Proof of stake blockchains have opened a new avenue of the investment into the cryupto market. Proof of stake blockchains allow you to stake the tokens and earn some either variable or the fixed tokens in return for the investment. Liquid staking has gained a lot of momentum since then and new protocols are coming into the market for liquid staking.
Recently one of the popular protocol called - Lido Finance has entered into the market. And this has made the decent investment option for the ethereum token stakers. The way lido finance has offered the returns there has been a lot of stakers who are making use of this marketplace with the liquid staking option.
Let's take a look at how the Lido Finance works.
What is liquid staking? How does Lido Finance works?
Staking works just like how we do deposits with the bank. You have say 1 ethereum and wish to stake it. When you do you earn the staked tokens in return and there is also annual percentage return. And that percentage also has the fixed and the variable rates based on the time of the token that you would get in the interest. So this is basically a liquid staking that has been out since the proof of stake model is out among the blockchain.
Lido Finance is one such protocol on the ethereum network. Where the protocol allows user friendly way to stake the ethereum. You stake say 1 Ethereum and you can get the 1 stETH in return for the staker. Staked tokens are kind of an asset that you would be holding. Another benefit of their staking is that you would not find the lockup issues that you would find with most commercial dApps in the same market. You can read about the Lido's approach to staking here.
What are some of the benefits and the issues with the Lido Finance?
Lido finance has a lot of benefits that make them idela for the staking. For example they have the independent auditors and they are also quality auditing the service. Lido is pretty simple to use and access for variety of the features within it's own ecosystem. There is no minimum staking amount like you find with other staking marketplaces. Staked economics also allows the compounding system as well. It has support for multiple networks and it kind of gives you much better option.
However just because these are some good points does not mean it's free from the issues. It has it's own issues like being in ethereum network they have high fees that would be something to tolerate as well. Staking also would be halting during the upgrades between the ethereum network updates. In that context the compounding is not possible with the ethereum network too. You can read more about the Lido in its documentation here.
What is the future of the liquid staking?
Ethereum is very much matured ecosystem where it has the features like tokens that would earn you the staking rewards. And also the amount of the rewards that we get largely depends on the market price. Another thing is that a lot of such crypto coins would be getting the govt manipulation treatment. Like more regulation means the customers would not be using DeFi and this would reduce the interest and the market price too which is kind of sad.
So the future maybe bright if the staking goes centralized as govt is inteded it to be but in near future we would be seeing how the future of the liquid staking. Other coins and the tokens on ethereum would continue to join into such marketplaces. And overall performance of the staking market would rise as the market matures. So a lot of interesting things we are about to witness in upcoming future of staking market.
Lido Finance is an interesting liquid staking marketplace that has gained some popularity over the years. Liquid staking would get more competitive over the years as the private and regulated market opens up in upcoming times.