Metis has taken a significant step forward in advancing our ecosystem by integrating Liquid Staking Token (LST) protocols, which improve network decentralization by distributing staking responsibilities and offering enhanced rewards for METIS token holders. In this blog we’ll examine how LSTs are transforming the Metis ecosystem while benefiting our users and how you can get involved.
Liquid Staking Tokens are among the latest and most versatile financial instruments in decentralized finance (DeFi), allowing users to lock their native tokens (in this case, METIS) while retaining liquidity. When you lock your METIS tokens in an LST protocol, you receive receipt tokens (LSTs) that represent your locked assets, which can be used in other DeFi applications, effectively allowing you to "double-dip" - earning sequencer mining rewards while also using your receipt tokens elsewhere in the ecosystem for additional yield opportunities. As a result, network token liquidity avoids suffering as a large portion of the outstanding supply is taken out of circulation, yet it does not remain captive in the sequencer locking mechanism by way of its receipt token.
What sets Metis apart is our unique pairing of LST protocols with decentralized sequencer nodes. Sequencers play a crucial role in Layer 2 solutions like ours by batching transactions and submitting them to the Ethereum mainnet. By decentralizing it, we reduce the risks of transaction manipulation, reordering, and censorship, while increasing the liveness capability of the network to an enterprise-grade level.
As mentioned, each LST provider on Metis has the opportunity to be paired with a sequencer node provider if approved by the community. The revenue generated by these nodes, plus the incentives that are provided by the Metis Foundation, are then distributed to users who have locked their METIS tokens in the corresponding LST protocol. This setup creates a win-win situation - users earn incentives for supporting the network’s decentralized sequencer, and the network benefits from increased decentralization, liveness, and security.
As of now, Metis boasts two LST protocols:
Artemis Finance is a liquid staking protocol designed exclusively for Metis Decentralized Sequencer Pools. Users can lock their METIS tokens on Artemis Finance and receive the liquid token - artMETIS. artMETIS can then be used on other DeFi protocols on the Metis network to earn additional rewards. Additionally, users who lock their METIS on Artemis earn sequencer rewards along with ART, the governance token of Artemis.
ENKI is built on top of the Metis decentralized sequencer, providing a simplified approach to earn rewards from sequencer nodes. By locking with ENKI, your Metis tokens remain liquid and can be used across a range of DeFi applications on Metis, maximizing returns. ENKI lowers the entry barrier for sequencer node participation. It eliminates the need for technical setup and maintenance, allows flexible staking amounts that caters to users with varying capacities, and utilizes eMetis/seMetis as financial instruments for other DeFi applications, enhancing overall ecosystem liquidity and functionality.
Both Artemis and ENKI allow METIS token holders to participate in securing the network while earning rewards from the paired sequencer nodes.
The journey doesn't stop here. We just entered the next phase of our decentralized sequencer upgrade. This phase will see the introduction of more LST protocols, each with the possibility of pairing with a sequencer node provider if they reach quorum in the Metis LST governance procedure. This procedure lets LST protocols submit proposals to the Metis community governance forum followed by a voting process in which the Metis community votes to select which LST providers can become eligible to pair with a sequencer node. If you hold any amount of METIS tokens, you can vote on the current LST protocol applicants here.
This move towards community-driven node selection further amplifies decentralization. It puts the power in the hands of the token holders, ensuring that the network's growth aligns with the community's vision. As more LST protocols come onchain, users will gain a broader range of options to lock their METIS tokens, leading to highly competitive reward structures and more comprehensive strategies.
