Liquid Staked ETH (LSETH) is a unique digital asset that operates on the Ethereum platform. It represents a new approach to staking in the digital asset world. When users stake their Ethereum (ETH) through the Liquid Collective protocol, they receive LSETH as a receipt token. This token evidences their legal and beneficial ownership of the staked ETH, along with any network rewards that accrue to the staked ETH, minus protocol service fees and network slashing penalties, if any. The LSETH token is based on the Ethereum ERC-20 cToken model, which uses a floating conversion rate to reflect the value of accrued network rewards, penalties, and fees associated with the staked tokens.

When a user deposits ETH into the Liquid Collective protocol, they receive LSETH in return. This LSETH token represents their ownership of the staked ETH and any network rewards that accrue to the staked ETH. The conversion rate between LSETH and ETH is not fixed and can increase over time as the underlying staked ETH accrues more rewards. This conversion rate is determined by the Ethereum network and not by the Liquid Collective protocol. The LSETH tokens can be transferred, stored, traded, and utilized in decentralized finance (DeFi) or supported decentralized apps (dApps), providing users with increased liquidity and capital efficiency.

LSETH has several potential use cases in the digital asset space. Firstly, it can be held by users to accrue network rewards. Secondly, it can be exchanged for another token, providing users with flexibility in their digital asset portfolio. Lastly, LSETH can be used as collateral to participate in a wide range of DeFi activities. This allows users to leverage their staked ETH without having to liquidate their position, thereby maintaining their participation in the Ethereum network's consensus mechanism.

Liquid Staked ETH is a product of the Liquid Collective protocol. The Liquid Collective is a collective of web3 teams that strive to create an enterprise-grade liquid staking standard. The protocol was designed to meet the needs of institutions and is governed in a decentralized manner by a broad and dispersed community of industry participants. The protocol's source code is intended to be made fully public, demonstrating the collective's commitment to transparency and openness. The Liquid Collective protocol has undergone multiple audits from security experts to ensure its robustness.

Yes, the Liquid Collective protocol has undergone an audit. To uphold the security and integrity of the protocol, Liquid Collective collaborated with independent security firms Halborn and Spearbit to conduct detailed security audits. Each feature of the protocol that has been launched on the mainnet has been examined by at least one of these teams. This thorough auditing process is a part of Liquid Collective's dedication to upholding strict operational standards and acting with accountability, urgency, and integrity. It highlights the effort they put into considering participants' security when using the protocol, acknowledging that security considerations are crucial in maintaining participants' trust.

In the Liquid Collective, staked Ethereum (ETH) is held by the Ethereum deposit contract. This is part of the protocol's non-custodial approach, which means that the deposited ETH is sent directly to the Ethereum deposit contract by the protocol. This approach is designed with the intention of enabling users of Liquid Staked ETH (LsETH), the token representing staked ETH in the Liquid Collective, to manage their LsETH and select a custody solution of their choice. This system strives to foster transparency in the staking experience for users, with the potential for users to use their LsETH within the context of decentralized finance (DeFi), or to transfer ownership of their staked tokens through LsETH transfers.

Transferring ETH and generating Liquid Staked ETH (LsETH) involves a series of steps managed by the Liquid Collective protocol. When a user transfers ETH, they obtain LsETH tokens at the current conversion rate. The transferred ETH enters the protocol's Transfer Buffer and is programmatically staked in Ethereum's consensus layer once it reaches a bulk of 32 ETH. LsETH tokens are generated at the time of transfer, and the conversion rate remains unchanged. To exchange LsETH for ETH, a user requests an exchange via an integrator, surrendering the amount of LsETH they wish to exchange. This request is added to the protocol's Exchange Queue. On each Oracle report, the protocol evaluates pending LsETH exchange requests and programmatically moves ETH from the Transfer Buffer to the Exchange Buffer to satisfy the requests. If the Transfer Buffer balance is insufficient, the protocol initiates validator exits. Once the exchange request is satisfied, the user can retrieve their ETH. It's important to note that exchange requests cannot be canceled once made, as validator exits cannot be canceled on Ethereum once triggered. The entire process is designed to be systematic in managing flows in and out of the protocol, facilitating the process of exchanging LsETH for ETH.

