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Have your stake and earn fees too: Tushar Aggarwal on double dipping in DeFi
"We're allowing you to stake in one place, but issuing you a representative coin that you can use in other places."
by Elias Ahonen
in Columns, Journeys
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Proof-of-stake protocols were designed to encourage users to lock up their coins, but synthetic assets are circumventing that design to allow double-dipping in DeFi.
One of Forbes' 30 Under 30 in Asia, Tushar Aggarwal wears many hats: He started the crypto podcast Decrypt Asia, works as a venture scout with LuneX Ventures, and runs Persistence, a platform that lets users earn liquidity rewards while they stake coins.
Aggarwal's platform issues synthetic assets, perhaps better understood as "redemption coupons," for staked coins that can be used elsewhere to maximize returns. This method is relevant for proof-of-stake coins, which are not machine-mined but accumulate to those who lock their tokens away from circulation. Persistence allows these staked coins to be used regardless.
Originally from India, Aggarwal believes that cryptocurrency holds great things in store for the nation on both the GDP and individual worker levels. However, he works from Singapore due to the Indian government's hostility toward the industry from which it could so greatly benefit.
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Liquid staking
Aggarwal, aged 28, started his journey in crypto as an investor in 2017, soon founding and hosting the Decrypt Asia podcast where he interviewed "all kinds of players in the ecosystem — fund managers, investors, entrepreneurs and service providers." The podcast worked as a springboard of sorts, opening up opportunities to write about the cryptocurrency revolution for Tech in Asia, "the equivalent of TechCrunch in the West." Aggarwal was an authority.
In 2018, he was contacted by a venture capitalist who had come across his writings and podcast. The VC sought advice on behalf of his firm, Golden Gate Ventures, which was looking to set up a crypto fund. "I basically asked them for a job on the spot and became the first employee for the crypto fund of Golden Gate — that fund is called LuneX Ventures," he recalls. Aggarwal still serves as a venture scout for the fund, which he describes as the "only regulated crypto fund of a VC fund in Southeast Asia."
He founded the Persistence platform in 2019 after a string of hackathons because "I wanted to move over to being an operator, as opposed to a capital allocator."
Source: pSTAKE
The platform's functions are based on the Tendermint algorithm, meaning that it accepts proof-of-stake coins such as Persistence, REN, LUNA, CRO, IRIS, BAND, and KAVA. The magic is that even after being staked, synthetic assets based on the coins can be deposited as liquidity to a decentralized exchange to earn fees while the original coins are still "staked in the background, earning you staking rewards as well."
"We're allowing you to stake in one place but issuing you a representative coin that you can use in other places."
"Liquid staking" is thus an appropriate descriptor, seeing as both liquidity provision and staking are combined. This process is beneficial because the tokenholder does not have to take a chance on either liquidity fees or staking, providing a higher yield on their capital. While the "original" coins are staked, the representative coins used to provide liquidity are 100% backed by the staked assets, meaning that "whoever ends up holding the representative coin then will ultimately get access" to the underlying asset.
"Liquid staking is something that basically addresses the problems of whatever 10,000–100,000 folks who hold proof-of-stake coins and are familiar with how staking works."
Though he describes his parents as normal middle-class Indian civil servants, Aggarwal spent five years of his teens on the foothills of the Himalayas with "kids of really powerful politicians and folks who run corporate India." The Doon School is "the Eton of India, which has produced prime ministers, army chiefs, journalists, movie stars, government officials, businessmen," he explains, comparing his school to the famous British boarding school with a similar reputation. As the school was founded when India was still a British colony, "it espouses a lot of those ideals still which might be a little bit ancient from today's perspective," Aggarwal muses.
In 2010 he headed to Nanyang Technological University in Singapore, "which is, I think, one of the top five universities in Asia," where he studied business administration under an arrangement where he promised to stay in the country for three years after graduating in exchange for a 60% reduction of tuition fees. Aggarwal explains that this bond arrangement was part of a "policy that Singapore had in place to attract talent from very young ages" — a successful policy, seeing as Aggarwal has not returned to live in India.
Graduating in 2013, he worked in private equity at PwC for two years before moving to Sia Partners, a French boutique consultancy specializing in financial services. That role saw him spend time in Hong Kong, Malaysia and Thailand while working with the private banking departments of European banks operating in the region.
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— pSTAKE Finance (@pStakeFinance) August 21, 2021
Working as a traveling consultant meant the bulk of Aggarwal's everyday expenses were covered by his employer, giving him ample savings to sock away. "It's a very Indian and Middle Eastern thing to do — where every penny that you save up, you put into gold or real estate — and that's what I did," just as his parents had taught him. Instead of buying apartments, which "have only so much room to grow," he looked at the bigger, long-term picture and focused on land itself.
