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What Is the Difference between Proof-of-Stake (PoS) Staking and Liquidity Provision?

PoS staking secures the network and earns native rewards; LP provides trading assets and earns fees but risks impermanent loss.
Greeks.Live16.11.25

What Is the Difference between Proof-of-Stake (PoS) Staking and Liquidity Provision?

PoS staking involves locking up tokens to secure the network and validate transactions, directly contributing to the blockchain's security mechanism. Stakers earn native token rewards, often from inflation or transaction fees.

Liquidity provision (LP), conversely, involves depositing two assets into a decentralized exchange (DEX) liquidity pool to facilitate trading. LPs earn trading fees but are exposed to "impermanent loss," a risk not present in pure PoS staking.

PoS is a security mechanism; LP is a market-making mechanism.

How Do Protocol Fees Contribute to the Long-Term Value of a DAO’s Native Token?
How Do Higher Trading Volumes in a Pool Affect the Likelihood of Trading Fees Overcoming Impermanent Loss?
What Is the Breakeven Point Where Fees Offset Impermanent Loss?
How Does the Concept of “Impermanent Loss” Relate to Staking?

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