The Benefits of Liquid Staking
What is Liquid Staking and how can you take advantage of it?
Hello, everyone! It has been a while. A lot has happened in the world of DeFi since I last wrote.
Today, I have good news. Yes, I know about the bull run. I see it and yes, I have also gotten some tokens with high potential and yes, I’m holding long term. But we will talk about that later. Today, I will be throwing more lights on Liquid Staking and the benefits it has to offer.
Like, I said, a lot of things have happened since the last time we chatted. Now, in the DeFi world, there is something we should most definitely look out for and take advantage of and that thing is Liquid Staking.
What is Liquid Staking?
I’m glad you asked. Before talking about Liquid Staking, it is only fair to know what Staking is first. Staking is the art of locking your cryptocurrency assets in a network or protocol to provide liquidity or support to that network or protocol.
Staking/Locking your tokens most times comes with benefits. Some protocols offer APR rewards to users who stake their project’s native token or any other crypto asset on their platforms/dApps. If it’s a DAO project, staking on the platform will also enable you to take part in their governance (decision making process) by using your staked assets as a voting power/right to vote on proposals.
Liquid Staking is not all that different from staking. I mean, it still has all the benefits of staking only with extra/added benefits. The added benefit is that unlike regular traditional Staking, you can unlock the value of your staked assets to trade or you can use it as collateral on DeFi protocols. Meaning, you can stake your asset and still retain liquidity on that staked asset and use that liquid staked tokens to trade and supply/lend on DeFi protocols. Cool, yes?
To further explain, let me give an example;
One of the well known liquid staking protocol is Lido. On Lido (same as every other liquid staking protocol), users can stake their tokens and receive daily incentives without locking their tokens. If it was a regular staking platform, your staked token will be locked and you cannot access that locked asset without unlocking. Also, unlocking may take up to 7–30 days depending on the protocol’s lock period.
If a user stakes his/her assets on either Lido, Ether.fi, Ankr or any other Liquid Staking Protocols, you will receive a liquid staked token.
That liquid staked tokens you earn from staking your ETH on any of the above listed platforms can now be used in DeFi protocols like Venus Protocol — A decentralized money market that is available on BNB Chain, Ethereum, Arbitrum, zkSync Era, opBNB and soon, Optimism.
Some liquid staked tokens are available on Venus Protocol. They have the Liquid Staked Ethereum and Liquid Staked BNB markets available on the protocol. Just visit their dApp and check them out. If you check the Liquid Staked BNB pool, you’ll see the different liquid staked markets that are available (ankrBNB, slisBNB, WBNB, BNBx). Also, if you check the Liquid Staked ETH pool on the Ethereum Network, you’ll see some nice liquid staked markets available there (WETH, wstETH, sfrxETH, weETH and several others)
Like I said earlier, your liquid staked tokens can be used on DeFi protocols like Venus to supply, borrow and earn rewards. That is one of the main benefits of Liquid Staking.
Differences between Staking and Liquid Staking
There is not much difference between traditional staking and liquid staking.
Here are what makes traditional staking and liquid staking different;
- One of the major differences between traditional staking and liquid staking is that when you stake your tokens, it is locked up for a certain period of time (it could be days or months). During this period, you won’t be able to access your staked token unless you unlock it which could take days or months before it unlocks. Also, during this period, you cannot use your staked tokens to earn more rewards on other dApps.
- Liquid staking is very flexible and makes it possible to earn on multiple DeFi protocols by giving you liquid staked tokens which is a representation of your staked asset, for you to use on other platforms to earn without waiting to unstake your assets first. Unlike traditional staking where you have to wait to unstake before accessing your asset.
- With traditional staking, you can only earn staking rewards on the platform you’re staking your tokens unlike liquid staking that enables you to earn on several dApps while still earning staking rewards!
Benefits of Liquid Staking
From what I’ve said so far, I believe we must have seen and understood some of the benefits of Liquid staking.
There are so many benefits of Liquid staking. Here are some of the benefits;
- More earning opportunities — Unlike regular staking where staking your asset may likely lead to you missing out on other earning opportunities, with liquid staking, you can earn on different DeFi protocols with your liquid staked asset while also earning staking rewards from your initial staked asset.
- You no longer have to choose between staking or using your assets for other earning opportunities. You can now earn from both staking, and other beneficial DeFi strategies. This is the real definition of eating your cake and having it. There, I said it.
- With liquid staking, you don’t have to wait to unlock your staked token. Your liquid staked token can be traded or used as collateral on any DeFi protocol anytime you want. This gives the word FLEXIBLE a whole new meaning.
- You can now reduce or diversify risk. Since liquid staking enables you to take part in several DeFi protocol strategies, you can now spread your assets across several DeFi strategies/protocols which is a good way to reduce risk because your assets aren’t locked up in one place.
In Conclusion,
Liquid Staking is a mind blowing advancement in decentralized finance which makes it possible for us to earn staking rewards and still use our liquid staked assets to earn even more rewards. It is not only flexible, it reduces risk and increases returns. This is also a huge step for the entire DeFi ecosystem because it encourages more active participation and liquidity flow.
Where does Venus Protocol come in?
Venus Protocol is a leading decentralized money market that sees the benefits of Liquid Staking and has listed liquid staked tokens on their protocol as collateral. You can now use your liquid staked tokens to borrow and supply while simultaneously earning staking rewards.
The partnership between Liquid Staking and Venus Protocol has surely unlocked a whole new opportunity for users to earn more and for DeFi to be even more accessible to we the users.
THE END.