How Does Liquid Staking Provide Flexibility to Stakers?
Liquid staking allows users to stake their cryptocurrency while simultaneously receiving a liquid, tradeable token that represents their staked assets and accumulated rewards. This token can be used in other DeFi protocols, providing liquidity and utility that traditional staking locks away.
It solves the capital inefficiency problem of standard staking.
Glossar
Liquid Staking
Mechanism ⎊ Liquid Staking is a decentralized finance primitive that allows users to stake their tokens in a Proof-of-Stake protocol while simultaneously receiving a liquid, tradeable derivative token representing their staked position and accrued rewards.
Liquid Staking Derivative
Token ⎊ A liquid staking derivative (LSD) is a financial token issued to a user upon staking their native cryptocurrency in a Proof-of-Stake protocol, representing both the staked principal and the accrued staking rewards.
Staked Assets
Collateral ⎊ Staked assets, within cryptocurrency and derivatives markets, function as pledged capital securing financial obligations, mirroring traditional collateralized lending but leveraging cryptographic proofs of ownership.
Liquid Staking Token
Token ⎊ A Liquid Staking Token (LST) is a fungible, on-chain representation of a user's staked principal and accumulated rewards in a Proof-of-Stake (PoS) network.
Tradeable Token
Token ⎊ A tradeable token, within the convergence of cryptocurrency, options, and derivatives, represents a digital asset embodying contractual rights or utility, distinct from a currency itself.
Flexibility
Adaptability ⎊ The capacity for flexibility within cryptocurrency derivatives hinges on the ability to adjust positions and strategies in response to rapidly evolving market conditions.