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Liquid Staking is a relatively new concept in cryptocurrency, but it’s quickly gaining popularity among crypto enthusiasts. In this article, we’ll introduce Liquid Staking, explain how it works, and explore some of its popular associated strategies.
The leading reason behind the popularity of traditional crypto staking is the financial benefits it offers. You can earn a return on your initial investment by locking your digital assets to verify proof of stake (PoS) blockchain transactions. On-chain staking of FUSE, for example, can reward token holders around 14% APY per year.
What is Liquid Staking?
Staking is a process many cryptocurrencies use, Including Fuse, to secure their network and validate transactions. In exchange for staking their coins, users can earn rewards. However, staked coins are typically locked up for a specific period, so users can’t easily sell or trade them until the staking period is over. Sometimes, hefty fines can be attached to unstaking your tokens early.
Liquid Staking, on the other hand, allows users to stake their coins while still retaining the ability to use them for other purposes. With Liquid Staking, users can receive staking rewards without locking up their coins. This opens up new possibilities for users who want to earn rewards on their staked coins while still having the flexibility to use them for other purposes.
How Does Liquid Staking Work?
Liquid Staking allows users to stake their coins on a third-party platform, which then issues a token representing the staked coins. These tokens can be traded or used in other ways without affecting the staking rewards that are earned.
For example, let’s say you have 100 FUSE that you want to stake. Instead of staking it directly, you could stake it on a platform that offers Liquid Staking services. The platform would issue a token, let’s call it sFUSE, representing your staked FUSE. You could then trade or use sFUSE without affecting your staking rewards. You would receive your original FUSE and any rewards earned at the end of the staking period.
Popular Strategies
Now that we’ve covered the basics of Liquid Staking let’s take a look at some of the popular strategies associated with it:
- Yield Farming: Yield farming involves staking coins to earn rewards, then reinvesting those rewards into other cryptocurrencies to earn even more rewards. With Liquid Staking, users can stake their coins and still participate in yield farming activities without waiting for the staking period to end.
- Leveraged Trading: Leveraged trading involves borrowing funds to increase your trading position. With Liquid Staking, users can borrow against their staked coins to increase their trading position without having to unstake their coins.
- Decentralized Finance (DeFi): DeFi platforms offer various financial services such as lending, borrowing, and trading. With Liquid Staking, users can stake their coins and still participate in these DeFi activities without waiting for the staking period to end.
Volt DeFi App
At Fuse, our mission is to make DeFi accessible to everyone, and that’s why we are excited to introduce liquid staking through sFuse, the Voltage Finance DEX, and the new VOLT app. This new token adds a layer of utility to staked Fuse tokens, revolutionizing the FUSE ecosystem.
This added utility layer increases the appeal of Fuse tokens and presents an easy-to-use and attractive yield opportunity for FUSE holders. Liquid staking will be exclusively available to those that secured a spot on the waiting list for the new VOLT app. Eventually, liquid staking will be available on Voltage DEX for advanced DeFi users.
In-summary
Liquid Staking is a new and innovative concept that expands the use case of standard crypto staking, allowing users to stake their coins while retaining the flexibility to use them for other purposes. Moreover, with its ability to enable new strategies in yield farming, leveraged trading, and DeFi participation, Liquid Staking is quickly gaining popularity among cryptocurrency enthusiasts.
If you want to earn rewards on your staked coins while still having the flexibility to use them for other purposes, Liquid Staking may be worth exploring.
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