NEAR City Stakeholders

    A deep dive into liquid staking on NEAR.

    :mag:Scope of Analysis


    In this analysis, we will look at key DeFi activities on NEAR and explore what do NEAR citizens commonly participate in.

    We will dive into liquid staking solutions offered on the NEAR blockchain currently. Specifically, we will explore:

    • how much NEAR has been staked through liquid staking platforms
    • how many users have utilised liquid staking & the type of users on liquid staking
    • whether liquid staking improved decentralisation

    :city_sunrise: What are Citizens of NEAR up to?


    A bustling city with streams of new citizens, do they participate in the economy of NEAR? Or do they just pass by and do nothing?

    NEAR citizens can participate in a whole host of activities on NEAR -

    • Staking their NEAR to help secure the city, while gaining staking rewards
    • They could trade on the financial districts via decentralisation exchanges (swaps) or provide liquidity
    • They could mint or buy NFTs from marketplaces such as Paras
    • They could deposit their assets to borrow or loan them out in money markets (Burrow Cash)

    :droplet::cut_of_meat: Liquid Staking on NEAR


    Currently, there are three main platforms for liquid staking on NEAR: Meta Pool, LiNEAR and Staker. Why stake your tokens through liquid platforms? There are a few advantages that liquid staking services offer:

    • Liquidity: Liquid staking allows for users to receive the yield from staking their NEAR without the long undelegation time
    • Yield: Stakers can utilise the liquid presentation of the staked tokens (stNEAR, LiNEAR, etc) for borrowing and lending, providing liquidity. This may allow stakers to stack on additional yield or get liquidity without selling their underlying staked token
    • Service: These platforms can also help users select reliable validators that have reputable uptimes to minimize penalty (slashing) for users
    • Decentralisation: Liquid staking services can also improve decentralisation by allocating the pool NEAR from staking to selected delegators.

    A short introduction of the 3 main liquidity solutions on NEAR can be found below

    Meta Pool


    • Staking: Users stake their $NEAR in exchange for $stNEAR, which increases in value relative to the $NEAR from staking rewards after each epoch.
    • Utility: Stake NEAR, receive stNEAR you can use across AMMs and Lending protocols such as Ref.Finance and Burrow Cash. Users can also fund new projects through staking on Meta Pool with MetaYield.
    • Decentralisation: Meta Pool’s algorithms automatically delegate NEAR across 87 validators and monitor for performance and uptime for users

    Source:

    LiNEAR


    • Staking: Users stake their $NEAR in exchange for $LiNEAR, which increases in value relative to the $NEAR from staking rewards after each epoch.
    • Utility: in various DeFi protocols on NEAR and Aurora or swap back to $NEAR at any time. Explore DeFi yields on top of your staking rewards
    • Decentralisation: Improve network security through delegating the stake to multiple reliable validator

    Source:

    Stader


    • Staking: Users stake their $NEAR in exchange for $NearX

    • Utility: Yield farming on REF for NEAR-NearX LP, backed by SD tokens, future NFT and gaming utility proposed

    • Decentralisation: Liquidity staking solution that issues NearX tokens. Through robust validator monitoring and rebalancing infrastructure, Stader aims to help network decentralisation

      Source:

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    Of the 1.14M citizens with a successful transaction performed since September 2021, the majority have not participated in the selected DeFi/on-chain activities that we explored.

    • Staking NEAR was the most popular DeFi activity explored, with 7.6% of all citizens doing so. In terms of liquid staking, adoption was substantially lower compared to native staking, with only ~1.37% of all citizens ever utilising Meta, LiNEAR, and/or Stader
    • Trading on the financial district (Decentralised exchanges) was the second most popular activity, with 78k users (6.8%). Only a small proportion (~2.5%) of citizen ever provided liquidity on DEXs.
    • Around 4.5 in every 100 citizens will mint an NFT, while only 2 in 100 will buy on from a Market
    • Money markets (Burrow) and minting of USN were the least popular activity, with <0.3% of users ever interacting with these protocols

    :city_sunrise: What are Citizens of NEAR up to?

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    Liquid Staking - Decentralisation

    Did liquid staking services contribute to improved decentralisation?

    Liquid Staking - Volume

    Total NEAR staked natively and through liquid staking. As NEAR staked through liquid protocol will be reallocated by the protocol, the delegations from relaying or operation contractors from the liquid staking protocols are excluded in the native staking transactions to avoid double counting. This analysis explores the amount of NEAR staked, not accounting for unstaking transactions.

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    Here, we count the total NEAR delegated by each group through liquid and the native approach.

    Overall, it appears that those who delegated less NEAR(<1 NEAR) were much less likely to stake through liquid protocols. The group with 100k-1M NEAR contributed to the most NEAR staked via liquid staking.

    Liquid Staking - User Growth and Profile

    How many new liquid stakers did these services bring? Were users who staked more NEAR more likely to use liquid staking protocols?

    Of all 3 platforms, Meta Pool had the most number of stakers, given that they have been around since 2021. LiNEAR saw a spike in new stakers in Mid-July and Stader recently started their operations, drawing 600+ new users in less than a week.

    Here, we classify each user based on the total amount of NEAR ever delegated. We notice there was a substantial number of users who delegated < 1 NEAR (~24K), inflating user delegation count (72k+ at time of analysis).== The majority of stakers delegated between 10-100 NEAR.

    Of the 3 platforms, Meta Pool received the most amount of NEAR delegated, at 22M. The weekly volume of NEAR staked has been hovering in the range of 3-5M most weeks.

    The proportion of NEAR delegated through liquid staking platforms has been increasing, reaching 40% dominance in some weeks (March 14, June 13).

    At the week of analysis, more than 50% of NEAR staked were through liquid staking contributed by Stader.

    Does liquid staking service contribute to improving decentralisation?

    Not really.

    The chart on the right shows the GINI index (a measurement of equality, with 1 being maximum inequality) of NEAR staked amongst validators with the proportion (%) and amount of NEAR staked liquidly.

    While GINI* has declined from the initial February spike, the data do not show a strong relationship between the proportion and the total amount of NEAR staked liquidly.

    Spikes in % of NEAR and absolute number of NEAR staked do not contribute to any visible change in decentralisation matrix.

    One possibility is that the majority of NEAR staked has already been delegated before the existence of these services and were not moved since then.

    **Additional measures of decentralisation on NEAR can be explored in this dashboard: *

    In terms of the proportion of NEAR delegated via liquid protocols, we see that the stakers that contributed between 100 to 1k and 1k to 10k NEAR had around 1/3 (~30%) of all their NEAR staked through liquid staking protocols.

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