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.
One thing the ongoing crypto bear market hasn’t been able to do is to drastically reduce the interest in staking. The growing interest in staking crypto has led to an enormous increase in the amount of locked tokens. Several stakers across the globe have put in huge amounts of their favorite tokens into staking pools to earn periodic staking rewards. This proves that staking crypto helps many crypto holders earn passive income – liquid staking makes it even better.
Just 2 years ago, about $400 million worth of tokens had been locked by crypto investors across various DeFi ecosystems. However, this number grew tremendously over time and has a reached a TVL of around $78 billion at the time of writing. A report by Beincrypto also outlined a recent 19% increase in TVL in July 2022 alone, amounting to more than $10 billion.
When scaled down, liquid staking takes a decent share of this enormous growth in TVL across the various staking products in crypto. Ever since its inception, liquid staking has demonstrated outstanding growth in the number of platforms and the TVL across them. One of the largest aggregators of DeFi TVLs, DefiLlama, has indicated incredible performance of liquid staking platforms in terms of TVL. Some have their monthly increment in TVL to be more than 80%.
pSTASKE, which is a very popular liquid staking platform, recently reported its TVL to be around $14 million, with more than 9,500 users.
Liquid Staking Crypto is an Augmented Version of Traditional Staking
Liquid staking crypto has been welcomed by the crypto community. Common questions that many investors are fond of asking staking providers is how long the lockup periods last and when they will have access to their staked assets. This is because the zeal to always participate in the market is what motivates users to venture into DeFi protocols. Liquid staking crypto emerged into the space as a means to ensure crypto stakers constantly get the opportunity to engage with the market. The rise in TVL of this new venture and the ongoing developments being made in it are therefore worth it.
Liquid staking crypto is beneficial to crypto users in so many ways. Basically, it increases user earnings through additional income streams by allowing stakers to use their staked tokens in DeFi. Liquid staking crypto has developed a lot of interest because it’s similar to traditional staking, but with numerous extra benefits added on top. Liquid staking crypto is the necessary augmentation that regular staking direly needed to maintain a strong long term CAGR.
Liquid Staking Crypto Appeals to DeFi Communities
Investors in the DeFi communities are always on the lookout for good strategies to earn more. Liquid staking crypto provides the ability to conveniently generate extra passive yield from your tokens, which is an ideal service for DeFi communities.
DeFi in crypto fundamentally comprises eliminating third parties involved in financial activities and then providing users with the means of earning yield rewards by becoming liquidity providers on DeFi services. DeFi services such as lending, borrowing, and staking all pay yield rewards to liquidity providers. Staking crypto also pays liquidity providers or stakers with certain yield rewards for providing liquidity, but unfortunately, with traditional staking, DeFi communities have to choose where they put their liquidity because they’re faced with a tradeoff.
Liquid staking crypto platforms take away the tradeoff involved in staking by allowing DeFi communities to stake their crypto, earn staking rewards, and still to use their tokens in other DeFi services. Liquid staking crypto is able to do this because it mints synthetic underlying representative tokens that represent your staked tokens. These representative tokens can be used to provide liquidity to DeFi services.
Liquid Staking Crypto Enables Business Development
Growth of DeFi in the crypto ecosystem is significantly attributed to the exceptional performance of DeFi projects. Developers and project owners have ensured the development of amazing dApps that make DeFi seamless and lucrative for users. Liquid staking crypto can work really well with DeFi and even other projects in this space.
The obstacle to the growth of DeFi projects and any other project is mainly lack of liquidity. DeFi projects can engage liquid staking platforms by offering some kind of incentive to these platforms in exchange for helping them bootstrap liquidity. This will boost people’s interest in the DeFi projects and ensure their growth in the crypto market. Many projects, primarily those in DeFi, have already begun considering working with liquid staking crypto platforms because they deem a relationship with them can be mutually beneficial.
Liquid staking crypto can become the gateway to liquidity provisioning in DeFi and dApps. With the crypto market constantly evolving and being highly volatile, liquidity is very crucial at all times. Liquid staking crypto has introduced the ability to essentially revive liquidity for staked tokens.
Several DeFi protocols now support pSTAKE’s derivative stkASSETs that represent staked tokens. There are now liquidity pools for stkASSETS on Osmosis, SushiSwap, Uniswap, and others where users can stake their tokens to earn more rewards. More markets are being generated for stkASSETs to provide more liquidity for them.
Liquid Staking Crypto can Appeal to the Entire Space
Staking crypto has grown over time, and now there are so many staking platforms in the space along with a significant total value of locked assets. Liquid staking crypto, which provides an efficient alternative to usual staking through its provision of liquidity for staked assets, has also grown tremendously in the crypto ecosystem. Liquid staking crypto still has a long way to go though, as many people in this space haven’t yet realized just how much potential this augmented form of staking truly has.