From Staking to Yield: A Guide to Tranchess Liquid Staking and its Yield-Boosting Potential
Liquid staking is well regarded as an innovative solution that allows users to earn staking rewards while maintaining liquidity and flexibility with their staked assets. Three years after it hit the market, the liquid staking sector still remains vibrant and growing. According to Dune Analysis, ETH staking remains a net inflow, with over 22 million ETH tokens staked on Beacon Chain.
Since the initial launch of the BNB fund back in January 2022, Tranchess has been at the forefront of exploring and implementing liquid staking strategies with its structured financial model for better yield enhancement. As our onboarding program successfully concludes and ETH staking grows, we would like to give our incoming users a quick look back into Tranchess’ past experience with BNB staking and a deep dive into the current qETH structure.
BNB Staking: The start of the validator node staking feature on Tranchess
Tranchess embarked on its liquid staking journey with the BNB QUEEN product, which leveraged the staking rewards from the BNB Chain, which has been providing a steady additional yield of 3~6% for all BNB stakers since the first launch. While BNB QUEEN wasn’t a fully decentralized staking (LSD) coin due to the structural and ecosystem differences of BSC, it laid the foundation for Tranchess to provide sustainable yield-enhancing opportunities to its users. BNB QUEEN allowed users to participate in BNB staking and benefit from the additional rewards generated by the staking nodes performing validation services. Tranchess remains a steady participant in the top 21 cabinet nodes and gained valuable experiences in node operation, security measures and stronger bonds with different node ecosystem teams.
Introducing qETH: Expanding Liquid Staking on Ethereum
Building on the success of BNB QUEEN, Tranchess expanded its liquid staking offerings to Ethereum with the introduction of qETH in November 2022. Naturally, it comes with the signature tranche product design,i.e., a single qETH can be split into BISHOP and ROOK tokens for more diverse utilizations — We will discuss this in detail over future articles. qETH is a structured product that combines the benefits of traditional staking with the flexibility and liquidity of an ERC-20 token. By staking ETH through Tranchess, users can earn staking rewards while still having the ability to trade, transfer, or utilize their staked qETH tokens within the Ethereum ecosystem.
Unlike the BNB fund, which Tranchess operates staking over its own validator setup, In ETH staking, Tranchess follows the industry norm and works with experienced node operating teams in the market. This change is largely due to the different nature of the BNB Chain and Ethereum — BNB Chain operates with limited nodes and requires a relatively large initial amount to be qualified, while Ethereum functions on a more decentralized basis with a large number of validators and requires 32 ETHs to initialize a node. The embedded risk of mishandling a node is much higher in BNB Chain than in Ethereum, thus requiring different management of users’ staked assets. The decentralized node operator setup on Ethereum allows Tranchess to focus more on the protocol’s ecosystem development on Ethereum. It also blends well with Tranchess’ continuous effort towards DAO, whose recent progress can be found here.
On April 13, a day after the successful Shanghai Upgrade, Tranchess announced its support of the qETH withdrawal function, cementing its position as one of the first few protocols in the market to support the feature. It is a popular belief that the newly added withdrawal function encourages users to stake their ETHs hassle-free; The recent market data such as the long queue time for activating validators has clearly proved it.
As the size of qETH grows, we would like to highlight to Tranchess newcomers some ways to earn an additional yield on top of the staking rewards.
qETH Yield Generation
qETH holders earn yield through three primary mechanisms: staking rewards, AMM pool yield farming opportunities and Tranchess’ innate structure.
- Staking Rewards: The standard staking rewards generated by validator nodes. Users who stake their ETH through Tranchess become part of a staking pool that participates in the Ethereum network’s proof-of-stake (PoS) consensus mechanism. This enables them to earn staking rewards in the form of additional ETH over time. These rewards are distributed proportionally to qETH holders based on their stake. It is worth mentioning that, given the current queue to activate new validators, it could take a few more days before the deposited ETH start generating actual rewards, which though will not affect the rewards of individual ETH earning since it’s a shared pool, it will still result in a temporary fluctuation of APR figures when deposit demand is high.
- AMM Yield Farming: Tranchess provides opportunities for qETH holders to further enhance their yield with AMM LP tokens. Tranchess participates in the bi-weekly bribing incentives on Hiddenhand for its Balancer AMM qETH-ETH pool using the weekly CHESS emission for the ETH fund on Ethereum. Bribing attracts a higher voting percentage from the Balancer community, which generate additional BAL allocation for the pool. Currently, there are one main AMM pool and two LP staking options for qETH-ETH, the Balancer pool and the Aura pool, both within the Balancer ecosystem.
2.a. Balancer Pool: Balancer is the default AMM pool that users will be redirected to when choosing “provide liquidity” through the staking page:
Besides the transaction fees from the pool, LPs receive additional BAL as liquidity mining incentives by staking the LP tokens with Balancer. Tranchess participates in the bi-weekly program through Hiddenhand with the weekly CHESS emission allocated to Ethereum, which enhances the BAL incentives staked LPs would receive.
By the time of this writing, the Balancer pool yields an APR of 7.76% — 16.81%.
2.b. Aura: Many of you might not know, Tranchess actually has a pool with Aura Finance for diversified staking needs. The relationship between Balancer and Aura is similar to that of Curve and Convex. Users can deposit their Balancer LP tokens, or Balancer Pool Tokens (BPTs) as Aura calls it, and earn Balancer trading fees, boosted BAL rewards and AURA tokens.
According to the Docs, “Aura gives users the ability to continue receiving their trading fees but at higher APY due to Aura’s protocol owned veBAL… Aura provides users the ability to maximise yield on their BPT whilst offering exposure to the governance token of a protocol with the economic weight of substantial veBAL.” It charges a fee of the BAL revenues which goes to the different groups within the Aura community.
By the time of this writing, the Aura pool yields a vAPR of 16.01% and has a projected vAPR of 18.17%.
3. Tranchess Ecosystem earning: Unlike any other LSD tokens in the market, Tranchess is fundamentally a provider of structured products, not a pure LSD protocol. Just like the QUEEN token of BNB, qETH can also be further split into BISHOP, a stable-coin like token and ROOK, a leveraged-long position of ETH. Besides the interests or the leveraged earnings from the position, BISHOP and ROOK also share the staking rewards of qETH.
By participating in Balancer and Aura pools, and utilizing BISHOP and ROOK tokens when needed, qETH holders can diversify their yield generation strategies and potentially enhance their overall yield further. Of course, it is important to note that yield farming involves risks, including impermanent loss and smart contract vulnerabilities, and users should exercise caution and conduct thorough research before participating in these strategies.
Liquid staking has become a crucial component of Tranchess’ product offerings, enabling users to earn rewards while maintaining the liquidity of their staked assets. Tranchess started its liquid staking journey with BNB QUEEN on Binance Smart Chain and later expanded to qETH on Ethereum. This dual approach combining structured products and liquid staking demonstrates Tranchess’ commitment to providing its users with enhanced yield opportunities and flexibility. We will continue this endeavor with future collaborations with protocols in the Ethereum ecosystem and diversified product design. The onboarding program marks the beginning of an exciting journey, and we look forward to having you with us every step of the journey!
Disclaimer: The information provided in this article is for informational purposes only and should not be construed as financial or investment advice. Users are encouraged to conduct their own research and consult with relevant experts before making any investment decisions.