What is liquid staking in crypto DeFi?
Direct from the desk of Dane Williams.
Liquid staking in crypto DeFi essentially grants you access to your money, even when it's staked.
Liquid staking is an extremely popular, yet underappreciated term that offers you the best of both worlds.
First of all, liquid staking allows you to earn staking rewards by locking your crypto in various platforms..
But the liquid staking magic comes via the issuance of a tokenised version, or derivative if you will.
As the name suggests, this derivative offers you liquidity.
Meaning that this new token can be openly transferred, staked, spent or traded as one would any other cryptocurrency.
Magic!
Liquid staking on Ethereum
Much of the interest around liquid staking in 2022 comes from the fact that Ethereum (ETH) is moving from a Proof of Work (PoW) consensus model, to Proof of Stake (PoS).
Consider this.
When you stake your crypto on a PoS network such as Ethereum, you receive a new token in its place.
A staked version of your original token if you will.
You can think of this new token in the same way you’d think of receiving a receipt for a purchase.
This receipt shows all of the details of your stake such as:
- How much you staked.
- When you staked.
- How much yield it will accrue.
An example of liquid staking on Ethereum would be staking ETH on Lido.
By staking your ETH on the platform, you will receive a new token called stETH in return.
stETH allows you to maintain your ETH liquidity, meaning you can use that ETH as you please, but still gain all the benefits of having your tokens staked.
Such as earning staking rewards.
With that in mind, there are actually a huge range of DeFi protocols and platforms available to put your stETH to work.
All with the prospect of earning higher yields… with varying levels of risk to accompany them of course.
An additional 4% is on offer for adding your stETH to Curve Finance and MakerDAO gives you the opportunity to use stETH as collateral to mind DAI.
The USD pegged stablecoin which you can use to chase higher yields by pooling with other cryptocurrencies.
Liquid staking in crypto DeFi opens up an entire world of opportunities.
Liquid staking on Terra
An alternative to Ethereum is liquid staking on Terra (LUNA) through what thy call bonded assets.
Or simply bAssets for short.
bAssets on Terra function exactly the same way as staked assets on Ethereum that we just spoke about in the section above.
Again, Lido allows you to stake your LUNA on their platform as well, at a rate of 8.42%.
Like stETH, the bLUNA you receive for staking your native LUNA, can then be put to work elsewhere in the Terra ecosystem.
The most popular being using your bLUNA to mint UST and then staking your UST on Anchor.
Just like on Ethereum, you can see that liquid staking on Terra opens up an equally large world of opportunities.
Final thoughts on liquid staking in crypto DeFi
Anyway, that’s a simple to understand rundown of liquid staking in crypto DeFi.
In a nutshell, liquid staking in crypto DeFi essentially grants you access to your money.
Even when it's staked!
Now use your newfound knowledge and go forward and conquer the markets.
Best of probabilities to you.
Posted Using LeoFinance Beta
Good to learn. Is there the possibility of getting such functionalities in PolyCUB or Hive dieselpools?
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Anything in the world of crypto is possible with the right dev team ;)
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Well! In Hashkings here in HIVE, we have a liquid staking (aka tokenized staking) for our main token BUDS :) ! Helps a lot to the users as improves a lot the APY with 0 efforts
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I just had a read of the BUDS staking section of your Docs and wow.
Super interesting tokenomics!
Okay, you've convinced me to start playing ;)
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And this, I'll do. Thanks @forexbrokr for putting forth this new knowledge for us. Well appreciated. 💚
Happy you're still finding value in my content :)
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Thanks for always putting them out. It helps us.💚
What happens when you un-stake, I suppose you must give back your stETH. I also suppose you cannot sell your stETH. I must say I don't understand much of all this!!
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Obviously you can't unstake until you have paid off what is essentially a loan.
Worth looking a little deeper into if you're interested :)
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Thanks for the feedback.
Hopefully Hive can Have something like that where using the tokens as liquid while stake.
I wonder what else will come to DEFI next?
Hard to see the true meaning of crypto.
Value will always find the space to grow.
!BEER
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Locking up your tokens for 13 weeks when powering up is too much.
I've fully come around to the fact there needs to be a mechanism to unlock early (for a fee).
With the fees being paid back to existing HP holders.
Liquidity is key!
