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alt.crypto
Understanding Liquid Staking.
lhorgic
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2024-07-26 18:48:45
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Hi friends! how are you doing? Welcome to my blog, it's super good to be back in your faces. I trust you got value from my last post. I bring to you another interesting content, one that I believe you would find interesting as usual. In my previous post, we explored the concept "Flash Crash in Crypto", you can check out my blog to read through if you haven't.
Today, we would be looking at *Liquid Staking** in the crypto world... it's actually another topic of interest I feel y'all should be enlightened on as many of us ain't just familiar with it. Anyway we are going to delve deeper into itnin today post.
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Staking is an activity that has been around in the Defi world for quite some time now and trust me it has been evolving, it evolution is what we would be discussing today. I know people didn't see this coming about staking because of the way it was introduced coupled with it modus operandi.
Staking is an act of locking up your asset for a period of time just so you can earn with it after an agreed period of time. This has actually put some money in people's pocket for real but then, the asset locked remains used-less to the owner if he must earn from that activity.
Now the good news is that there is a new approach and evolution to how staking works and I think it's the reason why people liked and subscribed to this staking type called the liquid staking, because it came up with some amazing solution to the traditional staking model. Let's delve deep into it guys.
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Liquid Staking is a kind of staking that allows you stake your asset for the smooth running of a network's operation and then still allow you to have a tokenized representation of the asset staked so you can use them on other Defi protocols for your financial transactions even while your original asset is locked up.
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We call these tokens LST's, meaning Liquid Staked token. This is an improvement on the traditional method of staking because in the traditional method, once an asset is staked, it remains staked and unusable until you decided to unlock it for other use. LST's is used to provide liquidity to those who so they don't get all boxed up when there is a need.
One fascinating and thrilling feature of these LTS is that it allows you to operate on different Defi protocols. It would have been some kind of limitation if it were only relevant on the network where the asset has been staked but that these token are accepted on Defi platform where stakers need financial services is amazing.
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Liquid Staking can be done on different Blockchain network which includes the Ethereum network, BNB chain, Solana, Cosmos, Fandom etc.
On the Ethereum network you can do your staking using two of their popular third-party DApp called LIDO and Rocket Pool. When you stake Ethereum using Lido, you get an LST called stETH while you get RETH when using the Rocket Pool.
On Solana, users can stake SOL using
Marinade (MNDR) and the Liquid Staking token LST they get is called the MSOL. Another medium you could use is Socean and Raydium. They would help you stake successfully and also give you your rewards accordingly.
Liquid Staking on Fantom
On the BNB chain you could use protocols like Ankr, Stader and pStake to stake your BNB. The LST's you would get for using the Ankr Stader and pStake protocols to stake BNB are as follows: aBNBc, BNBx and stkBNB respectively.
You can also explore that of cosmos and fantom as well.
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Yeah! There are risk associated with this activity, that's just to tell you that it's not all perfect as we picture it, there are some risk attached to it which I must share.
The first being that a staker could lose his stake asset if he doesn't manage his LSTs well and goes ahead to put it in some very risky protocols in a bid to earn from them, he might end up loosing both the LSTs and the staked asset which became a collateral after the LST was issued.
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Secondly, not all protocol allows you to have their LSTs without requesting for higher collateral, I guess it just in a bid to stay safe should in case staker goes haywire with the LSTs and this is where the traditional staking seem to be more advantageous because it doesn't require high collateral or over collateralization.
Lastly, there is always discrepancies in the value of the asset staked and the LSTs, as their price ain't always in sync and you know people could take advantage of it to get some unhealthy gain...it could even be via arbitrage trading.
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I believe by now we understand what Liquid Staking is and how beneficial it is. What an amazing way for utilizing an already staked token. I also want us to bear in mind the drawback of this kind of staking just to have a balance view to it.
As my usual custom is, I would always encourage that you DYOR to be sure of every financial step you would want to take as I won't be liable for any form of loss encountered by you.
Feel free to share with me your thoughts in the comment section. Thanks for your time once again. Gracias!
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**Disclaimer: This post is made as an education and not investment advice. Digital asset prices are subject to change. All forms of crypto investment have a high risk. I am not a financial advisor, before jumping to any conclusions in this matter please do your own research and consult a financial advisor.**
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Regards
@lhorgic♥️
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