LIQUID STAKING: THE FUTURE OF POS — A case for StaFi Protocol
One would lose count of all the places where they’ve come across liquid staking recently because it’s basically on everyone’s lips. Platform after platform after platform, bringing different staking programs where users can earn high rewards. To better understand this trend, it’s of importance to go through what staking and why people are now trying to look into liquid staking. How different is liquid staking from normal staking and what does it mean for the future of the proof of stake consensus.
Take a journey down memory lane to remember the first time you got to hear about staking? What moved you to stake your assets? Love for the project or for the daily rewards you felt you’d be receiving? Whichever way it is, let’s get to understand staking and liquid staking and the role it plays in the future of POS.
Staking is basically holding the coins of a blockchain platform in a crypto wallet or staking platform. This is to support the network of that project and provide the necessary security. First, we would understand the Blockchain technology. Blockchain is a chain of data (records) called blocks that are linked together by cryptography (code). It is a growing chain and new blocks have to be added to the growing chain in order to secure it. What’s the basis of this? How do you add blocks to a growing chain? We will talk about it in the coming sections.
Since we are talking about staking, we would be laying emphasis on the consensus mechanism that directly affects staking. This is the Proof-of-stake consensus mechanism.
Proof of Stake
With the Proof-of-stake, the aim is to add a block to the growing chain as is with other mechanisms. With the Proof-of-stake, however, users would have to lock their stake and stand a chance to be picked by the protocol as the user to add the next block to the growing chain. The more you stake, the more rewards you get for helping to secure the network. Isn’t that great? If that’s the case, why should we be looking for liquid staking? Let’s get to that.
The crypto space is filled with talk of liquid staking because users are trying to maximize the abilities of their staked assets so as to earn more rewards. Staking locks your assets to help maintain the running of the protocol you’re staking for. Your assets would be locked and all you can do is to claim rewards. Liquid staking allows you to make use of their staked assets even if they’re still locked. When you stake on a liquid staking platform, the platform gives you representatives of your staked assets. The staked representatives are pegged 1:1 with the assets you have staked. With these representatives, you can seek further yield in the DeFi space.
The future of Proof of Stake
You might want to ask if there’s a future for the Proof-of-stake consensus. Will it still be useful in the years to come? Is there a role that liquid staking can play in ensuring that the Proof-of-stake doesn’t lose its relevance within the blockchain space. It’s normal for users to have a desire to secure their favorite blockchain projects but a major driving force is the amount of rewards that they tend to get. When the rewards are bigger, users feel more incentivized to increase their stake. Users prefer the Proof-of-stake consensus to the Proof-of-Work, the rewards gotten from the Proof-of-stake protocols are not as good as what’s obtainable with DeFi yields. With this, users would want to take their assets to DeFi protocols for more yield. This would negatively affect the corresponding PoS platform as the network would becomes insecure. With Liquid staking, we would have a solution to that problem. When a user stakes, he receives staked representatives of their staked assets. These representatives can be taken into the DeFi space for high rewards from massive APYs. It’s a win-win situation for users and the projects being staked upon. The PoS protocol retains possession of the assets of the stakers for protocol security while the users earn rewards in two places at the same time.
A case for StaFi Protocol
StaFi Protocol is a top platform that is pushing the narrative for liquid staking in the Blockchain space. For now, you can stake $BNB, $ETH, $SOL, $DOT, $KSM, $SOL and $MATIC on the StaFi platform. When you stake your $BNB on StaFi Protocol,, you will receive the replica token, rBNB. This staked replica token is also called an rToken. It has the same value as the staked asset and can be traded on some DeFi platforms. The rBNB has a 1:1 value ratio as the $BNB. With the rBNB, you can get your staked $BNB back. A user can earn normal staking rewards by just staking your $BNB. The user can, then, earn further rewards by using their rBNB for certain processes within the DeFi space. The image below shows you some of the PoS staking programs and how staking on StaFi Protocol compares to other staking programs.
The ability to earn more from your staked assets would allow users remain committed to leaving their assets staked. This implies that there are many benefits for this and so, the future of PoS is bright and StaFi Protocol is playing a lead role is ensuring it stays that way
StaFi website: https://stafi.io
StaFi Twitter: https://twitter.com/stafi_protocol