Effects of Liquid Staking on Protocol Security — pSTAKE Finance
Looking at how the financial institution has grown, it is still clear that the banking sector is still lacking drastically in granting incentives to its users. Let's lay more focus on what the banking sector does, users save up money for maybe weeks, months, or even a year, all because they want to earn interest worthy to be called a passive income. The banks give the interest but it's even way lower than users would even have regret for not putting the money somewhere else to earn better yields.
The staking mechanism on the blockchain sector is what is being talked of now, recently, there’s been a lot of staking and farming pool on different blockchain networks, all aimed at providing better rewards in #APR & APY to all staked assets. Staking comes in here as a problem solver in giving its users enough dividends or rewards for all assets locked or delegated.
Liquid staking is an alternative to locking up a user’s stake: it allows for users to stake any amount of assets and to effectively unstake their assets without the requirement of transactions being enabled. Liquid staking has proven solutions in PoS staking rewards and also DeFi yields. Before we elaborate on liquid staking, we need to know what it means by PoS staking rewards and DeFi yields.
PoS staking rewards vs. DeFi yields
Both processes involve getting rewards by making use of assets.
The staking mechanism works in two ways, the Proof of Stake(PoS) involving staking rewards gotten from delegating assets on staking platforms, and the Proof-of-Work(PoW) involving users mining cryptocurrencies assets. Staking is a mechanism derived from the Proof of Stake consensus model, an alternative to the energy-fueled Proof-of-Work model where users mine cryptocurrencies while Yield farming also known as liquidity mining, on the other hand, refers to a way of earning rewarded assets in form of lending or borrowing crypto assets to DeFi protocols. Looking at the liquidity pool for #stkToken/ATOM on sushipool, liquidity providers can earn rewards by just providing liquidity. As assets are being provided in form of liquidity for a period of time, the user will earn fees on a daily basis for transactions performed on the said assets, so, the higher the number of assets being borrowed, the more the reward.
Unlocking liquidity through pSTAKE for dual rewards (PoS staking rewards + DeFi yields)
pSTAKE Finance being built as a product on the Persistence ecosystem is aimed at providing liquid staking solutions to its users. It is providing a better-tokenized staking position, better products, and DeFi compatibility.
So this is how liquid staking works on the pSTAKE Finance, PoS users provide the assets to be staked on the platform, currently, on pSTAKE, there’s only $ATOM & $XPRT being implemented. So the tokens are being wrapped and staked and staking rewards standing up as a representative token is being issued to staked assets and it is in form of #stkToken (stkATOM or stkXPRT) pegged at 1. Staked rewards — stkToken can also be provided as liquidity to earn more rewards as well.
Provide Liquidity for the stkXPRT-ETH pool on Sushi: https://sushi.com/
Liquid Staking having possessing capabilities and functionalities of PoS staking and DeFi yields can also have a positive impact on the protocol security of staked assets.
Increase in staking rewards or incentives: Users find it very hard putting trust in staking platforms cos of how insecure some may be. With liquid staking protocols, users can participate in stakings to earn rewards with the ability to unstake at any time. Larger holders can use liquid staking services to hedge their funds against ETH volatility; basically, it allows for all parties to stake without the requirement of maintaining complex staking infrastructure.
Trading Staked Tokens: Liquid staking provides better security in managing risk associated with rewards. This will give users access to trade-staked tokens without any intrusion on the network. Aside from trading, security is being made on a 100% to all users providing liquidity with staked rewards.
With liquidity being unlocked on pSTAKE on dual rewards from PoS rewards down to DeFi rewards, there would be a lot of recognition to pSTAKE Finance which would lead to a massive increase in adoption on staking cos of the maximum-security provided.
About pSTAKE Finance
Liquid staking protocol unlocking the liquidity of staked PoS assets — Bringing PoS assets to DeFi.
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