Liquid staking on different blockchains
Emerging Tech

Top 4 Blockchains Offering Liquid Staking

24views

As blockchain evolves, adoption increases, and efficiency and user experience must be improved. This has given birth to Proof-of-Stake (PoS), a greener alternative to the Proof-of-Work consensus mechanism used in Bitcoin. With PoS, validators replace the complex computational puzzles required by PoW.

While we consider Proof-of-Stake an upgrade on PoW, locked staking remains a major drawback. Here, staking requires you to lock your holdings for a stipulated period to participate in validation and earn rewards. This locked staking mechanism reduces the liquidity of staked assets, restricting trade or use of these assets for other DeFi applications. However, liquid staking innovatively unlocks the full potential of PoS and ensures that staked assets are still available for other uses.

This guide introduces you to the best blockchains offering liquid staking.

What is Liquid Staking?

In simplest terms, liquid staking unlocks liquidity for any staked assets. Generally, it follows this model:

  • Users deposit Proof-of-Stake assets into a liquid staking pool.
  • The protocol stakes the assets and participates in validation to receive certain rewards.
  • The users who have staked assets earn tokens. Like any other crypto asset, these tokens may be traded or used in DeFi protocols.

Liquid staking lowers the entry barrier by eliminating the need to meet a minimum staking requirement. This makes participation invalidation accessible. This staking approach unlocks a more dynamic and user-friendly DeFi ecosystem.

Now, let us explore the top blockchains that offer liquid staking.

Top Blockchains offering Liquid Staking

1. Cardano – Native Liquid Staking from the Ground Up

Cardano is first on this list because it stands out as a pioneer in offering liquid staking. It employs native liquid staking from the ground up. This implies that its staking system is designed for liquidity.

While liquid staking is an additional layer built on the base protocol in most blockchains, Cardano’s Ouroboros Proof-of-Stake (PoS) mechanism natively allows this fluidity.

Users only need to delegate ADA to a staking pool that validates and secures the network. The ADA, even after it is delegated, is tradable and liquid. You will receive rewards proportionally distributed based on the amount of ADA you have delegated.

With ADA staking, there are no minimum amounts to stake; however, what stands out the most is that Cardano liquid staking goes beyond ADA. Cardano Native Tokens (CNTs) create an expansive staking landscape, introducing staking for multiple assets and increased staking utility. LenFi is emerging as one of the top players in this category.

2. Ethereum – Unlocking Staking Liquidity Through Protocols

Natively, Ethereum does not offer liquid staking. However, the blockchain has one of the most vibrant ecosystems, including Decentralized Applications (DApps) and protocols. Some protocols offer liquid staking, allowing you to earn rewards without locking up your ETH.

To enjoy liquid staking on Ethereum, you must use liquid staking providers like Lido Finance, Rocket Pool, and StakeWise. These providers act as intermediaries between the Ethereum blockchain and users.

In return for staking on these protocols, you get wrapped tokens like Lido’s stETH or Rocket Pool’s rETH. You may freely trade these tokens on exchanges, and they represent the tokens you deposit in Ethereum on a 1:1 basis.

3. Cosmos (ATOM) – Interoperability Meets Liquid Staking

Once again, you will not find native liquid staking in Cosmos (ATOM) as it exists in Cardano, however, the blockchain thrives on a vibrant ecosystem. Cosmos functions as a network of interconnected blockchains, allowing each to develop its own blend of liquid staking.

The biggest Cosmos design principle is interoperability. Hence, you may expect blockchains within the ecosystem to communicate and interact seamlessly. This has fostered the creation of liquid staking solutions that work across Cosmos chains.

StaFi is an example, offering liquid staking for PoS tokens, including ATOM. With StaFi, you deposit ATOM and receive rATOM as a reward for staking. The Evmos blockchain is also built on Cosmos and allows you to stake your ATOM for the wrapped evATOM token.

4. Solana (SOL) – Multiple Decentralized Liquid Staking Providers

Solana is one of the more popular blockchains, sitting fifth in the market crypto rating by market cap when this article was written. However, just like Ethereum, it does not natively offer liquid staking. It, however, has a booming ecosystem that fosters a robust environment for decentralized liquid staking solutions.

Solana relies on external providers to facilitate liquid staking. One of the major players in this space is Lido Finance. However, Marinade Finance, Staking Rewards, and JPool are also alternatives.

Staking on Solana seems like a great option because of the high transaction speed and scalability; however, the blockchain has been known to have the occasional network shutdowns.

Potential Liquid Staking Risks and Considerations

While liquid staking seems to be a great incentive for users to participate in blockchain validation, it may pose its unique risks. At the top of this are smart contract vulnerabilities. Since the process relies heavily on smart contracts for staked asset management and reward distribution, bugs within the smart contracts may lead to loss of funds.

You should also be cautious of counterparty risk, especially when using liquid staking solutions that are not coded into the blockchain natively. This is particularly important since the the solvency and security practices of the solution become factors for consideration.

So far, Cardano’s liquid staking model is unique and in many ways mitigates some of the more common risks. It eliminates depositing assets into a custodian wallet managed by the protocol, allowing you retain custody of your ADA within your own wallets. Also because liquid staking is built into the cardano blockchain protocol, it eliminates dependance on external smart contracts, reducing the possibility of hacks and exploits.

The New Brave World of Liquid Staking

Yes, we may describe liquid staking as the new brave world. Liquid staking pools allow investors making the best profits while retaining liquidity. With its undeniable rewards, it’s important to know what potential risks it holds, no matter how insignificant.

We have explored some of the biggest blockchains that in one form or the other allow you have access to liquid staking, in the end, we only hope to help you make the most informed choice.

Do you already participate in liquid staking? What is your preferred blockchain?

1 Comment

  1. Interesting piece here, this made me have a better understanding on what liquidity staking is, and which of the projects actually supports liquidity staking.
    Thanks!

Leave a Response

Richard Omachona
Richard is a techie in providing fixes and solutions for computer issues of various kinds. Among his contemporaries, he is a preferred choice. His experiences are vast in Windows operating systems, and several other skills in programming such as Python, Web Frontend designing implementing at industry standards, best practices in HTML, CSS and JavaScript. and basics in Web Backend. He also loves traveling, gaming and music.