Liquid stakes benefit the crypto ecosystem in general – here are 3 reasons why

Proof of Stake (PoS) blockchains are waiting for you to stake your crypto. Nevertheless, the strike’s low participation — only 24% of the total market value of staking platforms is locked in staking – meaning that crypto enthusiasts have yet to realize the benefits.

While PoS blockchains improve the way the crypto-ecosystem works, liquid stakes are what will ultimately increase usage. Floating stakes provide the ability to not only stake crypto for validation rewards, but it also allows owners to continue using their locked assets for investment and returns in other activities. Liquid staking also solves some of the biggest hesitations crypto owners face when staking.

If you’re thinking about staking or are frustrated with lock-ups and looking for a solution, here are three benefits of floating staking to the crypto world.

What is Liquid Staking?

The innovation of staking is transforming blockchain functionality. As an alternative to the high energy consumption and highly competitive nature of Proof of Work (PoW) blockchains, PoS blockchains provide better energy efficiency – estimated 99.95% reduction in energy use — as well as more flexibility in the hardware used and faster transactions. Instead of competing against other miners, crypto owners simply stake a portion of their crypto for the chance to be selected as a validator and win the associated prizes. As blockchains move to PoS, efforts have lowered barriers to entry for many crypto enthusiasts.

But striking has not completely eliminated the barriers. One of the main reasons why crypto holders are reluctant to bet is because of the lock-in period. According to our latest report, “The strike condition,” many who hadn’t bet yet or wouldn’t bet again in the future pointed to the same hesitation: they don’t want their assets locked up in betting, not when those assets can be used elsewhere.

How do you get crypto owners to bet while allowing them to continue spending their assets? Liquid staking has the solution by providing those who stake their crypto with a derivative token they can use in other return activities, such as DeFi. It’s not just a way to get the best of both worlds, it’s the innovation that could ultimately tip the use of effort in general.

Three benefits of liquid use

There are many advantages to floating staking, as it solves the biggest hesitation crypto enthusiasts have from participating in staking: not being able to use their assets during the lock-up period. However, that is not the only benefit it provides. Here are three ways liquid staking improves the crypto ecosystem overall.

Benefit 1: Enables yield stacking

One of the advantages of floating betting is that it allows for yield stacking, or the ability to earn yields while earning rewards for effort. While this is still available in DeFi, the systemic risk of yield stacking in DeFi is a major concern. If a base layer protocol fails, the entire stack can collapse, resulting in heavy losses. In liquid staking, however, the base return comes from the PoS network itself. This means that even while stacking the returns, if a DeFi project fails, users can still rely on the base returns coming from PoS networks. The probability of a reliable PoS layer 1 failure is much less than a DeFi project being banked due to illiquidity.

In fact, the more stakers in PoS, the lower the chances of the network failing. Therefore, floating staking not only helps PoS security, but it also helps users get reliable returns from the network itself.

Advantage 2: Ease of use

Unless they go through an exchange, the process of betting is a bit of a hassle for the average user. But even if users were to bet through an exchange, the exchange itself would have a significant amount of capital – and stake – in the network, leading to centralization of the effort. This also creates an additional risk for stakes because if the exchange faces an attack, the entire capital is at risk.

The other way is to bet independently. However, the biggest problem with betting independently is the amount of time and effort required to do so. There is also a minimum required technical knowledge to understand validators and choose the ones with the highest uptime and no slashing history, among other things that the user must research and understand.

With floating staking, the protocol has different parameters with which it selects validators. In addition, because it wants to keep the liquidity that its users provide, the protocol is required to choose reliable validators that have no slashing history and have the highest uptime. This makes the user’s investment journey extremely simple.

Benefit 3: Network security

In a PoS network, the ability to validate transactions on the blockchain comes from the amount of capital available in the validators’ wallets, how much of it they intend to stake, and the duration for which the capital is held. Because of that, the strength of PoS- the network directly proportional to the number of validators and the amount of capital they have invested in the network. If the restrictions around stakes – such as lockout periods – are removed, more users can be motivated to stake their capital. As the number of validators on the network increases, the amount of capital invested increases, and the network becomes even stronger as the capital invested increases.

Make Liquid Staking available

Liquid staking not only provides a convenient way for crypto owners to continue to use their assets while locked up. Liquid staking offers the opportunity for more returns through a simpler method than conventional staking. Also, by giving users an easier option to stake through, it not only increases adoption, but helps strengthen blockchain networks in general. Go ahead and start betting today – the growth of the crypto industry depends on it.