investment.

In the future, with the development of the IC chain DeFi ecosystem, stICP is expected to gain more application scenarios, which is known as LSDfi. At that time, stICP can be used for trading, lending, and wealth management, allowing participants to earn staking rewards while also engaging in DeFi to obtain additional returns. It is foreseeable that this will significantly boost the staking rate of ICP and further expand the scale of the IC DeFi ecosystem.

StakedICP User Guide

stake: The staking function of StakedICP is now open for use. Users can stake ICP on the platform to receive stICP.

Redemption: Staked ICP currently only supports delayed unstaking ( Delayed Unstake ). When users redeem ICP, the protocol will destroy stICP, identify the neurons to be split, and begin dissolving to complete the ICP redemption. This may take some time, depending on the specific neuron. There are a total of 16 neurons in Staked ICP, with staking durations ranging from 6 months to 8 years, in order to maintain the liquidity of the redemption function.

Fast Unstake ( functionality is under development. Staked ICP will build a unilateral liquidity pool for stICP/ICP, where LPs can add ICP to the pool to earn transaction fees. Users can directly exchange stICP for ICP in the pool for quick redemption.

![Release NNS Liquidity? Detailed Explanation of the First LSD Protocol on the IC Chain StakedICP])https://img-cdn.gateio.im/webp-social/moments-7cab6469c4b1c84389b808a5b1b8c40f.webp(

Risk warning: StakedICP is still in the early stages of development and has centralization risks. In the v1 version launched in 2022, neurons and smart contracts were directly controlled by the development team. In the v2 version launched in May 2023, 16 neurons used for staking ICP were instead controlled by smart contracts, following the voting of the public neuron Synapse). However, due to the need for further development, the smart contracts are still managed by the team. This issue is expected to be resolved after the official product launch, at which point StakedICP will initiate a public offering for SNS, allowing SNS to take over the smart contracts and achieve community governance.

Summary of Interview with StakedICP Founder

StakedICP founder 0xAegir stated in an interview:

"At first, I just wanted to earn high returns by staking ICP on NNS for 8 years, without enduring the pain of long-term token lock-up. However, as the project developed, I foresaw that stICP, an asset that can generate returns and be liquid, would bring great benefits to the IC ecosystem. I am really looking forward to seeing IC ecosystem DeFi developers build new applications based on stICP. stICP is just the starting point of LSD, and the latest focus of the crypto narrative is LSDfi."

Regarding the future development roadmap, 0xAegir shared:

• December 2023: Complete the core protocol code, including the Fast Unstake feature.
• January 2024: Fast Unstake feature internal testing
• April 2024: Complete code audit
• June 2024: Launch SNS, introduce governance token STKD, and initiate liquidity incentives.

0xAegir said: "I hope StakedICP can become an important part of the IC chain DeFi ecosystem. The launch of the STKD token will enable the protocol to fully realize its potential and be governed directly by the community."

Regarding the LSDfi application prospects of stICP, 0xAegir believes: "The LSDfi narrative has only just begun, and I can't wait to see what ideas people will come up with based on stICP. Personally, I am most looking forward to innovations that enable people to 'double down', 'reinvest', and develop the IC ecosystem. For example, combining stICP with SNS allows ICP holders to earn passive income from stICP in their daily lives while also being able to automatically convert stICP( into ICP) to participate in public offerings when SNS projects go live, without being forced to choose. Stablecoins are also an interesting direction; I have had preliminary discussions with some who intend to build stablecoins on the basis of stICP, so stay tuned."

0xAegir believes that stICP can bring tremendous value to the IC ecosystem: "stICP provides ICP holders with a more flexible yield scheme, helping people reinvest in new ways and fully participate in the IC ecosystem. Moreover, due to the unique technical characteristics of the IC chain such as reverse Gas and HTTPS outcalls, ICP has a great opportunity to bring DeFi into the Web2 world. Some interesting LSDfi and RWA innovations have already emerged on other chains, such as self-repaying loans and zero-interest loans. How can we achieve these innovations on the IC? How can we provide these new services to global users in a low-cost, efficient, and convenient manner? I believe everything is possible on the Internet Computer."