Liquid Collective is a decentralized liquid staking protocol that provides staking solutions for institutional and enterprise participants across multiple blockchain networks. It establishes a standardized framework for liquid staking and is governed by a broad collective of industry participants.

A key component of the protocol is Liquid Staked ETH (LsETH), a staking token representing staked Ethereum (ETH) and accrued network rewards. LsETH enables staking while maintaining liquidity, facilitating broader integration within decentralized finance (DeFi) applications. ^{[1] [2] [6]}

Overview

Liquid Collective was publicly announced on September 20, 2022, marking the beginning of its development as a standardized liquid stakingprotocol. Shortly thereafter, on October 4, 2022, the LsETH smart contractwas deployed, initiating its staking operations on Ethereum. Over time, the protocol has expanded its ecosystem by incorporating major custodians, platforms, and nodeoperators.

Liquid Collective was developed aiming to provide a structured and secure liquid staking solution that meets institutional compliance requirements. Unlike protocols primarily catering to individual crypto users, Liquid Collective is designed to accommodate enterprises by aiming to ensure regulatory compliance, security, and operational efficiency. It is supported by a network of industry participants, including custodians, node operators, and service providers.

Initially launched on Ethereum, Liquid Collective follows a multi-chain strategy, with plans for future expansion to other proof-of-stake (PoS) networks. Governance is structured in a decentralized manner, involving a range of stakeholders contributing to protocol development and oversight. ^{[1] [2] [4] [6]}

Technology

The protocol is built on a foundation of smart contracts deployed on Ethereum, automating staking, LsETH issuance, and reward distribution while maintaining transparency and security.

Staking security is managed through a network of validators, including Figment, Coinbase Cloud, and Staked. These entities operate multi-region and multi-client infrastructures, aiming to reduce risks associated with centralization and downtime.

Compliance mechanisms such as Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements are integrated into the protocol. These measures are implemented to align with financial regulations and facilitate institutional participation.

Security audits, conducted by independent firms including Halborn and Spearbit, assess and mitigate potential vulnerabilities within the protocol’s smart contracts. The adoption of the cToken model ensures that LsETH reflects the value of staked ETH and rewards without periodic rebasing, supporting seamless interaction with DeFi applications. ^{[4] [17]}

Liquid Staked ETH (LsETH)

Liquid Staked ETH (LsETH) is a staking receipt token issued when ETH is staked through Liquid Collective. It serves as verifiable proof of ownership over the staked ETH and accumulated rewards, accounting for network fees and potential penalties.

By holding LsETH, participants retain liquidity while benefiting from staking rewards, allowing its use in DeFi applications. Rewards are automatically reinvested, increasing the value of LsETH over time.

The protocol’s validator network is selected based on operational security standards, with additional protection provided through a slashing coverage program developed in collaboration with Nexus Mutual. The compliance framework ensures that staking activities are conducted within regulatory guidelines, making the protocol accessible to institutional entities.

Liquid Collective's revenue model is built upon a Protocol Service Fee, which is set at 10% of network rewards. This fee structure ensures operational sustainability and is distributed among multiple ecosystem participants:

• Node Operators receive compensation for securing the network.
• Platforms facilitating staking earn a share of rewards.
• Custody Providers and Wallet Services receive a portion of the service fees for managing assets securely.
• The Liquid Collective DAO, composed of a dispersed community of protocol participants, manages governance-related funding. Unlike staking solutions with variable or unstated fee structures, Liquid Collective's model is transparently structured to support institutional participants while maintaining a predictable return for stakers. ^{[1] [4] [8] [11] [13] [15] [18]}

DeFi Ecosystem

Beyond its core staking mechanism, Liquid Collective actively integrates with decentralized finance (DeFi) applications to extend the utility of LsETH. Several DeFi platforms, including LBank, DefiLlama, iYield, and EigenLayer, have incorporated LsETH within their liquidity pools, lending protocols, and financial tracking tools. These integrations allow LsETH holders to engage with decentralized financial services without unstaking their assets.

Strategic partnerships have been formed with protocols offering liquid restaking services, such as Inception and EigenPie, broadening the asset’s usability within Ethereum’s broader staking ecosystem. This integration enables holders of LsETH to participate in additional staking layers while retaining access to capital-efficient liquidity solutions. ^[10]

Governance

Liquid Collective follows a decentralized governance model, with decision-making distributed among stakeholders, including validators, custodians, and service providers. Governance is coordinated by The Liquid Foundation, Alluvial, and other industry participants.

The governance framework includes mechanisms for evaluating validator performance, implementing security upgrades, and expanding protocol capabilities. Decisions related to protocol development and operational security are determined through collective input.

Ecosystem Participants

The Liquid Collective ecosystem includes multiple industry partners contributing to its governance, security, and operational framework:

• Staking services are integrated with platforms such as Coinbase, Figment, Bitcoin Suisse, Hashnote, Twinstake, Anchorage Digital, Alloy, and Staking Rewards. These platforms facilitate access to Liquid Collective’s staking infrastructure.
• Validator operations are managed by Figment, Coinbase Cloud, Staked, and Blockdaemon, supporting the network’s security and performance.
• Custodians, including Anchorage Digital, Bitcoin Suisse, BitGo, Coinbase, Copper, and Fireblocks, provide institutional-grade security for staked assets.
• Governance and research partners, such as The Liquid Foundation, Alluvial, Reverie, Exiger, and Nexus Mutual, contribute to protocol development and risk management initiatives.

Security measures include smart contract audits performed by Halborn and Spearbit, aiming to ensure that vulnerabilities are identified and addressed before deployment. The protocol follows a non-custodial model, with ETH deposits managed directly by Ethereum’s staking contract, reducing third-party risks.

Validators operate using multi-region and multi-client infrastructures to minimize downtime and mitigate security risks. Compliance with KYC/AML regulations distinguishes Liquid Collective from other liquid staking protocols by ensuring adherence to regulatory standards.

Network monitoring mechanisms are in place to detect and respond to potential security incidents, with automated responses implemented to mitigate risks. ^{[2] [3] [5] [7] [12] [14] [16]}

Future Developments

Liquid Collective continues to expand its network and capabilities. While its initial deployment focused on Ethereum staking, the protocol has outlined plans to support other proof-of-stake (PoS) blockchains. The Liquid Foundation and governance advisors are actively working to introduce an expanded governance framework that includes greater community participation and decentralized decision-making.

Liquid Collective has established itself as a liquid staking protocol tailored for institutional and enterprise participants. ^{[2] [3] [9] [12]}