Blockchain investment firm Pantera Capital is leading a $4.5 million seed round in Staked, a startup that provides institutional investors with the technical infrastructure for non-custodial staking services.
Other participants in the round include Coinbase Ventures, Global Brain, Digital Currency Group, Winklevoss Capital, Fabric Ventures and Blocktree Capital.
“You’ve got $25 billion of stake-able crypto that’s coming online in the next 15 months,” Staked CEO and co-founder Tim Ogilvie told CoinDesk, describing what he sees as a large opportunity. The idea behind Staked is that investors can compound their crypto by participating in the validation process of proof-of-stake blockchains.
“Pantera invests in many leading proof-of-stake projects, so we knew we needed a staking solution,” Pantera partner Paul Veradittakit said in a press release. Pantera first approached Staked as a customer before deciding to invest. (Last November, Veradittakit spoke about opportunities for earning through staking from the main stage of CoinDesk’s Consensus: Invest.)
“Our cap table is all people who have stake or can influence stake,” Ogilvie said of his investors. “Everybody is basically a customer or potential partner.”
Ogilvie started Staked last March alongside Seth Riney and Jonathan Marcus, working with Multicoin Capital as an early client. Ogilvie said he started talking to customers more broadly in May and started to see traction in the fall.
Staked lets its customers determine the protocols it builds infrastructure for. Ogilvie explained that if Staked provides services for a given token, that’s because someone with significant holdings came to them looking for a solution.
Right now, the startup supports Tezos, Dash, Decred, Livepeer, Factom and EOS. The latter two, it should be noted, don’t provide a return for staking (EOS potentially can, but the technical hurdle is considerable); nevertheless, investors want to be able to participate in these networks fully.
More cryptocurrencies will be added, Ogilvie said, projecting that 20 coins will come online in 2019.
Handling the details
Anyone who digs into staking knows that there’s a lot of variation between protocols. Staking on Tezos, for example, is fixed. A user stakes and they are likely to earn money proportionally at a steady rate.
On the other hand, Decred uses a more intermittent staking approach where users buy tickets on an open market that pay out less predictably.
Staked allows holders to turn these complexities over to a team that will sort out optimizing them and handle a lot of the ongoing issues like updates and upgrades.
Staked’s basic business model gives it a maximum of 10 percent of the earnings of its customers’ staked tokens. There is a caveat, though: Staked only gets the full 10 percent if it hits 100 percent uptime. Its earnings shrink proportionally with the amount of time it goes offline.
Beyond institutional investors, Staked also provides a white label version that can be used by consumer-facing companies, such as exchanges and wallets. So an exchange could use Staked to set up a way for its customers to delegate their XTZ to a baker without taking them off the exchange.
Up next: lending
“Passive yield is a big opportunity,” Ogilvie said.
To expand customer options, Staked will also build ways for token holders to put their assets into platforms that allow them to lend their holdings out, such as dy/dx, Dharma and Compound.
“We’re going to build a smart contract that allows you to get the best rate from all the best options that exist out there,” Ogilvie said.
For his part, this is going precisely to Compund founder Robert Leshner’s plan: “Compound was designed for other applications and businesses to be built on top of the protocol,” he told CoinDesk. “Long-term, we hope they take over the user experience, and we can retire our web interface completely.”
Staked is open now to anyone for any of its supported protocols.
“We’re one size fits all. You can delegate to us,” Ogilvie said. “If you were to go to the yield page on our site, and click on Livepeer or Tezos, we’ll give you the details on how to delegate to us.”
That said, Staked is really designed with the large-scale user in mind – funds, wallets, exchanges and the like.
Those large holders are looking now for any way to take some of the sting out of a bear market, Ogilvie said:
“If your coins are going up 100x in a few months you probably don’t care as much about a 10 to 15 percent yield. Nowadays, people are probably looking for an edge wherever they can get it.”
Paul Veradittakit image via CoinDesk archives