25th February 2021

StakerDAO – building the Vanguard of crypto

In this episode of the DeFi Download, Piers Ridyard interviews Jonas Lamis, founder of StakerDAO and CEO of Staker Services Ltd. StakerDAO is a platform for governing financial assets in a decentralised, secure, and compliant manner.

StakerDAO – building the Vanguard of crypto

The best way to achieve putting the community in charge of creating meaningful to its members decentralised crypto assets is to empower a group of individuals who work together to run a governance process, with the ability to make decisions, and the tools they need to create exciting new financial assets. This is StakerDAO’s contribution to the DeFi space.

StakerDAO’s products and differences from Aave and Compound

Jonas has been active in the crypto community since 2016. He realised quickly that there were some fascinating value propositions associated with layer-1 networks, outside of Ethereum, such as Tezos and Cosmos. He felt these networks had a lot of value to add. Therefore, while Aave, Compound, Balancer, and others are purely Ethereum-based, the StakerDAO team adopted a cross-chain approach, creating smart contracts for each chain they deemed valuable.

StakerDAO became an asset factory that currently offers two types of assets built by its community as well as bridges between networks. The two types of assets are:

Decentralised index products: Combinations of different tokens from various networks into single tracking tokens. Essentially, they offer the ability to build indexes that represent a certain class of product. An example of that is the Blend (BLND) token.

Wrapped products: Core assets from layer-1 networks, wrapped on those networks so they can continue to provide value on those networks, such as receiving staking rewards. Simultaneously, they get a liquid version bridged over to Ethereum or other networks.

Lessons learned

According to the founder of StakerDAO, the community of builders is still small and the world of DeFi in its infancy. For this reason, anyone interested in getting involved in this space and translating DeFi’s complex concepts to make them accessible to the mainstream has an excellent opportunity to do so.

StakerDAO’s vision

The objective of StakerDAO is to attract more people to crypto by becoming the decentralised, crypto version of Vanguard. All existing financial services are centralised entities owned by corporations. Crypto offers the opportunity to re-imagine them in a decentralised way, by replacing the concept of the corporation with that of the community.

StakerDAO’s approach to governance

When Jonas got involved in Tezos, he was amazed by its liquid proof-of-stake governance model. To control the riskier parts of the system, the architecture of governance on Tezos replicates the representative democracy model and, at its top level, offers the ability to change the protocol. The Tezos token holders do not vote directly on every proposal. Instead, they delegate their votes to a group of users that have a lot at stake on the protocol, the validators (called “bakers,” in Tezos’ case).

StakerDAO, inspired by Tezos’ system, introduced a two-tiered model in which token holders elect a group of council members. Those council members vote on the proposals submitted by the community.

The DAO model, as it currently develops across crypto, is predominantly a digital implementation of the old cooperative (co-op) structure. Following this concept, StakerDAO began as a corporation with Staker Services Ltd and raised venture capital. The next step will be to separate the Corporation from the DAO and become fully decentralised.

StakerDAO’s approach to asset holding

Wrapped Tezos, one of StakerDAO’s products, is a series of smart contracts built on Tezos that allow Tezos holders to move their tokens into a vault. When they put their Tezos in the vault, they receive a tracking token, the WXTZ, a Wrapped Tezos token that is also still on Tezos and continues to generate rewards. StakerDAO provides a bridge that facilitates moving that Wrapped Tezos from Tezos to Ethereum.

StakerDAO uses oracles and automated contracts on both sides of the bridge. The StakerDAO Council manages the central servers that provide coordination between those contracts. There is a multisig key structure for managing that via governance.

A community-driven asset factory

According to Jonas, StakerDAO is a community-driven asset factory that aims to grow the amount and type of assets that it develops, as well as the range of layer-1 networks that it works with. Jonas is aware that their ambitious vision of becoming the decentralised Vanguard is still several years away, and depends on the time of the imminent mainstream adoption.

Further resources