Intermediate
With the rise in popularity of blockchains, Staking has become an essential way for users to win a passive income while strengthening network security. However, traditional storage requires blocking tokens for long periods, making assets unavailable during stuking. This is where the Liquid Staking intervenes, offering a solution that allows users of staker their assets without sacrificing their liquidity.
Table of contents
What is Liquid Staking?
The Liquid Staking allows users of staker their assets, such as Ethereum Ethereum other tokens of Proof of Stake (POS), while keeping the possibility of using them. Unlike classic storage, where the active ingredients are blocked and illiquid, the liquid stoking issues tokens from Liquid Staking (LST) which represent the value of stakes. These tokens can be exchanged, loaned or used as collateral in the DeFi , while continuing to accumulate stoking rewards.
How does Liquid Staking work?
When users participate in the liquid Staking:
- They lock their assets in a protocol of (for example, Ethereum Ethereum Lido ) .
- In return, the protocol emits a corresponding LST, like the Steth for Ethereum .
- This LST can then be exchanged or used in different DeFi protocols while generating rewards.
The process is fully automated by smart contract , ensuring that the LST reflect the value and yield of stakes.
Its advantages
- Liquidity : Users can access their funds without unlocking them.
- Flexibility : LST can be integrated into the DeFi to generate additional yields.
- Capital efficiency : by releasing capital, liquid Staking maximizes the yield potential.
For example, a user with Ethereum Ethereum stake it, receive steth, then use this STTH on a platform like Aave to obtain an additional return.
Comparison between liquid stations and traditional sting
| Traditional Stuking | Liquid Staking |
|---|---|
| Blocked active | Liquid active |
| No additional use | Use of stakes in DeFi |
| Limited capital efficiency | Increased capital efficiency |
| Rewards without flexibility | Rewards with flexibility of LST |
Why the Liquid Staking is gaining popularity in the DeFi
The Liquid Staking perfectly completes decentralized finance by offering greater composability , allowing users to integrate LST in several protocols. This ability to use LSTs in platforms such as Compound or Aave to borrow and lend led to an increase in the use of liquid Staking.
The most popular protocols
Lido : Currently the undisputed leader in Liquid Staking, Lido offers a diversified liquid storage offer, notably for Ethereum with its Token Steth . This protocol also supports other Proof of Stake (POS), such as Solana (with the Token Stsol ) and Polygon (with the Token Stmatic ). Thanks to this multi-blockchains compatibility, Lido allows users of staker their assets on different platforms while maintaining significant liquidity.
Rocket Pool : This protocol, both community and decentralized, mainly concentrates on Ethereum , offering a stuking service for ETH 2.0. Although its scope is more limited compared to Lido, Rocket Pool is distinguished by its decentralized approach. Rocket Pool allows any user to become a node operator provided you have a minimum of 16 ETH (against 32 ETH required for staker directly on Ethereum ).
Ankr Staking : Ankr offers a wide range of Liquid Staking options on several blockchains , offering liquid tokens other than Ethereum . For example, there are stuking options for Binance Smart Chain (with the BNB ) , Avalanche (Avx) and Polkadot (DOT) . Ankr focuses on interoperability and allows users to take advantage of stoking benefits without blocking their assets.
Although Lido dominates the market and tends towards more decentralized governance, Rocket Pool, by its conception, is structurally more decentralized. It allows a larger number of users to actively participate in the security of the network as an operator of nodes, which limits the concentration of funds under the control of a small number of entities.
Associated risks
Despite its advantages, the Liquid Staking has certain risks:
- Volatility of the markets : The value of LST can vary depending on market conditions.
- Risks of Smart Contract : Users depend on the safety of smart contract of the protocol.
- Dependence on the stability of platforms : the technical problems of a platform can affect the stations process.
How to start with the Liquid Staking
Step by step guide:
- Choose a platform : select a reliable platform (for example, Lido, Rocket Pool).
- Place assets : Place the chosen cryptocurrency.
- Receive the LST : the protocol emits the LST, representing your stakes stifles.
- Use LST in DeFi trading options for your LST.
How to choose a platform
To choose a platform, take into account:
- Security : check the history and audits of the platform.
- The costs : compare stoking and transaction costs.
- DeFi integrations : Look for platforms with large DeFi for more utility.
The tokens of Liquid Staking (LST): what they are and how to use them
LSTs, like Steth or Reth, represent Staké assets and can be used in DeFiprotocols. Holders can:
- Generate additional return : Use LST in loan and liquidity protocols.
- Exchange LST : take advantage of price fluctuations on secondary markets.
LSTs allow additional gains opportunities, which makes them very versatile.
The future of the liquid Staking in the DeFi ecosystem
As the DeFi evolves, the Liquid Staking should grow, with possibilities of Stuking Cross-Chain and increased interoperability. The climb of platforms supporting several blockchains could make Liquid Staking a fundamental element of the DeFi .
Conclusion
The Liquid Staking packed the gap between stuking and liquidity, making a transformer tool for the DeFi. For investors looking for flexibility and efficiency of the capital, Liquid Staking offers a robust alternative to traditional Staking, promoting innovation in decentralized finance.
FAQ Section
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What is Liquid Staking?
- The Liquid Staking allows you to stake assets while keeping them accessible for trading and use in DeFi.
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How does it differ from traditional staking?
- Traditional storage blocks assets, while the liquid Staking issues representative tokens that remain liquid.
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Are LST tokens sure?
- Tokens safety depends on the protocol used. Choose well -audited and famous platforms.
Complementary readings: Discover by clicking on the words in bold our articles on the protocols DeFi , Staking , and the comparison between Proof of Work and Proof of Stake to deepen your knowledge on the universe of decentralized finance.
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Yohan Uzzan
Training engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future ahead of it, I participate in its democratization by developing Crypternon.
