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On January 18th, Ethereum staking platform Kiln completed a $17 million financing round. The round was led by 1kx, with participation from IOSG, Crypto.com, Wintermute Ventures, KXVC, and LBank.

“Nowadays, staking is considered one of the safest sources of returns in the crypto market. In this complex era, investors see companies specialized in this activity as true ATMs,” revealed by an investor.

As an enterprise-level Ethereum staking platform, Kiln enables institutional clients to stake their assets and provides them with white-label solutions for their own customers. Although it supports multiple PoS blockchains, most of Kiln’s staked assets are on Ethereum, worth over $3.1 billion according to its Dune Analytics dashboard.

The new pools launched by Kiln achieve organic growth in a different manner. Additionally, as Ethereum staking becomes more centralized over time due to dilution, Kiln pools offer diverse and robust staking pool options to mitigate centralization risks. It encourages users to diversify their staked assets across different pools operated by various node operators, promoting the decentralization of the network.

Top Node Operators on Ethereum

While staking is considered one of the safest sources of returns in the crypto market, Ethereum’s exit queue has been greater than its entry queue since the Shanghai upgrade.

According to a report published by Galssnode late last year, more and more validators in the Ethereum staking pool have opted out since October last year, reaching an average of 1,018 validators per day. The increase in validator withdrawals has led to a decrease in daily Ethereum issuance, which is related to the amount of active Ethereum in the staking pool.

Related Reading:”《Twists and Turns》”

But recently, with the rise of the re-staking narrative and the FOMO sentiment caused by the anticipation of airdrops, LSDFi has also been talked about again. Riding this wave, Kiln is now the number one node operator on Ethereum. According to the Ethereum staking board rated.network, Kiln Infrastructure manages approximately 4% of staked ETH, equivalent to approximately $4 billion in assets under management.

Kiln’s technical features

As we all know, the minimum number of tokens required to run an Ethereum 2.0 staking node is 32 ETH.

Currently, there are four main options for Ethereum staking: centralized platform staking (CEX Staking), such as Binance and Coinbase; large pool staking, such as Lido and Rocket Pool; solo staking (Solo Staking); and staking as a service staking.

Simply put, it boils down to 2 main categories: setting aside 32 Ethereum and staking it all yourself, or relying on liquidity staking platforms that allow staking with smaller funds and often without a minimum ETH requirement. Therefore, for those users who hold less than 32 ETH, the staking service is the only solution.

On the LSD track, for general cryptocurrency players, participating in LSD is indeed enough, but they do not have a deep understanding of the underlying logic and security implementation of participating in staking. A large number of users choose LSD, which creates the risk of centralization in Ethereum. This is actually a big threat to the entire Ethereum ecosystem, and Lido is a typical example.

Staking as a Service

Decentralization should be a rational choice made by each user based on their own interests. To meet the security requirements of staking, there are two options: Solo Staking and Staking as a Service. However, for the majority of ordinary people, they lack the technical expertise or resources to run their own nodes. Therefore, although solo staking is the most decentralized and does not involve any additional fees or cuts, it is also the most difficult option.

As a result, Kiln has established a full-stack Staking as a Service platform. Simply put, SaaS involves you providing the funds (32 ETH), while the node operator provides the technical expertise (software and hardware). Both parties collaborate in the staking process.

This staking method is suitable for users with moderate to large amounts of funds. Compared to LSD, the key advantage of SaaS is higher security, lower trust requirements on third parties, lower costs, and potentially higher returns. However, since SaaS is not a familiar concept for most Ethereum users, even for experienced DeFi enthusiasts, a large number of potential users who could have participated in SaaS are lost.。

For the specific advantages of SaaS compared to LSD in terms of security, revenue, cost and operability, please refer to “Surprisingly honest: Ethereum staking as a service - a rational choice between security and income”.

The SaaS platform launched by Kiln allows capital pools to participate in PoS, enabling investors and builders to manage validators and read/write nodes on multi-cloud infrastructure. It offers a simple, fast, and secure way to do so. Kiln allows customers to securely deploy, manage, and monitor blockchain validators across multiple networks in a single space, while still maintaining control over their private keys.

Through the Kiln Dashboard, Kiln operates validators on all major PoS blockchains, managing over $360 million in stakes (a 4.4x increase from the previous year) across multi-cloud and multi-region infrastructure. Kiln also provides a suite of validator-agnostic products for automated deployment, reporting, and commission management, simplifying staking operations across providers for custodians, wallets, and exchanges.

The Ethereum Validator Monitoring Program, Kiln Dashboard, is developed by the team’s senior engineer, @aimxhaisse. It is a Python tool that can connect to execution nodes and beacon nodes.

Within the Kiln organization, users can create multiple accounts, which act as folders for interests, and can organize their holdings by client, region, etc. as needed. You can see an overview of AUS and total rewards for each account. You can also view AUS for each account and total rewards for each protocol, and view details of each stake within the account.

