Everything to Know About Quicksilver: The Cosmos Liquid Staking Zone
The Current Staking Scenario in the Crypto Industry
With the advent of the Ethereum Merge, staking has been one of the most talked about protocols in the crypto and blockchain industry. Quicksilver is one of the emerging protocols which offers staking but with additional benefits.
In fact, regular staking has its own challenges that take time to be understood. But before we look at these challenges, let’s look at the current staking scenario in the industry.
In general, staking is a much better process than mining in Proof of Work (PoW) in terms of the energy consumed, the profits made, and the environmental impact it has. According to Coinbase, over 2.8 million people crypto customers had locked their funds in staking protocols in Q3, 2021.
Over two-thirds of Solana, Binance Smart Chain, and Cardano tokens were staked in the same year. In Q4 of 2021, about 7.7% of the crypto market cap of $2 trillion was staked.
Besides these, there are numerous other statistics and numbers that can depict how staking is gaining popularity. This has become more prominent after the introduction of Beacon Chain by the Ethereum Foundation. The trend will only become more dominant once the Ethereum Merge occurs.
However, despite its popularity, staking in different protocols has its own challenges. So first, let’s look at these challenges, understand them, and then learn how Quicksilver solves them with relative ease.
Challenges of Staking
Despite staking’s obvious superiority to mining, it has its own risks and difficulties that users might face. Let us take you through each of them to understand how it would affect you as a staker.
When users lock their funds into the staking protocol, they can’t use them for other purposes such as purchasing assets, trading, investing, and more. This is because their funds are stuck in the smart contract, and they’ll have to wait for their funds to be relieved to actually use them.
There are numerous protocols that either follow a centralized form of staking or have whitelists which could potentially lead to the centralization of the process. This leads to the protocol being compromised and puts your funds at risk.
Lack of Security
Cyberattacks are evolving at a rapid rate, and the various companies and protocols should constantly upgrade their security infrastructure to the latest standards. However, sometimes even if this isn’t enough, all the precautionary measures fall short. The same can be said for the staking protocols, where your funds are locked in.
This occurs when a validator on the network engages in some malicious activity or misbehaves. When they do so, the network will confiscate all of their staked ETH funds for fraudulent activities. This essentially is known as slashing and leads to you losing your funds to it as well.
Overall, these are some of the significant challenges for users participating in a staking protocol. So, how do the Cosmos Liquid Staking Ecosystem and Quicksilver Zone solve these? How do they work? How can you be a part of them?
We’ll take you through everything you need to know about the Quicksilver Zone — A Cosmos Liquid Staking Zone. Let’s jump right in.
What is the Cosmos Ecosystem?
The Cosmos Ecosystem is a hub of interoperable chains which work together to provide various DeFi services in a decentralized, sovereign, profitable, and secure manner. It aims to create a series of products that together act as a one-stop shop for people looking for any kind of DeFi services.
For this, the platform would require a liquidity-driving protocol, and here’s where the Quicksilver Zone comes into play.
What is Quicksilver Zone?
The Quicksilver Zone is the protocol that will provide liquid staking for the complete Cosmos ecosystem. It is in the form of a permissionless and sovereign SDK that supports any IBC-enabled blockchain networks within the hub.
It will be the medium via which users of the complete Cosmos Ecosystem would be able to stake their assets, no matter what chain they operate on. This protocol would be driven by the community and the users instead of a central authority.
The Purpose and Vision
Quicksilver aims to accomplish this while maintaining the network integrity, fostering innovation, to provide the most efficient ways of staking. The long-term vision of the protocol is to act as a home to all the staked assets for the Cosmos platform. But it doesn’t end there.
It wants to create an asset that represents the value accrued by the Cosmos ecosystem. Quicksilver would become an index for people who want to be exposed to the various chains and tokens within the hub.
Furthermore, this index will be collateralized against all the staked assets in one go. Above all this, the team aims to build a series of products with the possibility of creating assets for niches such as privacy, environment, and more.
Let us depict what Quicksilver Zone would look like when it is fully functional and operational.
How Quicksilver Zone Works
In simple terms, Quicksilver Zone enables users to stake their assets in exchange for qAssets. These qAssets can then be used for other DeFi products based on your purpose. Thus, even when your assets are staked in the protocol, you’ll not be restricted from using the funds to invest, trade, buy, or build more wealth.
Besides this, the platform will also have a native token called the QCK Tokens. These tokens will be used as a payment medium for various types of transactions. These include distributing rewards, on-chain governance, paying transaction fees, incentivizing good practices, and more.
This is merely an overview of how the system is. The operations have deeper intricacies, such as governance, delegating validators, minimizing slashing risks, and more. These have
Features of Quicksilver Zone and Utility of QCK Tokens
As mentioned earlier, the Cosmos Ecosystem will be driven by the community with the help of a governance mechanism. Quicksilver will act as the governance hub, which will be the gateway for different kinds of users, such as stakers, liquidity providers, and other DeFi users.
This will be possible with the help of the QCK tokens, which act as governance tokens. Any staker will automatically get voting power, while others can buy the token to get the same rights.
As people who are invested in the protocol, you’ll be able to vote on decisions such as which chains must be onboarded, which validators should be denied access, how the funds should be spent, changes in the network parameters, and more.
Delegation of Validators
To avoid the possibility of centralization, Quicksilver ensures there’s no whitelist of validators on the network. Instead, it facilitates a system where people staking different assets of different chains can choose their own validators. In fact, they’ll be incentivized to choose validators.
The process will ensure a higher level of decentralization and will not give any people the luxury of being the chosen ones. In fact, the choice of validators or assets to be staked will not affect the governance rights of native chains. This is because of the ecosystem’s proxy feature.
