IS LIQUID STAKING THE FUTURE OF PoS?

The question of Liquid Staking being the Future of Proof-of-Stake (PoS) is not one that can be answered in a straight forward manner without sky-diving into the concept of liquid staking and understanding what liquid staking really means to the world of Decentralized Finance (DeFi). To do this effectively, let’s talk a little about blockchain technology shall we…….

BlockChain: A Brief Build up

Picture this scenario:

PoW to PoS

The Problems with PoW

Emergence of Liquid Staking

Liquid Staking Solution Categories

  1. Custodial- A centralized entity holds the private keys and issues staking reward representations under this technique. These platforms may also require users to complete a Know Your Customer (KYC) process. Stakehound is an example.
  2. Collateralized loan- A distinct trustless protocol is used in this approach to provide liquidity for staked assets and to enables users to mint stable coins, rendering their assets liquid. Ramp DeFi is a good example.
  3. Native- Protocols under this category such as Acala Network build liquidity representations for staked assets at the core protocol level, making it ineffective for other platforms to do so.
  4. Exchange- Binance and Kraken are perfect illustrations. Here, centralized exchanges use this method to permit token holders to interact in other products on their platform.
  5. ETH 2.0- These are Ethereum (ETH)-specific protocols that issue derivatives for staked assets at the core protocol level. For instance, consider the Rocket Pool.

How pSTAKE unlocks liquidity of PoS assets for dual rewards

Liquid Staking can shape the future of PoS in more ways than one:

Final Thoughts