pSTAKE Co-founder Mikhil Pandey Explores Staking & Bitcoin’s Trillion-Dollar Potential

Join us for insights from Mikhil Pandey, Co-founder of pSTAKE based out of Dubai, as we explore the dynamic world of cryptocurrency staking.

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Mikhil Pandey, one of the industry’s leading experts, shares how the innovative pSTAKE platform is reshaping the crypto landscape. Staking has emerged as a cornerstone of DeFi, offering passive income opportunities while enhancing blockchain security.

As Ethereum leads with its PoS model and institutions eye yield-bearing assets, including ETH Staking ETFs, the future of staking looks increasingly promising. Moreover, Bitcoin’s foray into programmability marks a shift towards decentralized finance, utilizing its vast capital to secure PoS networks.

Delve deeper into the interview for a comprehensive understanding.

Q-1: What are your views on staking and how it is changing crypto?

A: Staking has been one of the biggest drivers of the DeFi movement, providing token holders a passive income opportunity while securing their favorite blockchain—truly a win-win for both protocols and stakers. Yields dictate finance, and in this light, staking can be viewed as a form of fixed income in the crypto world, setting the bedrock for new financial primitives to be built on top of it.

Not only is Staking a financial innovation, but it is also a leap in mechanism design that fosters trustlessness in decentralized networks.
“Ethereum is currently the biggest Proof-of-Stake (PoS) blockchain, riding the massive wave of stakers, and currently offers an APR between 2% to 5%. With about 33 million ETH currently staked, which represents 27.33% of the total ETH supply via over a million validators, there is a clear interest in staking.”

Mikhil Pandey, Co-founder of pSTAKE
The number of ETH staked since late 2020 actually depicts an upward trajectory.

So, the idea of passive income is certainly attractive to retail investors, but they are not the only ones interested. Institutions are also looking to invest in yield-bearing assets, which could include innovations like ETH ETFs evolving into ETH Staking ETFs, the Grayscale Fund holding a majority of tokens as PoS ones that can be staked, or even funds operating their infrastructure to become validators or node operators.

I expect staking to solidify itself as the basic building block for DeFi, bringing a form of native yield to assets. The latest entrant into this landscape is Bitcoin, the largest crypto asset, with Babylon’s Trustless Staking and projects like pSTAKE building on top of it.

Q-2: How do you see staking evolving?

Already, staking has come a long way since its early days. Over the past couple of years, it has evolved to eliminate the need for tokens to be locked through liquid staking. In this advanced form of traditional staking, token holders get all the benefits of staking while retaining access to their locked funds, which can then be put to use again.
“The popularity of liquid staking derivatives (LSDs) has also grown to exponential proportions, so much so that over 13 million ETH worth over $50 bln are now locked up in these protocols alone. But this is just the beginning; the whole experience of staking will get bigger, easier, and more seamless.”

Mikhil Pandey, Co-founder of pSTAKE
For the past few years, we’ve been working on providing a seamless way for users to improve their staking and liquid staking experience across various networks. Liquid staking first started gaining adoption in 2022 after the DeFi boom in the last bull market. Witnessing a surge in traders hunting for yield and investor risk appetite, we introduced a specialized layer 1 platform entirely focused on unlocking the liquidity of staked assets.

Looking at pSTAKE’s journey offers a great story of how staking has evolved. Since pioneering Cosmos liquid staking in 2021, we’ve evolved as the market has.

We’ve built liquid staking for high inflationary app chains such as Osmosis to real-yield loops such as dYdX and are now developing liquid staking for Bitcoin. Staking (essentially locking up funds to prove a certain task) will always remain prevalent for assets with a high market cap.

Market demand is also moving in that direction. The ETH staking market is huge, with multiple leading players, including liquid staking protocols and institutional funds.

Q-3: Do you think staking is a risky endeavor?

Certainly, while an attractive way to boost earnings, staking isn’t without its issues. There are massive security risks and power concentration, as seen with Lido accounting for 72.29% of all liquid ETH staking.

Liquid Staking and Restaking create an additional layer of derivative leverage that naturally comes with risks.

Take ETH, for example. With LRTs, the potential slashing of ETH becomes two-fold: Consensus-based and AVS-based. Although these are mutually exclusive, they introduce additional risk to capital.

A long-term risk involves ETH stakes being centralized within an LRT protocol that offers the highest yield.

The yields from AVS themselves pose a risk. If the expected returns don’t match restakers’ appetite, it could pose a systemic risk to Restaking and the applications it intends to empower overall.

At the same time, liquid staking and restaking can also be good for decentralization. Therefore, there is a need to emphasize security, and this is something we at Persistence are addressing by taking advantage of Bitcoin.

Q-4: Where does Bitcoin fit in this?

There is a major shift currently happening in this space. While Ethereum has been leading the staking narrative, Bitcoin has now also entered the realm of programmability. This marks the first time Bitcoin is being exposed to native yields, not just general DeFi ones. It is no longer only PoS blockchains that can offer their users yield; developers and investors are building on the largest blockchain to power a truly decentralized financial future.
“This time, Bitcoin will lead the DeFi revolution, having attracted institutional interest and capital. Bitcoin is no longer playing a passive role in the crypto economy; rather, it is now front and center, witnessing a wave of innovation that allows BTC holders to finally participate in the world of opportunities.”

Mikhil Pandey, Co-founder of pSTAKE
So, for the first time in years, Bitcoin is seeing a creative development that is set to make this self-sovereign asset the foundation of the future of DeFi. With liquid staking offering a completely new experience for coin holders, introducing it to Bitcoin allows them to take advantage of multiple income streams on the world’s most decentralized and robust blockchain.

Q-5: How can Bitcoin help tackle the issue of security in staking?

Interestingly, Bitcoin can offer far more than just an untapped market. It is actually a reservoir of trillion-dollar capital that can be used to secure PoS networks.

We are leveraging Bitcoin’s unutilized value to redefine the utility of BTC. For this, we have been working with Babylon, which can be integrated into any PoS chain to allow users to stake BTC, thereby securing PoS ecosystems and making BTC an active asset.

The way our Bitcoin liquid staking solution works is that users deposit their BTC into pSTAKE to mint a liquid staking token (LST) representing their staked BTC and earn a yield. The LST can then be used in Bitcoin’s emerging and thriving DeFi (BTCfi) world, providing stakers with additional opportunities to generate yield on their BTC holdings.

Up until now, Bitcoin holders didn’t have much to do with their BTC except for keeping it locked in the old storage. But now, BTC holders can liquid-stake their BTC through pSTAKE securely and earn a passive income without sacrificing liquidity.

This way, Bitcoin is emerging as a critical security provider for not just decentralized applications but also PoS networks. The introduction of Bitcoin staking will further transform BTC from a passive store of value to a rewards-generating asset. However, this is still in the early stages, with the DeFi ecosystem yet to align well with Bitcoin holders, stakers, and miners. But once that is achieved, we’ll be seeing a new era of Bitcoin utility and innovation.

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