The validators’ choice mechanism will also lend itself to securing the various zones and chains within the ecosystem. It will also help with mitigating the risks of having validators who aren’t as trusted as others.
Bonding and Unbonding with the Ecosystem
When you choose a specific zone and delegator in that zone, you’ll be bonded with that delegator. Now, suppose you’re currently in this scenario and want to get onto Quicksilver. In that case, you will be able to do it seamlessly if your zone has enabled the Iqlusion’s Liquidity Staking Module (LSM).
Alternatively, if the zone hasn’t enabled this, you’ll need to use separate liquid assets to stake in the Quicksilver protocol. However, you need not be bonded mandatorily. Your stake will take an unbonding period to transfer the assets back to the traditional staking.
Besides this, if you want to stay bonded, you can do that too and use the qAssets you get for other DeFi services. This would be relatively easy when compared to unbonding the assets.
Security here is of two kinds. One is the security within the Quicksilver system, and the other is the interchain security in the overall Cosmos ecosystem. For the first one, the protocol relies on validators’ choice, Liquidity Staking Module (LSM), positive participation, and more to secure the system.
With the LSM, users won’t have to unbond their assets, and their assets can be automatically transferred. This way, even temporarily, the zone security will not be compromised.
Validators’ choices will encourage users to choose ones with better performance and ones that add to the system’s decentralization. This way, the protocol is secure and less vulnerable to fraudulent validators.
When it comes to interchain security, the platform has developed a system called interchain security v3. Leveraging this, complete Cosmos Hub and the Quicksilver Zone will share their individual sets of validators, which would be responsible for securing the zones.
Over 50% of the QCK tokens will be part of the airdrop. This would include 100,000,000 Quick (QCK) tokens. The first airdrop will occur during Genesis and at regular intervals after as well. The amount of these airdrops will be determined by the performance of the validators, the way users stake their assets, how the system participation is, and more.
Overall, these are the most significant features of the Quicksilver liquid staking protocol. These and a few other features lead to the users gaining a few advantages over staking in a native chain.
Benefits of Quicksilver Zone
This is one of the most important benefits that users gain. Numerous chains have staking protocols that do not give this much importance, which leads to the users’ funds being under the networks’ control. But here, with the help of policies such as validators’ choices, decentralization can be maintained.
Liquidity is another challenge for staking protocols. With Quicksilver, liquid staking is made possible. People are given the network’s assets which are connected by the actual assets users stake into the system.
As mentioned before, these assets are known as qAssets and can be used by the users for other integrated DeFi protocols. Thus, you can earn your APR while having the funds staked in the smart contract while also having the money for other investments, trades, and operations.
Besides its various mechanisms which promoted enhanced security, the platform has a specific interchain security system developed for the network. Furthermore, the system’s security is also being audited by third-party vendors who possess expertise in the field and can assist the platform in bolstering its security infrastructure.
Mitigating Slashing Risks
The effects of slashing a validator are mitigated by having its effect spread across all the remaining validators. This way, the overall redemption rate wouldn’t be as high.
For instance, when a validator misbehaves and their assets are confiscated, the spread would be about a 5% slash on an average validator. For this, the redemption rate would be -0.05%, and if there’s a downtime slashing, then the rate would be -0.0001%, which is negligible.
So, these are some of the obvious benefits of the Quicksilver liquid staking system.
QCK Token Allocation and Distribution
The supply of the QCK tokens will be 400 million. In this, 200 million will be launched during the Genesis, and 200 million will be released in installments over the next year. This supply will increase to 1 billion, and the tokens’ inflation rate will also decrease by 25%.
The allocation and distribution of the Genesis collection will be as follows:
- 102.7 million tokens will be distributed as community incentives and liquidity rewards.
- 40 million tokens will be allocated for the foundation that will use the funds to progress the platform further and develop it.
- 26.3 million tokens will be allocated to various investors.
- 21 million tokens will be assigned to the development team.
- 10 million tokens will be distributed as testnet incentives.
In general, the users will have huge decision-making power over how these community funds are used for development. The different developments that can be brought onto the platform and how it can evolve.
- Liquid Atoms deposits enabled on Quicksilver enabled for liquid staking
- Staked Assets deposits enabled on Quicksilver for any chain that has enabled the Liquidity Staking Module (contingent on governance vote)
- Unbonding / Undelegating Assets from Quicksilver enabled for any zone with the Liquidity Staking Module (contingent on governance vote)
- Unbonding / Undelegating Assets from Quicksilver disabled for zones without the Liquidity Staking Module (exiting the protocol would only be possible by selling qAssets)
- Native Quicksilver Governance enabled
- Staking of the QCK Token enabled
- Participation Rewards feature enabled
- Governance by Proxy feature disabled
- Governance by Proxy feature enabled
- CosmWasm integrated, allowing developers to build DeFi applications on top of Quicksilver, using qAssets as their base collateral.
While this is in the near future of the project, the future plans for the protocol can move in various directions. These include:
- Creating products for Quicksilver and enabling it to become a sub-ecosystem within the Cosmos Hub.
- Leveraging the success of Quicksilver zone to develop, launch, and run privacy-based, environmental impact-based, sustainability-based, and more tokens.
- Overall, the Quicksilver zone can also act as a DeFi driver for multiple interoperable chains in the Cosmos Hub.
These are all the things you need to know about the Quicksilver Zone within the Cosmos Hub. The Liquid Staking Ecosystem will drive liquidity in an efficient, decentralized, profitable, and secure manner. The long-term vision for Quicksilver is to become a prominent DeFi platform where people can access any service around the DeFi niche and benefit from it.
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