(I. Introduction
"Cosmos is dead" - Fud Cosmos's comments have appeared frequently recently, full of disappointment, sadness and unwillingness of early supporters. Cosmos's performance in recent times is indeed shocking, and the ecosystem is like a stagnant pool of water. And how far in the future will the next phenomenal Cosmos subchain be?
The Cosmos ecosystem is dead silent, but Cosmos never seems to lack innovation.
Even under the shadow of Terra’s collapse, popular sub-chains such as Evmos and Canto were born. After that, the Cosmos ecosystem fell silent for a long time, and no phenomenal public chain appeared.
However, the pace of exploration and innovation by Cosmos ecosystem developers has not stopped. The project to be discussed in this article is based on a brand new track - full-chain LSD.
LSD stands for "Liquid Staking Derivatives", which is a hot track in the crypto field this year. The core of LSD is to release the liquidity of staked PoS assets. While obtaining node staking income, you can also get a bonus of DeFi income;
The full-chain LSD extends the empowerment form of assets to multiple chains, aiming to release the liquidity of pledged assets to a greater extent and achieve more value accumulation. It can also be simply understood as adding an extra layer of empowerment on the basis of LSD.
(II) The two heroes of the full chain LSD
Coincidentally, the full-chain LSD protocols Entangle Protocol and Tenet Protocol both come from the Cosmos ecosystem, and we will call them the full-chain LSD duo of Cosmos for the time being. Entangle and Tenet are both application chains built on the Cosmos SDK and focused on full-chain LSD scenarios. Although the two have similar track positioning, their full-chain LSD implementation paths are very different.
1）Entangle Protocol
Entangle is a full-chain LSD application chain centered on native oracles and compatible with EVM. Its "full-chain" attribute is reflected in the ability to create cross-chain LSDs of any supported chain LP on other chains, thereby achieving multi-chain benefits. For example, a user's 1 unit of AVAX/USDC LP token on TraderJoe (DEX on Avalanche) can be mapped to 1 unit of AVAX/USDC LP liquidity pledge assets (LSDs) on the Ethereum chain through Entangle.
Let’s not talk about the technical implementation principle for now, let’s first understand why it is designed this way? In other words, why do LP holders want to mess with the liquidity of their group? The reason has been mentioned above. Through Entangle, you can get an extra layer of income, that is, the income generated by LP LSD.
Let's look at two examples more concretely:
Example 1:
1) Xiao Ming provides liquidity of stETH/ETH on Curve Finance and obtains corresponding LP tokens;
2) Xiao Ming pledges LP through Entangle;
3) Entangle automatically puts LP tokens on Convex for staking compounding;
4) Entangle issues LP’s LSD certificate to Xiao Ming;
5) Xiao Ming deposits LP-LSD as collateral into Curvance and obtains lending income.
Example 2:
1) Xiaohong provides AVAX-USDC liquidity to TraderJoe and obtains corresponding LP tokens;
2) Xiaohong pledges LP through Entangle;
3) Entangle automatically deposits LPs into TraderJoe’s yield farm for compound interest;
4) Entangle issues LP-LSD on the Polygon chain to Xiaohong;
5) Xiaohong deposits LP-LSD into AAVE as collateral to obtain lending income (this is just an assumption, AAVE does not support Entangle’s LP-LSD)
By using the above-mentioned method of multiple DeFi Lego for LSD assets, the liquidity of assets is greatly improved, and at the same time, sticky liquidity is brought to the protocol (discussed later).
1.1 Implementation Mechanism
The above scenarios are not difficult to understand, but the technical implementation is not that easy, involving complex full-chain asset price feeding, full-chain asset anchoring and other issues. How does Entangle realize the application scenario of full-chain LSD?
The core of Entangle's technical implementation mechanism is Liquid Vaults, which deploys LVs on different chains it supports through the underlying native oracle network and multi-chain deployed internal DEX.