The Slashing Coverage Program in Liquid Collective is a risk mitigation strategy designed to protect participants staking through the Liquid Collective protocol from potential losses due to network-wide events or node operator failures. This program encompasses three distinct elements. The first element is provided by Nexus Mutual, a decentralized crypto-native protection provider, which provides scalable protection that adjusts dynamically with the protocol's assets. The second element is the Slashing Coverage Treasury, which allocates a portion of all network incentives to cover slashing coverage deductibles on network-wide slashing incidents. The third element is the Node Operator Commitment, where node operators contribute to deductibles against slashing incidents and missed incentives due to their infrastructure's fault. This coverage program strives to improve the safety and reliability of staking in the Liquid Collective protocol.

Yes, Liquid Collective does utilize a multisig system. An administrative multisig is composed of a variety of participants within the Liquid Collective ecosystem. Over time, governance decisions are intended to be executed through an increasingly programmable, smart contract-based execution system. This multisig system is part of the protocol's security measures, which also include node operators, a non-custodial staking framework, multiple code audits from top security teams, and collaborations with technology providers. This approach is designed with the intention of maintaining the integrity and security of the Liquid Collective protocol.

In the Liquid Collective protocol, public withdrawal keys are assigned to the Liquid Collective protocol smart contract address during the validator onboarding process. Once established, this address cannot be altered, as it is regulated by the Ethereum protocol when setting Type 1 (0x01) address. Validator public keys are submitted by Node Operators to the Liquid Collective Node Operators Registry. Validator private keys, conversely, are owned and managed by the Node Operators, with an intention towards security. This structure is designed with the intention of maintaining the process within the Liquid Collective protocol.

Liquid Staked ETH (LsETH) is a token that represents staked ETH along with network incentives. It seeks to give users the opportunity to participate in ETH staking while preserving the flexibility to utilize their LsETH within decentralized finance (DeFi) or transfer ownership of their staked tokens. LsETH adheres to the ERC-20 cToken model, which employs a floating conversion rate to mirror the value of accrued network incentives, penalties, and fees tied to the staked tokens. This conversion rate determines the amount of ETH for which LsETH can be redeemed. As network incentives are received, the value of LsETH adjusts. LsETH aims to provide coverage to mitigate the risk of Node Operator failures and network outages. It also seeks to provide diversified node operators and on-chain transparency.

Liquid Collective utilizes a cToken model for its Liquid Staked Ether (LsETH). The cToken model aims to represent ownership of a staked token, along with any accrued staking rewards, and less any slashing penalties and fees. The conversion rate between the receipt token and the corresponding tokens is calculated based on the staked tokens, staking rewards, penalties, and fees. This conversion rate is determined by the total balance of staked ETH over the total supply of LsETH. In contrast, the aToken model adjusts the supply of a representative token to correspond with the underlying token on a 1:1 basis. The aToken model is sometimes referred to as a rebase token model. Unlike aTokens, cTokens are Ethereum ERC-20 compliant and have been adopted within the DeFi space. The Ethereum ERC-20 compliance and adoption within the DeFi space of cTokens align with the design considerations for Liquid Collective’s LsETH.

The Protocol Conversion Rate in Liquid Collective refers to the amount of ETH (Ethereum) for which Liquid Staked ETH (LsETH) can be redeemed, and the amount of LsETH that is minted to evidence ETH staked. This rate is dynamic and reflects the amount of ETH staked along with any non-monetary incentives that the stake has accrued from the Ethereum network, minus any potential penalties imposed by the network and protocol service fees. As such, the Conversion Rate for LsETH is not fixed 1:1 LsETH:ETH. Instead, the Conversion Rate adjusts over time in response to the underlying staked ETH and its accrued non-monetary incentives. The Ethereum network determines the non-monetary incentives generated, and the Liquid Collective protocol does not determine rewards and fees at its discretion. This mechanism seeks to offer a representation of the staked ETH and its accrued non-monetary incentives.