Drop is a liquid staking protocol for Interchain assets that enables users to earn staking rewards while maintaining liquidity of their staked assets. As a member of the Lido Alliance, Drop transforms staked capital into liquid tokens (dAssets) that can be utilized across various DeFi applications while continuing to generate staking rewards.

Overview

Drop was developed to address the challenge of capital inefficiency in proof-of-stake networks, where staked assets typically become illiquid during the staking period. The protocol operates on Neutron, leveraging the Inter-Blockchain Communication (IBC) protocol to provide liquid staking services across multiple blockchain networks in the Cosmos ecosystem ^[1].

Led by former Lido and P2P contributors, Drop aims to strengthen the economic viability of sovereign blockchain economies by transforming stagnant, frozen capital into productive assets. The protocol's architecture utilizes Neutron's Interchain Transactions (ICTX) and Interchain Queries (ICQ) modules, enabling it to provide trust-minimized liquid staking services that can scale with minimal additional overhead and risk ^[2].

Drop's core innovation lies in its ability to mint liquid staking receipt tokens (dAssets) using the Token Factory standard, allowing users to maintain liquidity while earning staking rewards and potentially additional yield through various DeFi applications.

Products

Drop offers several liquid staking tokens (dAssets) that represent staked positions on different networks:

• dATOM: Liquid staking token for Cosmos Hub's ATOM
• dTIA: Liquid staking token for Celestia's TIA
• dNTRN: Liquid staking token for Neutron's NTRN
• deINIT: Liquid staking token for INIT Labs' INIT ^[3]

Each dAsset automatically compounds staking rewards, increasing in value relative to the underlying asset over time. Users receive these tokens in a 1:1 ratio when staking their native tokens through the Drop protocol.

Features

Drop's protocol offers several key features that differentiate it in the liquid staking market:

• Auto-compounding rewards: Staking rewards are automatically reinvested, maximizing returns without manual intervention ^[4]
• Immediate liquidity: Users can transfer, sell, or utilize their dAssets at any time, unlike traditional staking which locks assets for a period ^[4]
• Composability: dAssets can be deployed across various DeFi applications for additional yield opportunities ^[5]
• Airdrop eligibility: Users remain eligible for ecosystem airdrops while staking through Drop ^[4]
• Validator diversification: Assets are distributed across multiple validators, reducing risk compared to staking with a single validator ^[6]
• Real-time monitoring: The protocol employs 24/7 monitoring and alerting for all critical components to ensure security ^[5]

Ecosystem Integration

As a member of the Lido Alliance, Drop benefits from collaboration with one of the largest liquid staking providers in the blockchain space. This alliance was confirmed through a Lido DAO vote, positioning Drop as a strategic partner in expanding liquid staking solutions to the Interchain ecosystem ^[7].

Drop has established integrations with numerous DeFi protocols across the Interchain, including:

• Astroport: Permissionless Concentrated Liquidity (PCL) and Automated Market Maker (AMM)
• Margined: Vault strategies
• Apollo: Vault strategies
• Shade: AMM, Lending, and Stablecoin services
• Fission: Yield splitting
• Levana: Perpetual contracts
• Osmosis: Uniswap V3-style AMM
• Mars: Lending, Margin trading, and Perpetual contracts ^[5]

These integrations enable users to deploy their dAssets in various applications to earn additional yield beyond the base staking rewards.

Use Cases

Drop's liquid staking tokens enable several use cases for users:

• Earning staking rewards without lockups: Users can stake assets and earn rewards while maintaining the ability to exit positions at any time ^[4]
• Yield farming: dAssets can be provided as liquidity in AMMs or yield farming protocols to earn additional rewards ^[8]
• Collateralized lending: Users can use dAssets as collateral in lending protocols to borrow other assets while still earning staking rewards ^[5]
• Trading and arbitrage: The liquid nature of dAssets allows for trading opportunities between the dAsset and its underlying token ^[5]
• Participating in governance: dAsset holders can potentially participate in the governance of both Drop and the underlying networks ^[4]

Architecture

Drop's technical architecture is built on Neutron as an Integrated Application, utilizing several key components:

• CosmWasm smart contracts: The core protocol logic is implemented as CosmWasm contracts that control the flow of assets between multiple blockchains ^[2]
• Inter-Blockchain Communication (IBC): Enables secure cross-chain communication and asset transfers between Neutron and other Cosmos-based chains ^[2]
• Interchain Transactions (ICTX): Allows Drop to initiate transactions on remote chains from Neutron, essential for staking and unstaking operations ^[2]
• Interchain Queries (ICQ): Enables Drop to query data from remote chains, providing real-time information about validator performance and network conditions ^[2]
• Token Factory: Used to mint and manage dAssets according to the Token Factory standard on Neutron ^[2]

The protocol employs rigorous unit and end-to-end testing with Cosmopark, alongside continuous monitoring and alerting systems to ensure security and reliability ^[5].

Validator Selection

Drop carefully selects validators for each supported network based on several criteria:

• Technical reliability: Validators must demonstrate consistent uptime and performance
• Security practices: Strong security measures and infrastructure are required
• Governance participation: Active involvement in network governance
• Community contribution: Positive contributions to the ecosystem ^[6]

The protocol distributes staked assets across multiple validators to reduce centralization risks and improve the resilience of the networks it supports.

Droplets Program

The Droplets Program is an initiative that allows users to earn DROP tokens (the native token of the Drop protocol) by using dAssets across various DeFi applications. Users earn Droplets points for participating in supported activities, which can later be redeemed for DROP tokens upon the token launch ^[9].

Activities that earn Droplets include:

• Staking assets through Drop
• Providing liquidity with dAssets
• Using dAssets in supported DeFi protocols
• Participating in specific campaigns and promotions ^[8]

Partnerships

Drop has established partnerships with several key projects in the Interchain ecosystem:

• Lido: Member of the Lido Alliance, collaborating on liquid staking solutions ^[7]
• Neutron: Built as an Integrated Application on Neutron, leveraging its interchain capabilities ^[2]
• INIT Labs: Partnership for liquid staking of INIT tokens through deINIT ^[3]
• Multiple DeFi protocols: Integrations with Astroport, Margined, Apollo, Shade, Fission, Levana, Osmosis, and Mars to enable dAsset utility ^[5]

These partnerships enhance the utility and adoption of Drop's liquid staking solutions across the Interchain ecosystem.