Exclusive Interview with Charles K, Founder of StakeStone: Where Is the Turning Point for Liquidity Markets? What Is True Value TVL?
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Exclusive Interview with Charles K, Founder of StakeStone: Where Is the Turning Point for Liquidity Markets? What Is True Value TVL?
Charles K, Founder of StakeStone, Interprets the Turning Point in the Liquidity Market and TVL Value Restructuring
Navigating Web3 tides with focused insightsInterviewee: Charles K, Founder of StakeStone
Interview and article: Karen, Foresight News
TVL boom driven by airdrop incentives—sunset glow or sustainable chapter? What kind of TVL truly holds value? And where lies the turning point for liquidity markets?
To find answers, we had an in-depth conversation with Charles K, founder of StakeStone, discussing the feasibility of "TVL-only valuation," the TVL boom fueled by airdrop expectations, what constitutes valuable TVL, the inflection point for liquidity markets, as well as StakeStone’s unique advantages and differentiated strategies.
Has the era of “TVL-only valuation” and attracting TVL purely through airdrop speculation come to an end?
As we examine whether the crypto space has moved beyond the paradigm of valuing projects solely by TVL or relying exclusively on anticipated airdrops to attract deposits, we must reassess the profound shifts currently reshaping the market. Blast sparked significant controversy after its token launch; comparing it within the L2 competitive landscape against Optimism and Arbitrum reveals that market cap and TVL do not always correlate linearly. Similarly, when comparing other capital-intensive protocols like Lido, the correlation between market cap and TVL remains weak.
The current crypto market has entered a more complex and diversified phase. TVL is no longer the sole metric for measuring project success. True project value is determined by factors such as tokenomics, real-world utility, market demand, and overall financial health. The era of “TVL supremacy” has quietly ended.
Foresight News: How do you view the correlation between TVL and market cap across blockchains, Layer 2s, and liquid staking protocols?
Charles K: First, from the perspective of value capture, take Lido as an example—many protocol tokens are limited to governance functions without substantial utility, which restricts their intrinsic value creation. For protocol tokens to realize their full potential, they must establish additional mechanisms for value capture, though this may involve complex securities considerations. Non-U.S.-based projects often implement value capture—for instance, Curve uses the ve model to distribute revenue dividends to token holders, significantly strengthening the positive linkage between token value and TVL. Even without dividend models, tokens need compelling use cases to stimulate demand and enhance value.
Moreover, StakeStone isn't just a staking pool protocol—it's better understood as a liquidity issuance protocol, designed to provide incentivized utility for its token beyond governance, based on actual liquidity usage scenarios.
Second, from a market dynamics standpoint, recent fierce competition among staking pool protocols has led to a phenomenon: high TVL often comes with massive liabilities, accumulated aggressively to compete, placing heavy repayment pressure on secondary markets. Once TVL exceeds a certain threshold (e.g., $1 billion), increasing selling pressure and debt burdens can actually drag down market cap.
Furthermore, we must consider how primary market fundraising affects protocol valuations. Large funding rounds bring in capital scaled to TVL, boosting total deposits—but these funds also carry expectations for high annualized returns and investor ROI, creating significant burdens on the protocol’s market cap. Thus, higher TVL does not automatically translate into proportionally higher valuation. In fact, elevated TVL coupled with large primary investments may conceal greater market risks and return pressures—because such TVL is essentially obtained via “high-interest loans.”
Foresight News: Has the era of attracting TVL through airdrop speculation ended?
Charles K: The peak period of attracting TVL solely through airdrop expectations is over, but that doesn’t mean airdrops as a capital attraction tool are obsolete. Many protocols now offer increasingly larger airdrop allocations, yet some engage in user manipulation (“PUA”), which has weakened trust in airdrops. Nonetheless, the fundamental value of airdrops should not be dismissed.
Foresight News: What’s your view on Sybil attacks?
Charles K: Under the current TVL game rules, splitting funds across multiple addresses only makes sense if individual deposits reach substantial size. Sybil behavior distorts contribution metrics based on deposit amount and duration, but compensating small depositors for gas fees is a reasonable and constructive approach. That said, we don’t encourage people to farm minimal rewards. At StakeStone, we aim to keep the TVL game fair.
What Kind of TVL Is Truly Valuable?
