Author: Fahad Sheikh
Note: This is a community-written piece. The views expressed within are those of the author and not necessarily those of the pSTAKE team.
Staking is a huge sector of the crypto industry. It has given participants a better way to earn within the crypto ecosystem as compared with its eternal rival, PoW. It has also found ways to integrate with the DeFi ecosystem. In comparison to the traditional ways of putting money at the bank and earning interests or dividends, staking provides a better alternative. Investors delegate their tokens to validators to support the blockchain network and then in return earn staking rewards; a better, more profitable, environmentally efficient and decentralized way of earning within the cryptoverse.
However, these benefits of staking come with a catch. Stakers have to endure illiquidity while they leave their precious assets locked for a stipulated period of time. With the use case of crypto constantly increasing and the market constantly evolving, these investors would want to use their assets for different purposes even if they have to lock it up for several months. That is where the great benefits of liquid staking cryptocurrency come into play.
Liquid staking cryptocurrency allows crypto investors the opportunity to utilize their staked assets for yield farming, and potential risk mitigation whilst allowing them to continue to support decentralization efforts on their blockchain. This article goes into further detail on these three most significant benefits of liquid staking cryptocurrency.
Liquid Staking Cryptocurrency Allows you to Maximize Yield Rewards
Liquid staking cryptocurrency is continually becoming crypto investors’ favorite option because of the numerous benefits it has. With liquid staking cryptocurrency, investors are given derivative tokens that serve as a representation of their actual staked tokens. These tokens are then further used by stakers to participate in the DeFi economy so that they don’t miss its important earning opportunities. This is in addition to the staking rewards they’re receiving.
The DeFi economy has significantly expanded over the past years after crypto enthusiasts discovered its benefits. DeFi offers the opportunity to earn LP farming rewards, lend for interest payments, and collateralize tokens to borrow other tokens.
Users who participate in liquid staking cryptocurrency receive derivative tokens amounting to the same (approximate) value of their staked tokens. The user can then use these derivative tokens to deposit to liquidity pools and earn LP farming rewards. The user can also lend the tokens to borrowers and in return get rewarded with interests. Another thing you can do with your derivative staked tokens is using them as collateral to borrow some other tokens. The best part of liquid staking cryptocurrency is you can do all these activities in DeFi whilst you continually earn staking rewards.
Liquid staking cryptocurrency opens up many new strategies for DeFi enthusiasts who are constantly looking to maximize their yield farming rewards. Liquid staking cryptocurrency essentially adds another layer onto DeFi that can pretty much be paired into almost any yield farming strategy out there.
Liquid Staking Cryptocurrency Potentially Reduces Risk
Crypto is a fast-moving market that trades 24/7/365 with very high volatility. Tokens are always on the move, and the market is always moving in various directions – upwards, downwards or sideways. It is therefore prudent for every crypto user to have quick access to their assets at crucial times in the market.
Consider a situation where a token starts depreciating very fast, and you want to sell your tokens, but you don’t have access to them because they are locked for the next 20 – 25 days. That is how unpleasant the lock-up periods of regular staking are to investors. Liquid staking cryptocurrency takes that headache away, and gives investors timely access to their own assets in order to participate in the market at any time.
With the derivative tokens that are given to investors by virtue of liquid staking cryptocurrency they can essentially trade their staked tokens at any listed exchange, or even DEX without having to wait for their staked tokens to unbond (unstake). This makes liquid staking cryptocurrency the ideal option for PoS enthusiasts. Unlike regular stakers, people who participate in liquid staking cryptocurrency do not have to wait for the long lock-up periods to sell their tokens in a bearish market.
Liquid Staking Cryptocurrency Protects your Blockchain
Staking in general has enormous benefits for crypto enthusiasts. The process of delegating assets to validators, and earning rewards on them has been welcomed by the crypto community. The more stakers there are on a blockchain network, the better the network’s security, and more efficient it gets. Staking also facilitates the hallmark feature of blockchain technology: decentralization.
Liquid staking cryptocurrency does not take away any of the benefits a blockchain receives from regular staking. In fact, participating in liquid staking cryptocurrency provides the exact same benefits to your blockchain as regular staking. Liquid stakers continue to contribute to network efficiency by delegating their tokens to validators who ensure transactions are verified, faster, and more efficient. Liquid staking cryptocurrency also maintains the power to keep the blockchain decentralized in the hands of the stakers
Regular staking and liquid staking cryptocurrency both allow users from different parts of the world to have distributed, and shared control over blockchain networks through delegating their tokens to validators. There is no need for high computational power or sophisticated hardware, and users can stake almost any amount they want through staking pools. This, together with several other reasons, is why PoS has become the choice of many crypto enthusiasts.
pSTAKE Offers Liquid Staking Cryptocurrency Solutions
If you are thinking about trying out liquid staking cryptocurrency yourself, then you should consider trying the pSTAKE app. pSTAKE is the premier liquid staking platform for the Cosmos ecosystem.
pSTAKE is constantly adding support for new cryptocurrencies. As of right now pSTAKE offers liquid staking opportunities for XPRT, ATOM, and ETH. Check out this FAQ, which will walk you through how to use pSTAKE to start liquid staking cryptocurrency, and earn up to 25% APR on certain tokens.