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.
Can I trade or send ATOM while they’re being staked? This is a common question you’re likely to find in any FAQ section of a staking platform. The usual answer that you’re likely to get is that no, you can’t use your ATOM while they’re staked. The only way to use your ATOM again after you’ve staked them is to stop staking ATOM, which means you’ll need to wait for a certain bonding period to end, which can take several days. Staking is a lucrative venture in the crypto ecosystem as it helps users accrue amazing rewards and benefits, but comes with a few downsides.
Apart from the fact that you can earn staking rewards, staking ATOM helps you strengthen the security and resilience of the Cosmos blockchain, boost its scalability, and provide a better alternative to PoW. The problem, however, is that users are restrained from using their tokens when they are staking ATOM. This is the reason why liquid staking ATOM came into the limelight. Liquid staking ATOM retains all the usual benefits of staking and also gives users additional benefits of being able to use their liquid staked ATOM within the Cosmos ecosystem for things like DeFi.
Cosmos is a blockchain network that has gained significant traction in the crypto ecosystem due to it being fast, cheap, and highly interoperable. ATOM is the official token of the Cosmos blockchain and is also one of the most valuable tokens within the Cosmos ecosystem. Liquid staking ATOM will empower ATOM holders by giving them liquidity for their staked tokens, thus helping accelerate adoption for the Cosmos blockchain.
Liquid Staking ATOM Provides Attractive Yield Opportunities
Staking ATOM has, over the past few years, gained popularity among crypto enthusiasts. It has been well accepted and helped several crypto investors to earn attractive yield rewards in the Cosmos ecosystem.
Liquid staking ATOM has proven to be a better way to earn rewards with your ATOM than the traditional system of staking. Though liquid staking is still a novel idea it has grown rapidly in a short timespan, and analysts predict this is going to get bigger in the future as more products are introduced into the staking ecosystem.
Liquid staking ATOM gives investors the chance to enjoy the yield opportunities obtained from usual ATOM staking, and the opportunity to participate in DeFi on top of that. Liquid staking ATOM on pSTAKE gives you a derivative token called stkATOM, which you can use across many DeFi platforms. For example, users are able to use their stkATOM to provide liquidity on Uniswap or other lending platforms to earn additional rewards on top of their usual staking rewards.
Liquid staking gives ATOM tokens a lot more utility than they had before, and in a sense gives them a unique new use case. The ability to be used as a liquid staking token makes ATOM a lot more attractive in comparison to the many other PoS tokens that don’t have the ability to be used in liquid staking.
Liquid Staking ATOM Increases Network Activity
The benefits of liquid staking transcends beyond just the yields individuals get from their staked tokens. Liquid staking ATOM also provides the ability to boost the activity of the Cosmos blockchain and the Cosmos ecosystem. Regular staking ATOM basically involves delegating tokens to a validator and locking them into a staking pool. The problem with regular staking is that it actually makes the Cosmos blockchain illiquid, since ATOM tokens end up being taken out of circulation for as long as they are staked.
Liquid staking ATOM helps make the Cosmos blockchain more efficient and robust. When ATOM tokens are staked on pSTAKE, people can mint the derivative stkATOM, which can be used on the Cosmos blockchain and ecosystem. These derivative tokens represent the underlying ATOM and have a similar value to them. People can also use their stkATOM on the Cosmos blockchain and ecosystem the same way they would have used their regular ATOM.
The ability of liquid staking to essentially revitalize staked ATOM makes it possible for the Cosmos blockchain to be a lot more liquid. More liquidity could potentially increase the amount of activity within the Cosmos ecosystem. More activity and liquidity on the Cosmos blockchain can help promote development within the Cosmos ecosystem.
Liquid Staking ATOM Promotes Decentralization
Decentralization has always been a big topic in the crypto ecosystem. It has always been a main point that crypto enthusiasts rely on to justify why the crypto industry is better than traditional platforms and will thrive for many years to come. Several projects have developed systems to help make decentralization a focus point in the crypto ecosystem. Staking is one of crypto’s mechanisms of ensuring a decentralized ecosystem within PoS blockchains.
When someone participates in staking ATOM, that person is actually helping to make the whole Cosmos blockchain more decentralized. Similar to regular staking, liquid staking ATOM also helps make the Cosmos blockchain more decentralized. Liquid staking ATOM is actually very similar to regular staking of ATOM, and the only difference is it adds in a few extra steps. People who decide to liquid stake their ATOM will still get the ability to choose which validator they delegate their ATOM to, thus helping promote decentralization.
Liquid staking ATOM really is an enhanced version of regular ATOM staking, because you still get the same old rewards and still promote decentralization. It is an enhanced version though, since you also get to continue utilizing your staked ATOM.
Staking ATOM has become very necessary in the crypto ecosystem as it helps holders get good yield on their assets. The delegating part of staking also makes blockchains more decentralized, and safer. Unfortunately, there is a downside to regular staking ATOM, but liquid staking helps resolve these issues.
Liquid staking ATOM is an enhanced version of regular staking because it has all the benefits, and none of the negatives associated with staking. Liquid staking has the ability of helping users earn great yields through staking rewards and still being able to participate in DeFi with derivative tokens that represent their staked tokens. By liquid staking ATOM, a staker can also help maintain robust liquidity on the Cosmos blockchain by revitalizing the staked ATOM through stkATOM. This is a great way to ensure there is a constant amount of activity in the Cosmos ecosystem.