Liquid staking is a game-changer for the decentralized finance (DeFi) ecosystem. It allows users to stake their crypto assets and receive liquid tokens that can be used in other DeFi applications, such as lending, borrowing, trading, and more. This way, users can enjoy both the staking rewards and the liquidity of their assets, without sacrificing security or decentralization.
One of the most promising platforms that support liquid staking is BNB Chain, the blockchain network powered by Binance, the world’s largest cryptocurrency exchange. BNB Chain is fast, scalable, and interoperable, and it hosts a variety of DeFi projects that leverage the potential of liquid staking. In this article, we will explore how liquid staking works, why it is beneficial for DeFi users, and what are some of the exciting projects that are built on BNB Chain using liquid staking.
What is liquid staking and how does it work?
Liquid staking is a process that involves locking up a certain amount of crypto assets in a smart contract or a validator node, and receiving a corresponding amount of liquid tokens that represent the staked assets. For example, if a user stakes 100 BNB on BNB Chain, they will receive 100 stBNB, which are liquid tokens that can be freely transferred, traded, or used in other DeFi applications.
The liquid tokens are pegged to the value of the staked assets, and they also accrue staking rewards over time. The user can redeem their staked assets and the rewards at any time by burning the liquid tokens. Alternatively, they can sell or swap the liquid tokens for other crypto assets, without affecting the staking process.
The main advantage of liquid staking is that it enables users to access the liquidity and utility of their staked assets, while still earning passive income from staking. This way, users can maximize their returns and optimize their capital efficiency, without having to choose between staking and DeFi.
Why is liquid staking beneficial for DeFi users?
– Increased returns: Liquid staking allows users to earn both staking rewards and DeFi yields from their assets, resulting in higher returns than just staking or just DeFi. For example, a user can stake their BNB and receive stBNB, which they can then lend on a DeFi platform and earn interest, or use as collateral to borrow other assets and trade them on a decentralized exchange (DEX).
– Reduced risks: Liquid staking reduces the risks associated with staking, such as slashing penalties, validator downtime, or network attacks. Since the liquid tokens are issued by smart contracts or protocols, they are not affected by the performance or security of the validators or the network. Moreover, liquid staking allows users to diversify their portfolio and hedge against market volatility, by providing them with more options and flexibility to use their assets in different DeFi scenarios.
– Enhanced innovation: Liquid staking fosters innovation and growth in the DeFi ecosystem, by creating new opportunities and use cases for staked assets. For example, liquid staking can enable new types of derivatives, such as futures and options, that are based on the staking rewards or the liquid tokens. Liquid staking can also facilitate cross-chain interoperability, by allowing users to bridge their staked assets from one blockchain to another, and access the DeFi services on different networks.
What are some of the exciting projects on BNB Chain that use liquid staking?
– Helio: Helio is a decentralized borrowing protocol that lets users borrow the HAY stablecoin in exchange for depositing BNB or BUSD as collateral. Helio also stakes the underlying BNB collateral and distributes the staking rewards to the borrowers and the lenders, increasing their returns and incentivizing them to use the protocol. Helio is backed by Binance Labs, the venture arm of Binance, and it aims to become the largest CDP (collateralized debt position) on BNB Chain.
– StakeWise: StakeWise is a liquid staking platform that allows users to stake their BNB and receive SWISE tokens, which are liquid and yield-bearing tokens that can be used in other DeFi applications. StakeWise also offers a governance token, SWIPE, which gives users the right to vote on the protocol’s parameters and decisions. StakeWise is designed to be simple, secure, and transparent, and it claims to offer the highest staking rewards on BNB Chain.
– BNB48 Club: BNB48 Club is a community-driven platform that aims to promote the adoption and development of BNB and BNB Chain.BNB48 Club offers a range of services, including DEX, wallet, NFT marketplace, and more. The BNB48 Pool provides users with the opportunity to stake BNB and receive Koge tokens for participation within the ecosystem.
Liquid staking is a game-changer for the DeFi space, and BNB Chain is at the forefront of this innovation. By enabling users to stake their assets and receive liquid tokens, BNB Chain offers a unique value proposition that combines the best of both worlds: staking and DeFi. With the support of Binance Labs and the BNB community, BNB Chain is poised to become one of the most dominant and influential platforms in the DeFi industry.
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What is Liquid Staking & How Does It Work? – Moralis Academy