When discussing TVL, we must ask: what kind of TVL genuinely reflects value? And how can this metric accurately represent a protocol’s real health? According to Charles K, the true value of TVL lies not in sheer numbers, but in whether assets are actively used and circulated.
Foresight News: What kind of TVL counts as valuable?
Charles K: First, I believe there should be no fake TVL. TVL only holds value when the underlying assets are actively deployed and integrated into various protocols and ecosystem applications. Additionally, fairness is essential—any artificially inflated or unfair TVL fails to reflect a protocol’s true strength and health.
Foresight News: What is the current structure and landscape of the liquid staking market? How does this impact StakeStone specifically?
Charles K: I believe the current liquidity structure is highly unhealthy because most liquidity is locked up. I even think Ethereum’s low gas fees are partly due to illiquid assets being trapped and unable to circulate. This恶性 locking of liquidity is extremely detrimental. The defining characteristic of a liquidity asset should be liquidity—not indefinite locking. Short-term profit-driven behaviors that sacrifice market fluidity are shortsighted and irresponsible.
Foresight News: Why is utilization rate the most valuable metric for liquidity protocols?
Charles K: Take USDT as an example—it became one of the earliest widely adopted liquidity assets precisely because of its high liquidity and broad applicability. Users can instantly convert USD to USDT and back again. This seamless exit mechanism is key to building trust. Moreover, USDT’s extensive use across payments, yield farming, trading, and more further enhances its liquidity value.
For StakeStone, the real measure of TVL value is **TVL utilization rate**. Unused TVL brings no value to the industry or ecosystem—in fact, it extracts value rather than creates it. We’re committed to building a liquidity ecosystem that generates real value. Currently, we’ve integrated with over 40 protocols and established connections with more than 100 others. Furthermore, we believe our collaboration with Native.org will set a new paradigm for solving cross-chain liquidity fragmentation. Eventually, STONE will become the only interest-bearing liquid ETH asset offering equally strong exit liquidity across all chains. For any liquidity asset, superior exit liquidity everywhere is paramount.
StakeStone’s Unique Advantages and Differentiated Strategy
In the fiercely competitive liquidity sector, how does StakeStone stand out? Charles K reveals its unique strengths and differentiated strategy, likening StakeStone to a yield-bearing ETH version of MakerDAO.
Foresight News: What are StakeStone’s unique advantages and differentiation strategies?
Charles K: LRTs are staking pool protocols whose core offering is staking services. StakeStone, however, positions itself as a liquidity asset protocol—an asset issuance protocol from day one. There’s a fundamental difference.
For StakeStone, staking is merely a method to help users capture Ethereum’s risk-free yield. We partner with staking providers like InfStones and StakeFish, but StakeStone itself is not a staking service provider. Personally, I believe even LRTs are weaker at staking compared to dedicated staking operators.
As a liquidity asset protocol, we must meet several conditions: first, assets must be fully transparent so users feel confident depositing; second, assets must have genuine liquidity, allowing instant deposits and withdrawals.
Overall, StakeStone holds significant advantages in transparency, liquidity, and composability. Every asset in our pool is highly transparent. We ensure real liquidity—users can deposit or withdraw anytime. Composability allows STONE to seamlessly integrate into diverse DeFi protocols, enabling richer application possibilities.
Foresight News: Beyond governance, what utilities will StakeStone’s token have?
Charles K: We allow changes to underlying assets, but only through a fully decentralized process requiring LP approval—we cannot arbitrarily change them. All STONE holders participate in this decentralized governance.
Regarding underlying assets, StakeStone will strive to allocate higher-yielding, more competitive base layers while maintaining controlled or zero risk. STONE continuously captures and adjusts yield-generating base layers—the frequency depends on how often new base layers emerge. Currently, major new base layers appear roughly once per quarter to every six months. I believe StakeStone is essentially a yield-bearing ETH version of MakerDAO.
Future Outlook and Insights
Previously, LRT projects attracted massive arbitrage capital to Pendle by offering carefully designed high-point incentive programs, creating an artificial boom soon facing a major turning point. These incentives prompted some users to discount-sell their principal tokens (PT) to acquire more yield tokens (YT), inflating PT’s APR.
