Proof-of-stake (PoS) blockchains are waiting for you to stake your crypto. However, the low participation of bets: only 24% of the total market capitalization of staking platforms are locked into staking, meaning that crypto enthusiasts have yet to realize its benefits.

While PoS blockchains are improving the way the crypto ecosystem works, liquid staking is what will ultimately increase adoption. Liquid staking offers the ability to not only stake cryptocurrencies for validation rewards, but also allows owners to continue using their locked assets for investment and performance in other activities. Liquid staking also solves some of the biggest questions crypto owners have to stake.

If you are thinking of staking or are frustrated by blackout periods and looking for a solution, here are three benefits that liquid staking brings to the world of cryptocurrencies.

What is Liquid Stakes?

Staking innovation is transforming the functionality of the blockchain. As an Alternative to the High Power Consumption and Highly Competitive Nature of Proof-of-Work (PoW) Blockchains, PoS Blockchains Enable Better Energy Efficiency: An Estimate 99.95% reduction in energy use, as well as more flexibility in the hardware used and faster transactions. Instead of competing against other miners, crypto owners simply stake a portion of their crypto for a chance to be chosen as a validator and win associated prizes. As blockchains move to PoS, staking has lowered the barriers to entry for many cryptocurrency enthusiasts.

But gambling hasn’t completely removed the barriers. One of the main reasons why cryptocurrency holders are reluctant to gamble is because of the lock-up period. According to our most recent report, “The state of the bets”, many of those who had not yet bet or who would not bet again in the future pointed out the same hesitation: they do not want their assets to be locked in staking, not when those assets could be used elsewhere.

How do you get crypto owners on board while allowing them to continue using their assets? Liquid Staking has the solution by providing those who stake their crypto with a derivative token that they can use in other yield activities, such as DeFi. It’s not just a way to have the best of both worlds, it’s innovation that could ultimately tip staking adoption in general.

Three benefits of liquid staking

Liquid staking has many benefits as it solves the biggest concern that crypto enthusiasts have when participating in staking: not being able to use their assets during the lock-up period. However, that is not the only benefit it provides. Here are three ways that liquid staking is improving the crypto ecosystem as a whole.

Benefit 1: Enables performance stacking

One of the benefits of liquid betting is that it allows for accumulating returns, or the ability to earn returns while also earning rewards for gambling. While this is still available in DeFi, the systemic risk of yield accumulation in DeFi is a major concern. If a base layer protocol fails, the entire stack can crash, resulting in huge losses. However, in liquid staking, the base return comes from the PoS network itself. This means that even while accumulating their returns, if any DeFi project fails, users can still rely on the base return coming from PoS networks. The probability of a reliable layer 1 PoS failing is much lower than that of a DeFi project going bankrupt due to lack of liquidity.

In fact, the higher the number of PoS participants, the lower the chances of the network failing. Thus, liquid staking not only helps in PoS security, but also helps users earn reliable returns from the network itself.

Benefit 2: Ease of use

Unless they are going through a trade, the opt-in process is a bit complicated for the average user. But even if users were to bet through an exchange, the exchange itself will have a considerable amount of capital, and stake, in the network, leading to the centralization of stake. This also creates additional risk for the participant because if the exchange faces an attack, all capital is at risk.

The other way is to bet independently. However, the main problem with betting independently is the amount of time and effort required to do so. There is also minimal technical knowledge required to understand validators and select those with the highest uptime and no clipping history, among other things the user needs to research and understand.

With liquid staking, your protocol has various parameters with which you select validators. Also, because it wants to retain the liquidity that users provide, it is up to the protocol to select reliable validators that do not have a history of outages and have the highest uptime. This makes the user engagement journey extremely simple.

Benefit 3: Network Security

In a PoS network, the ability to validate transactions on the blockchain comes from the amount of capital that is available in the validators wallet, the amount they intend to stake, and the duration for which that capital is held. Therefore, the strength of the PoS network is directly proportional to the number of validators and the amount of capital that they have staked within the network. By removing limitations around participation, such as blackout periods, more users can be incentivized to stake their capital. As the number of validators in the network increases, the amount of capital invested increases, and the network becomes even stronger as the capital invested increases.

Making Liquid Stake Accessible

Liquid staking not only provides a convenient way for crypto owners to continue using their assets while they are locked up. Liquid staking offers the possibility of obtaining more returns through a simpler method than conventional staking. Furthermore, by giving users an easier option through which to bet, it not only increases adoption, but also helps strengthen blockchain networks in general. Go ahead and start betting today – the growth of the crypto industry depends on it.

Posted in: Guest Post, Stakeout

Guest Post by Mohak Agarwal of ClayStack

ClayStack is a decentralized liquid staking protocol that unlocks the liquidity of staked assets on Proof-of-Stake (PoS) networks. Users can deposit tokens into ClayStack smart contracts, which issue fully backed and fungible tokens. These tokens increase in value as they receive participation rewards from the network.

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This post Liquid Staking Benefits The Crypto Ecosystem At Large – Here Are 3 Reasons Why

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