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Tuesday, November 29, 2022

Liquid Staking- Misconceptions That Has Held It Back

For those who are uninformed, liquid staking actually helps holders of staked assets to get the required liquidity in the form of a derivative token that can be used in DeFi. This would come at the same time when all the assets which are staked would start earning rewards. In fact, this is the best way to maximize one’s earning potential while experiencing the best of both worlds.

As has been mentioned repeatedly, Proof of stake has also started increasing in popularity. The protocols of POS do account for close to half of the total market cap of crypto- which is a total of $594 billion. This means that the opportunities would simply be increasing as Ethereum moves further to a PoS in the next few months.

Liquid Staking And Its Multiple Misconceptions

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Now, despite the apparent benefits available in liquid staking, there is still major confusion about how it really works. There have been some major misconceptions about it- which need to be debunked at the earliest. After all, that would be the best way to utilize this staking protocol for the blockchains that employ it. 

One of the major misconceptions about liquid staking is that only a single player will exist through which investors will be able to gain liquidity. While it may seem to be the case, it is still quite early in the space of staking, but in the future- it is expected that quite a few staking protocols will be coexisting at the same time. In fact, there might never be a cap on the number of liquid staking protocols that could exist at the same time. 

Another misconception that comes up enough is that liquid staking isn’t just another way of getting liquidity. Although liquid staking does help most of the proof of stake networks acquire some much-needed staked capital that would go a long way towards securing the network, it is not really limited to that. It is also a way of getting composability because one would be able to use their derivative in quite a few places.

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