Kiln operates a SaaS model for its services, dashboards, and APIs. Kiln partners with Ledger Live, Crypto.com, and Coinbase to offer a pooled staking service that allows each Ethereum holder to stake any amount of Ethereum, creating value in the digital asset ecosystem. Additionally, Coinbase Cloud has integrated Kiln’s on-chain platform into its product, allowing Coinbase Cloud to bring on-chain partial Ethereum staking functionality to customers with limited engineering effort required for integration.

Kiln On-Chain

Kiln said that its Kiln On-Chain platform is the first 100% white-labeled on-chain staking platform in the Ethereum ecosystem. The platform’s newly launched Ethereum staking pool allows for staking any amount of Ethereum and receiving daily rewards. It also allows integrators to seamlessly integrate access to staking pools into their workflows, improving accessibility.

Integrators enjoy complete autonomy and can set fees, customize liquid staking tokens, select operators, and provide a customized user experience. Users and assets remain on its platform, while smart contract-based commissions eliminate external referrals and off-chain invoicing. The entire system operates entirely through smart contracts in a transparent and auditable manner.

Additionally, the introduction of the new Kiln Pool, a new Ethereum staking pool with limited liquidity, presents unique challenges.

As early participants experienced dilution as the pool expanded and dealt with longer validator onboarding queues. During the initial growth phase, as staked assets accumulate, rewards for new validators take longer to materialize. This results in a suppression of the diluted Gross Reward Rate (GRR) due to the distribution of rewards and pool value across the larger user base.

GRR represents the annualized ratio of rewards earned in the pool, relative to the total staked amount in the pool. Opting for organic growth rather than pre-financing, a notable feature of the initial launch of a pool is the initial dilution and volatility of GRR. Specifically, GRR will be close to or at 0% for at least ~20 days after the first deposit as initial validators wait for activation.

As such, the growth of the Kiln staking pool relies heavily on the support and participation of integrators and early adopters. As the pool grows and more deposits are accumulated, GRR will steadily increase towards a stable rate that is generally consistent with the network-wide average reward rate.

On the other hand, over-control by certain staking services could harm Ethereum’s censorship-resistant nature due to dilution over time. Kiln Pool provides a variety of powerful staking pool options to reduce centralization risks and encourages users to spread their pledged assets into different pools run by different node operators, promoting the decentralization of the network.

While Kiln is responsible for managing and operating the underlying pool, including infrastructure and validator operations, the integrator will grant stakers access to the pool through its platform. The central pool is a global liquidity source of which aggregators have a share based on their deposits and rewards.

Kiln On-Chain enables integrators to create unique solutions independently of other solutions built on top of the pool. For example, multiple integrators can each create their own custom liquid staking tokens (or not) and set their own fees, while the underlying pool is operated and managed by Kiln and its validator infrastructure.

Kiln On-Chain has also partnered with The Graph to build a subgraph to provide indexing services to the network and customers. By leveraging Kiln subgraphs, users are able to run a variety of queries that provide data to any platform offering staking services, including comprehensive information about system status and parameters. An intuitive event system stores event keys in a notification format, simplifying the development of front-end applications. Embedded, capable of retrieving data from any past block, and a powerful reward aggregation module that can calculate the total reward rate and net reward rate, and present the total reward in different time frames.

The Graph Indexer: Data example provided by the Kiln app on Ledger Live

Funding and Team

Kiln co-founder and CEO Laszlo Szabo is also the co-founder of Skill Hunter, a digital recruiting firm focused on tech careers.

According to Linked, Laszlo Szabo founded Skill Hunter in 2015 and Kiln in 2018, and is still involved in the business of both companies. In addition, Pierrick Vela, another co-founder of Skill Hunter, also works for both companies.

Kiln CEO Laszlo Szabo

So far, Kiln has completed three rounds of funding. The first was a $5 million funding on May 20, 2022, led by Third Kind Managing Partner and Andreessen Horowitz (a16z) Board Partner Shana Fisher, with participation from SV Angel, Blue Yard, Alven, Kima Ventures, and others.

Next, on November 28, 2022, the company completed a Series A funding round of 17 million euros (approximately 17.6 million dollars). Blockdaemon and Illuminate Financial led this round of funding, with participation from ConsenSys, GSR, LeadBlock Partners, Sparkle Ventures, Alven, Blue Yard Capital, and Kraken’s venture capital division.

The latest funding round was completed on January 18th this year, raising $17 million. The round was led by 1kx, with participation from IOSG, Crypto.com, Wintermute Ventures, KXVC, and LBank. This new funding round is an extension of Kiln’s Series A funding announced in November 2022, which raised $17.6 million.

It is reported that Kiln has raised a total of $35 million in funding from investors since its launch, including Illuminate Financial, Kraken Ventures, Avon Ventures, Consensys and GSR.

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