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Use stETH as collateral on MakerDAO, mining DAI and then staking DAI for more rewards. That's a chain of genius.
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*plus fees.
We're so spoiled here on Hive.
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Stake one crypto to get another.
Stake the second crypto to get another.
Compound the third crypto back to make more crypto. :')
Sign me up! 🤑
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Just weigh up the risk:reward ;)
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Sure ;)
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Alcohol is one of the best liquids for defi staking in the crypto industry because when you start suffering impermanent losses, you'll need it to cope 😄
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Haha, peak Belemo! ;)
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I might have to look at those ETH staking possibilities. Would be nice to find something for BTC too.
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Well that's just it right, the gas fees on ethereum are still what they are.
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But isn't the whole idea of buying Bitcoin that you have a secure asset that you hold in a cold wallet?
Why do you want to expose it to DeFi risk?
And if you do, why not just buy assets offering higher yield?
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If there is a way to keep the ownership of my Bitcoin and get some yield it may be interesting as I still want to be long Bitcoin.
But I agree, Bitcoin is an important pillar in my crypto strategy that I don't want to expose to any other unnecessary risks.
Liquid staking is an interesting concept. It helps investors remain liquid whil putting money to work.
Posted Using LeoFinance Beta
Pretty much sums it up ;)
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I know people must have their reason for not appreciating liquid staking but for me I think it is a nice concept and that is why I into it.
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Are you using Lido or any of the other platforms yourself?
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This is basically new to me. It would be nice to find one to stake some ETH :)
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Do you have any liquid ETH that you're looking to earn yield on?
As an alternative to liquid staking, I wrote about using Cub Finance as the best way to earn yield on Ethereum.
Just something else to consider.
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Yes, just been sitting on the wallet for a while. Thank you for sharing that and I will check it right now.
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Interesting concept indeed. I'm not familiar with Lido bit it does seem worth checking out
!hivebits
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Success! You mined .9 HBIT & the user you replied to received .1 HBIT on your behalf. mine | wallet | market | tools | discord | community | <><
We've gotta do a LeoFinance Crypto Guide on Lido.
It's awesome when you start reading deeper into the project.
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I hope ETH is transitioning to POS in my lifetime
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I'm not saying the s-word...
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Can't wait for something like this to hit PolyCUB.
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A definite use case for POLYCUB if/when they do.
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Based on the last AMA, I wouldn't be surprised to see it soon.
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Am I right in assuming that the number of bLUNA you receive won't change but the ratio underneath might change? In a way, similar to how xPolyCUB works with its ratio.
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Can liquid staking work on Hive? Are there any special considerations we need to take into account because of how long it takes Hive Power to be unstaked?
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Ping @taskmaster4450 - What's your best piece of content talking about this concept?
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Before I don't stake,but since I started reading the value of stake. I do stake my coins.
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Okay...
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I think it is a very good development,it's just as if it's a creation for more money making opportunity although ain't really familiar with it,just hearing of it for the first time ,but I think it worth trying.
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Happy to hear my content is helping to expand your crypto DeFi knowledge :)
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You are welcome bro
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Yeah, that's more like it. Liquid staking. But what are the risks..? It looks good enough to research further for sure
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What are the risks of liquid staking in crypto?
Liquid staking in crypto and asset-backed securities share similar risks.
And we all know what happened to mortgage backed securities during the GFC...
Well, staking your crypto create a new layer of abstraction that tends to distract people from the health of the underlying assets.
Which in crypto are obviously extremely high risk on their own.
Always do your own research and fully understand the risks involved.
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I'll have to re-read the post. I was under the impression liquid staking was something else maybe.
Are we talking g about liquidity pools then?
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Liquid staking allows users to earn passive income, more like your money working for you.
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Earn a passive income on top of an already passive income ;)
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https://twitter.com/LeoAlpha2021/status/1522216465453424641
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BEER.Hey @forexbrokr, here is a little bit of
BEERfrom @pouchon for you. Enjoy it!Learn how to earn FREE BEER each day by staking your
BEER.What is the difference between liquid staking and the one offered here https://p2p.org/networks/kusama ?
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Honestly mate, I have never heard of Kusama and you're probably better off getting advice off someone involved in the project.
My only advice after quickly glancing at the link you shared is be careful...
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