Entangle supports the minting of LSD in the LV of chain B at a 1:1 ratio based on the liquidity of chain A's LV. The supported underlying assets include three categories: LP of mainstream DEX (such as AVAX/USDC LP pair on TraderJoe), lending assets (such as USDC lending pool on AAVE) and liquid pledge tokens (such as stETH). The essence of the liquidity vault is to encapsulate LP and map it to other chains.
With the help of the underlying native distributed oracle solution E-DOS (Entangle Distributed Oracle Solution), Entangle provides lower-cost full-chain asset feeds for full-chain dApps without relying on third-party oracles.
1.2 Viscous fluidity
The realization of the LP-LSD application scenario brings more capital gains to users, and from the protocol side, it also brings "sticky liquidity" to the protocol.
In order to attract users to provide liquidity in the early stages of their launch, many Defi projects usually adopt aggressive token economic models (high inflation rate/fast release speed). This incentive method is unsustainable. While quickly diluting the chips, it also reduces the income of the protocol. Once the LP income is not as expected, users will withdraw liquidity, and this liquidity is not "sticky".
Entangle’s full-chain LSD infrastructure provides users with cross-chain LP empowerment, improves liquidity incentives, and to a certain extent increases the “stickiness” of liquidity.
2）Tenet Protocol
Entangle provides full-chain application scenarios for LP-LSD, while Tenet provides specific application scenarios (Tenet chain staking) for full-chain LSD. The former is a mesh structure, while the latter is more like a convergence structure.
Tenet is also an EVM-compatible application chain built on the Cosmos SDK, deeply integrated with the LayerZero full-chain interoperability infrastructure, enabling LSD assets to be empowered at the chain level.
The core of Tenet's full-chain LSD implementation is based on its innovative consensus mechanism - DiPoS (Diversified Proof of Stake). Simply put, users will no longer be limited to protecting the network by staking native tokens $TENET as validators/delegaters, which is applicable to LSD assets across the entire chain.
2.1 Supported LSD asset classes
Tenet supports a basket of assets as collateral for its DiPoS consensus, such as stETH and rETH issued by liquid staking protocols such as Lido and RocketPool; it also supports LSD issued by CEX, such as cbETH and wBETH issued by Coinbase and Binance.
In addition, users can stake PoS assets directly through Tenet’s native liquid staking module without paying any management fees (Note: Lido and others charge a 10% management fee). The first batch of PoS tokens that support liquid staking include ETH, ATOM, BNB, MATIC, ADA, and DOT, and more PoS assets will be gradually supported in the future.
In this way, PoS asset pledgers not only receive native network consensus rewards, but also receive a share of Tenet's block rewards and transaction fees. This cross-chain asset pledge method makes the connection between different chains closer, achieving a positive effect of mutual benefit and win-win - LSD pledgers get higher returns, and Tenet gets higher network security based on DiPoS.
(III) Dream Linkage
Although Entangle and Tenet are both full-chain LSD application chains and are rooted in the Cosmos ecosystem, the relationship between the two seems to be more cooperative than competitive.
Entangle's core focus is LP-LSD, that is, providing cross-chain LSD services for LP assets; Tenet's focus is DiPoS, supporting diversified LSD assets to participate in the staking consensus. Imagine if Tenet can support Entangle's LP-LSD as a staking asset for the DiPoS consensus in the future, LP-LSD will receive additional rewards from Tenet, and Tenet will receive security guarantees for LP-LSD staking. This is a real dream linkage.
(IV) Postscript
LSD Summer brought several waves of enthusiasm to DeFi, but full-chain LSD did not receive much attention from the market. As a brand-new track, whether full-chain LSD is brewing before the outbreak or dying in the cradle, time will tell everything.
For Cosmos, the most powerful response to “Cosmos is dead” is to create a truly phenomenal Cosmos subchain. The full-chain LSD track seems to have the opportunity to become this breakthrough.