Liquid staking is similar to regular staking, with an additional benefit of providing stakers with access to a liquid representation of their staked assets.
Staking is the process of delegating tokens that are used to validate transactions in blockchains that use the Proof-of-Stake consensus mechanism. Stakers are incentivized to delegate their tokens because this earns them rewards. With regular staking, staked assets are locked. So, stakers do not have access to their staked assets until they unstake their tokens. A huge drawback to this is that users are unable to leverage their staked assets to access the DeFi ecosystem. They would have to unstake their tokens instead, which not only incurs waiting periods, but also loses profits. Additionally, if stakers had liquidity over their staked tokens, they would be able to make added returns on those assets.
This is why liquid staking is attractive. Having access to staked tokens allows stakers to trade or lend that asset elsewhere to make extra returns and to interact with other opportunities in the DeFi-verse. Liquid staking has encouraged a lot more engagement with staking simply because of the wide range of advantages it provides users.
What happens when I liquid stake?
The Steakwallet app is the easiest way to get started with Liquid staking. Steakwallet chooses the largest players in DeFi for liquid staking solutions, which is essential for network security. For instance, users looking to liquid stake their ETH through Steakwallet will utilize the Lido staking contract, which returns users 1:1 representation of their staked ETH in the form of stETH. The Lido code is open-sourced, audited and covered by an extensive bug bounty program to minimize risks. It is one of the most used networks by stakers for liquid staking.
With your stETH, you can take ideas from our Explore screen to interact with recommended dApps and opportunities that can reward you with additional earnings!