Chukwunelo Ebuka Alpha
5 min readNov 30, 2023

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Liquid Staking on Injective

Staking is the act of keeping the currency of a blockchain project in a wallet or staking platform in order to protect and maintain the network. A blockchain is an encrypted collection of data blocks, or records, connected together. It is a growing chain and so a new block has to be added to the growing chain to secure it. Perhaps you're wondering if that's it. Why would you want to safeguard a network that neither you nor your father own? Staking compensates users for doing this, but in order to comprehend the foundation of incentives, we must take a trip down memory lane and learn how blocks are added to an expanding chain.
There are two mechanisms: the proof-of-work and the proof-of-stake. We’d go through them and see where the staking process comes in. The first stop is the proof of work.

Proof of work
The proof of work approach served as the foundation for the creation of the first cryptocurrency, Bitcoin. Exactly how glucose is added to the developing starch chain, transactions inside the blockchain are created into blocks and joined along cryptographic lines into a blockchain. But the blocks don't line up to create a blockchain on their own. "Miners" are a group of users who perform this alignment. Miners compete against the clock and with themselves to solve a mathematical puzzle or hash, and the victor adds the next block to the expanding chain. The miners usually get rewarded for success and in this game, wits and speed are necessary. That brings us to the other mechanism.

Proof of stake
Same goal, but different methodology. Swiftness and wit are not necessary in the proof of stake procedure. There is absolutely no for them. To add the next block to the expanding chain under this technique, users must lock their stake and wait to be chosen by the protocol. This would be illustrated with an example. Let's examine two friends, Daniel and Alex. On the staking platform, Daniel staked three thousand coins, and Alex staked three hundred. Daniel would have ten times the opportunity to verify the next block and ten times the rewards that Alex would because his stake is ten times larger, according to this and the staking principles.
Unlike the proof of work, there is no need for speed or wits. All you have to do is accumulate and stake to earn rewards.

Staking
Staking is here to stay, thus the focus now is on increasing its profitability and rewards. There is a record amount of user awareness regarding staking incentives, and many people just don’t keep their tokens in their wallets. They make good use of them. To get paid, they stake them. See stakingrewards.com’s data for a better understanding of this. They made it very evident that we had almost $142 billion stowed away in assets, with an average annual percentage rate of 5.9%. You’re probably grabbing for your calculators now. It may be beyond the range of the calculator, so don’t bother.
Now let’s compare it to the total value locked (TVL) in the DeFi ecosystem which is about $120 billion combined and then you see how huge staking his. Rewards upon rewards. Stakers must be living their best lives whilst helping to secure these proof of stake networks but don’t take your eyes off the next word, “locked”. This means that when you stake your coins, they are locked there and you can’t use them for other purposes. That’s where liquid staking comes in.

Liquid Staking
With liquid staking, you’re talking about unlocking the liquidity of your staked assets. What does this mean and how is it done? In fact, it refers to the ability to make use of your locked assets for different goals during their lockup. Your locked assets are available for use, but how can you do that? incredibly simple. You receive a representative token (for the sake of this, we’d call it hToken) by using a liquid staking platform to stake your PoS token. You can perform DeFi actions (trade, borrow, and lend) with the same assets and receive incentives for staking with this hToken. Things are beginning to take on an intriguing quality. How does the magic of the hToken happen? Easy peasy!!!
Upon obtaining a PoS token via a liquid staking platform, you will receive an equivalent quantity of this hToken (while keeping your initial assets staked). Similar to a receipt proving that you have staked on the platform, the hToken serves more purposes than that. It is a duplicate or a stand-in for the assets that are staked. Consider this instance. On the liquid staking platform, you stake INJ. After locking your INJ for staking, the platform would provide you hINJ. In terms of both quality and quantity, this hINJ is equal to your staked INJ. You can push for greater incentives in the DeFi ecosystem through trading, borrowing, lending, and even farming using this hINJ in addition to redeeming your staked assets. That’s the liquidity of your locked assets, unlocked. This is one great feature that would interest all stakers. Instead of earning just one way, you can use your staked assets to earn more efficiently.
"How good is the hToken and what actual features does it have?" might be on your mind. To begin with, you can exchange your staked assets while they are still being staked using your hToken.
It is not necessary to wait for the unlocking period to end in order to utilize the hToken. Your assets are still locked, so you can take advantage of any opportunity that presents itself inside the DeFi ecosystem without worrying about price changes. Second, you can quickly redeem your staked assets using the hToken.
Recall that it functions similarly to a receipt. Along with your assets and, of course, the staking incentives that you must have accumulated throughout the staking time, you bring back your receipt. The liquid staking platform protects the system’s security through the use of hTokens. In conclusion, the hToken functions as a contract that facilitates the user’s connection to the blockchain. To protect the interests of users, you have to possess a certain hToken in order to redeem the staked assets that were used to produce it.
Liquid Staking on Injective
It’s fair to say that we have waited long enough to see liquid staking in the Injective ecosystem. Everyone wants to leverage on the low fees, high speeds and high throughput on the Injective blockchain. So far, we’d be having two liquid staking platforms on Injective. The first is Hydro Protocol and Gryphon. Hopefully we get there enjoy the beauty of liquid staking on Injective.
Contact
Injective
Twitter: https://x.com/Injective_
Website: https://injective.com

Gryphon
Twitter: https://x.com/Gryphon_fi
Website: https://gryphon.finance/

Hydro Protocol
Twitter: https://x.com/hydro_fi
Website: https://hydroprotocol.finance/

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