DeFi has transformed the cryptocurrency market and made its way into the global economy. There are surplus ways to generate passive income. But most DeFi users find staking to be the most beneficial way to earn.
Contributing to the proof-of-stake blockchain can be done just like traditional betting. But, in addition to being limited by the bonding period, users receive a receipt of accumulated funds in the form of a liquid staking token or LST.
This LST can be used in other DeFi systems to generate additional reward and performance opportunities. This type of bet involves storing funds in DeFi escrow accounts. Users can still access the account that makes the protocol liquid.
In the traditional proof-of-stake protocol, liquid staking would be done by depositing the funds into the Defi escrow account which is executed by a smart contract. The platform issues equivalent tokenized versions of staked funds with returns of the same value.
Users can still earn rewards from staking funds, but in the case of liquid staking, these funds can be used for other purposes. LST can be transferred off the platform, stored elsewhere, traded and spent without affecting the base deposit. To gain access to the original holoding, the user must exchange the tokenized version of the same security.
Difference between betting and liquid betting
There is a difference between betting and liquid betting. There is a blackout period for betting. It can vary from days to months and the funds are not accessible. But, when staking, there is no lock-in period so that users can access funds and accounts at any time. Because there are no limits on access to funds, the rewards and market utility are greater.
Liquid bets have their opportunities. It gives users the opportunity to earn staking rewards without locking them. Users can earn additional rewards by increasing their performance chances by applying LST on various protocols such as lending pools and prediction markets. Additionally, users can withdraw their bet at any time.
Therefore, the benefits of liquid staking can be summarized as unlocked liquidity, increased returns through the application of many protocols, and investors using existing crypto assets in exchange for cryptocurrency-backed loans. This is done by locking up funds and receiving equivalent tokenized liquid versions of your assets.
To interact with the DeFi platform you need experience. The operation of liquid bets depends on smart contracts, but carries the risk of attacks. Therefore, there is a risk of being scammed. Due to unexpected market volatility, the price may drop and the price of the LST is not linked to the underlying asset they represent.
Summary
Liquid staking allows the user to access liquidity and also stake their tokens with ease. This means that users can contribute to the proof-of-stake blockchain. It provides benefits such as withdrawing the bet at any time, access to funds and no blocking restrictions.