After selling some property in late 2016, Aggarwal considered new avenues of investment. He first looked into angel investing but soon "came across crypto and basically just went all in." He says that he was at the right place at the right time, explaining that "crypto was super hot in Singapore" when he invested in 2017, before listing off multiple projects from the time such as Republic Protocol, OmiseGo, and Kyber Network. He was fortunate with his timing, gaining financial independence in only a few short months.
"By the end of 2017, I had done well enough to quit my job and start a podcast," he says.
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Opportunity in India
"I'm from India originally; our entities are all based out of Singapore," Aggarwal tells me, making it clear that he wants to "be a little careful, as I kind of straddle across Singapore and India." The problem at hand is that though his team is based there, "there's huge amounts of regulatory uncertainty in India." For that reason, Singapore reaps the benefits of Aggarwal's success.
"That is the big beef that the Indian government has with crypto because it's so easy to move your capital around the world. Once it's in a wallet, basically, it's not under any jurisdiction."
Capital controls are one aspect keeping entrepreneurs like Aggarwal away from his native India. "If your money is in India or China, you're not allowed to take beyond a certain amount outside of the country," he explains. In contrast, if you're in the U.S. or Singapore, you can "basically take your money anywhere."
Because of the Indian government's "beef" with crypto, Aggarwal chooses to build his crypto empire from Singapore. Only recently did the authorities in India ditch a plan to ban Bitcoin outright. "We're just using India as a base to access talent," he admits, referring to Persistence.
"We're sort of building from India, but building for the world. Our target market is not India," he says.
Indian tech workers are building a decentralized future while their country struggles to attract direct investment in the sector. Aggarwal considers the unfortunate status quo a natural continuation of a Web 2.0 phenomenon where the digital machinery of many large multinational companies is "run by Indians" who provide cost-effective labor.
Indians have a long cultural tradition of investing in gold for purposes of retirement and legacy. To mark holidays, even relatively poor families regularly purchase small gold jewels and trinkets to be permanently hodled by the household. In 2015, the Indian government even launched the Gold Monetization Scheme to encourage people to deposit their gold and earn interest on their holdings.
With this tradition of saving hard assets ingrained into society, it is relatively easy to imagine masses of Indians making the jump to "digital gold." At least, it's much easier to imagine than in countries like my native Finland, where saving for retirement is not a widespread concept, and most people prefer to keep their savings in cash accounts.
Aggarwal explains that though only 3–4% of Indian households are invested in stocks compared to 30–40% of U.S. households, "there's about $50 billion worth of crypto assets that are being held by Indians." If and when the government allows Indians to fully participate in the crypto economy, he foresees the floodgates opening. He brings up Dream11, a fantasy sports betting application that accumulated 100 million users out of the population of 1.4 billion, as an example of what the future might bring.
Featured recently by Forbes 30 Under 30 Asia, Aggarwal has come quite a long way in a short time. Aggarwal believes that "the three biggest leverages that are available to any individual or company are technology, media and capital."
Today, Aggarwal focuses on these three prongs of advantage to grow his business: Persistence covers technological leverage, whereas LuneX Ventures allows him to allocate capital towards other promising projects. On the media side, he holds it together with the reach of his podcast — and articles like this one.
"Asymmetric bets — 1x downside, 100x upside. I was very clear in my head that I wanted to be in a place where I could make asymmetric bets."
In addition to and with the help of this leverage, asymmetric bets are another trick up Aggarwal's sleeve. From the beginning, he knew that if there was an industry where such positively lopsided bets could be made, it had to be crypto. Asked how much money would be enough for him, Aggarwal turns philosophical, explaining that all money does is buy access to good people, time and mind-space.
With all the levers Aggarwal is pulling, I question how much time he can possibly have for himself. It is apparent, however, that he persists in pulling the right ones.
Tags: Indialiquid stakingliquiditylunexpersistenceRegulationSingaporestakingtushar aggarwalXPRT
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Elias Ahonen
Elias Ahonen is a Finnish-Canadian author who has lived and worked around the world while operating a small blockchain consultancy. His book 'Blockland: 21 Stories of Bitcoin, Blockchain, and Cryptocurrency' tells the story of the crypto industry. He holds a degree in Political Science and is completing a Masters in International & Comparative Law. In summertime he can be found fishing from his wilderness cabin under the midnight sun.
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