So what if we’ve entered a bear market — How PoS assets can help bring stable yields to the masses

What do you do in a bear market?

If anyone says that they know with 100% certainty how the crypto market will move, they’re likely either lying or overconfident (otherwise please DM me the future too). But even in uncertain market conditions, opportunities still abound.

DAI deposit rates on Aave v2. Source: Aavescan

Could PoS be the next big opportunity for yield?

Although there has been much hype about the DeFi market and its Total Value Locked (TVL), an often-overlooked market is that of PoS assets and their respective networks, such as ETH2.0, Polkadot, Terra, Solana, etc.

LUNA staking returns (based on tax, oracle, gas rewards, excluding airdrops). Source: Flipside Crypto — Terra

A stake in PoS staking

There are various ways to obtain exposure to PoS yields, each with their different pros and cons.

1. Hold PoS assets and stake them directly

This is the most straightforward of them all and needs little explanation. Less savvy users may choose to go with the centralized exchanges, many of which provide locked or flexible staking options.

2. Protocols that generate yield via PoS assets — Anchor

There are also protocols that provide higher returns by effectively tapping on underlying PoS yield, but in more novel ways. Anchor, a savings protocol built on Terra that provides 18%-20% APY on Terra’s UST stablecoin is the prime example of this.

Source: “Terra: The DeFi Giant Reaching Mainstream Adoption” by Phang Jun Yu on Messari

3. PoS yield aggregators — Stone

Just as yield aggregators for stablecoins have emerged in DeFi, they will too for PoS assets. And rather than aggregating across say different lending protocols, they will be aggregating yield across different PoS chains instead.

Source: Stone Litepaper
  • Aggregation of the fragmented liquidity of staking derivatives — for example Stone could have an sETH asset that represents the various liquid staked PoS tokens of aETH (Ankr), bETH (Bifrost) and stETH (Lido), further diversifying the risk of slashing on the staking protocols.
  • Exposure to upside from crypto price appreciation through the PoS assets, which should also have lower volatility compared to other altcoins.
  • Optimal asset allocation based on factors such as users’ risk profiles or the Sharpe ratio, with the index rebalancing as needed.

Moving up the stack to mass adoption

When it comes to PoS yields, there lies opportunity across the entire stack, from the PoS assets themselves, to the staking derivatives that unlock liquidity, and finally to the aggregation layer where protocols provide risk-optimized, higher yields backed by the staking returns of those assets.

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