Hop off the sidelines and join the Metis Liquid Staking Blitz! Ethereum Layer 2s are entering a whole new paradigm, and you want to be part of it. Metis will soon become the first rollup with a decentralized sequencer, and consequently, the first rollup to share sequencer revenue with the community.

To bolster our LSD ecosystem, we’re launching the Metis Liquid Staking Blitz (LSB), an initiative for accelerating the growth of LSDs and LSD-focused products on our Layer 2 network, leveraging the 4.6M METIS Ecosystem Development Fund. Starting now and running until the end of February, LSD platforms will be able to submit proposals to Metis community governance. A limited number of LSD applicants will win the right to be paired with a Decentralized Sequencer Node, opening up liquid staking to a pool of up to 100,000 METIS tokens per node.

Background 

The rise of LSDs has significantly impacted the DeFi industry by unlocking the liquidity of staked assets and fostering rapid growth and broader participation in the DeFi ecosystem. Protocols such as Lido and Rocketpool have been at the forefront, offering high-security standards, versatility, and eliminating the need to lock fixed amounts (i.e. Ethereum’s 32 ETH), thus attracting a large user base. 

Especially after the Shapella upgrade, in which Ethereum stakers were able to unlock their tokens, many of these chose to move their ETH to Liquid Staking Derivative protocols. This has fueled unprecedented growth for LSDs, which currently account for 38% of all staked ETH; it has also given more versatility to staked ETH.

However, there has never been an LSD for a Layer 2 network’s native token. LSDs will enable Metis to be the first to blaze that trail, unlocking LSDs’ versatility, and blending it with our Layer 2 network’s profit and growth potential – spurred on by the imminent launch of the first ever decentralized sequencer for a Layer 2 Optimistic Rollup.

Sequencer Mining

Sequencer Mining is the process in which lockers, or participants that lock governance tokens, are rewarded by smart contracts for the block production process. During the first year, there will be a 20% Mining Rewards Rate (MRR) for all sequencer nodes. The MRR will be an incentive for LSD platforms to apply for a node allocation, as they can get creative with the way they reward individual lockers and create novel revenue models.

Blitz

Get ready for the Liquid Staking Blitz. For the first 12 months, a 20% Mining Rewards Rate (MRR) will apply to all sequencer nodes. The MRR is the rate at which smart contracts reward lockers for block production.

Sequencer Mining allocation

3,000,000 METIS are allocated for Sequencer Mining through the Metis Ecosystem Development Fund. The decentralization of Metis' sequencer presents a unique opportunity for users to engage in Sequencer Mining, contributing to the security of our network. This initiative is complemented by a strategic allocation of resources towards sequencer nodes and LSDs, ensuring a transparent and efficient distribution of fees and incentives.

Ecosystem Grants: Fueling Innovation

1,600,000 METIS were allocated for Ecosystem Grants through the Metis EDF. At the heart of LSB's strategy is the commitment to onboard and/or support dApps that can significantly contribute to the LSD landscape, creating a wider variety of use cases for LSDs through:

• Lending pools
• Stable and volatile farms
• Collateralized Debt Positions (CDPs)

The allure of METIS incentives, combined with the potential of new assets, products, and platforms present a strong proposition for liquidity providers and overall blockchain users.

Governance

LSD protocols will be able to submit proposals to Metis Governance effective immediately, and lasting through February 29. Submissions should be made on the Metis governance page, under Infrastructure Proposals (https://ceg.vote/c/infrastructure-lst/24). For simpler distinction within the folder, LSD protocols may use the tag “LSD Proposal”.

Starting in March (after the February submission process has ended), the voting process for LSDs will begin. At the end of that voting period, the proposals that receive the most support in terms of total METIS tokens voted will be allocated Sequencer Nodes pairings with a select group of industry-leading node operator entities.

Why LSB Matters

The Metis Liquid Staking Blitz aims to accelerate the adoption and growth of LSDs within the Metis ecosystem. By integrating Sequencer Mining and Ecosystem Grants, LSB will foster the development of LSD-centric products, amplifying the benefits of liquid staking and paving the way for additional liquid staking-related dApps to deploy on Metis, including liquid restaking protocols, and much more.

Driving Liquidity and Innovation

The successful implementation of LSB hinges on the deployment of native Metis dApps, especially DEXs, designed to meet the ecosystem's needs. Supported by the Innovation Grants and Ecosystem Development Fund, these protocols will attract liquidity providers with competitive emission capabilities and schedules, minimizing impermanent loss and bolstering the ecosystem's liquidity.

Detailed insights into the operational dynamics and structural model of LSB will be disclosed in a forthcoming update, providing a comprehensive understanding of how the initiative functions.

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‍Tl;dr: LSB aims to accelerate LSD growth in the Metis ecosystem through Sequencer Mining and Ecosystem Grants, focusing on LSD-focused products and dApps with a composable nature. The initiative seeks to attract liquidity providers and drive innovation, supported by grants for deploying native Metis dApps, especially DEXs, to improve ecosystem liquidity and reward structures.