While this short-term capital surge appears attractive, it’s unsustainable and poses long-term risks. In contrast, StakeStone’s稳健 strategy—including features like instant withdrawals and integrating external market makers to fulfill redemption demands—demonstrates a healthier, more sustainable development model. Looking ahead, StakeStone aims to become a leader in the liquidity asset space.
Foresight News: How will StakeStone reshape the Ethereum and Bitcoin ecosystems through yield-bearing ETH and BTC?
Charles K: Currently, StakeStone focuses primarily on Ethereum and Bitcoin, supporting multiple consensus mechanisms including PoS staking and restaking. To understand how we’ll reshape these ecosystems, let’s first examine the industry problem StakeStone solves.
During the last bull run, Arbitrum and Optimism absorbed ETH as primary on-chain liquidity assets. But in this cycle, native ETH carries high opportunity costs due to PoS and restaking. Even at a 3–4% APR, since rewards are paid in ETH, any ecosystem needing to subsidize PoS yields with its own token would require at least double-digit percentage token incentives. This critical pain point was our original motivation for building StakeStone. We aim to provide the market with a new type of liquid ETH/BTC asset capable of offsetting the opportunity cost of holding Ethereum and Bitcoin.
Additionally, thanks to STONE’s high stability and excellent exit liquidity, it can be integrated into more protocols and use cases to generate additional yield opportunities—including collaborations with ORA, an Ethereum AI oracle protocol, to explore diverse applications of STONE within the ORA ecosystem—further expanding STONE’s utility and creating more value for users.
Foresight News: What market position do you hope StakeStone achieves in the coming years?
Charles K: We aspire to become a leading player in the liquidity asset space. During a brief window, EigenLayer dominated the base layer, causing us to heavily support EigenLayer as STONE’s underlying asset—leading some to mistakenly perceive us as an LRT protocol.
But as the base layer diversifies, STONE—which maintains consistent instrument characteristics regardless of underlying asset changes—will demonstrate its unique value as a distinct form of liquidity asset to both developers and the broader market.
Foresight News: What are your predictions for the future of the liquid staking赛道?
Charles K: The period before and after the EigenLayer airdrop will see different dynamics. Prior to the airdrop, massive liquidity floods into EigenLayer and restaking protocols. Afterward, liquidity will restructure—and projects that can apply liquidity tokens more broadly and efficiently will gain long-term competitive advantage.
Restaking has already acted as a catalyst for liquidity transformation, driving a dramatic leap in active on-chain TVL—from $5 billion last year to $20 billion today. Although liquidity may face near-term pullbacks as the restaking cycle matures, the long-term growth potential of this space remains substantial.
Notably, the trend of LRTs artificially inflating high-point incentives to lure arbitrage capital into buying Pendle PTs is approaching a turning point. As PTs mature, the market will undergo significant structural adjustments in liquidity, potentially triggering volatility.
Specifically, projects like ether.fi employ double or even triple-point incentive schemes, which boost short-term arbitrage flows but are difficult to sustain—since arbitrageurs ultimately aim to exit back into ETH to complete their trades.
For example, under normal circumstances, when STONE runs campaigns on Manta, initial deposits cannot be withdrawn immediately. If users urgently want to exit, they might sell STONE on DEXs, causing STONE/ETH de-pegging and discounting—once falling to 0.9, implying a 10% instant profit. This drove a $300 million increase in StakeStone’s TVL. However, we cannot incentivize this behavior, as excessive incentives would widen arbitrage spreads and worsen de-pegging, undermining long-term market stability.
Pendle itself, as a principal-yield splitting platform, is neutral. But because discounted principal tokens (PT) don’t directly reflect price depreciation on the token itself, LRTs have exploited this to create artificial discount arbitrage products without worrying about de-peg risks.
Foresight News: What are StakeStone’s strategic plans in the medium to short term?
Charles K: Our strategy unfolds across three dimensions:
First, horizontal asset expansion—including entering the Bitcoin space—to meet growing user demand for diversified assets.
Second, deepening consensus-layer integration. On restaking, StakeStone will initially adopt Symbiotic while continuing to monitor and invest in emerging consensus mechanisms like AI-based validation.
Third, innovation at the application layer. StakeStone will not only deepen its presence in existing blockchain ecosystems but also expand STONE’s adoption into AI, gaming, payment, and other domains, creating more diverse and practically valuable use cases.
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