With the ever-expanding cryptocurrency space, emerging terms are constantly appearing in this industry. One of these new terms is the concept of liquid staking, which refers to a new method that allows earning money by depositing digital currencies.
In this article we will check out together:
- What is liquid staking?
- Trading and investing in digital currency with Liquid Staking
- Buying digital currency and various investment methods with Liquid Staking
- Platforms to make money with liquid staking
What is liquid staking?
The process by which users, after buying digital currency, lock it in a network of validators is called liquid staking. To participate in the verification and validation of transactions and get rewards.
Earning passive income through staking digital currencies is one of the most effective methods that allows you to get the most profit by placing and depositing assets.
In general, Liquid Staking is considered as an innovative approach to exploit locked assets.
Trading and investing in digital currency with Liquid Staking
The staking process allows the cryptocurrency community to participate in verifying and validating transactions in a network. Validators or people participating in the staking process receive a reward as compensation for their services.
This type of income that occurs without selling assets is known as “passive income” and may be earned by depositing digital assets.
At a glance, staking is quite different from depositing in a high-yield savings account. In this account, banks lend cash and use it, and as a result, you receive interest on your account balance.
In contrast, staking performs transactions in a completely different way. This process does not assign transactions to individuals and instead uses services available on the blockchain network, often through third-party staking services.
Staking is only possible for cryptocurrencies with Proof of Stake (POS) consensus algorithm. This means that digital currency Bitcoin or Dogecoin, which use the Proof of Work (POW) consensus algorithm, cannot be staked.
Among the various protocols that provide the possibility of liquid staking, we can mention Ethereum, Solana, Polkadot, Kazama and Polygon (MATIC).
Buying digital currency and various investment methods with Liquid Staking
Now that you are familiar with how liquid staking works after buying digital currency, it is necessary to mention the types of this method.
Liquid Staking can be divided into four main categories: Native, Non-Native, Synthetic and Custodial.
Native Liquid Staking
In this category, the tokenization of deposits is implemented as part of the main protocol and at the network core level.
Non-Native Liquid Staking
In this method, a separate protocol performs the tokenization of deposits without the need for trust confirmation. This method is also commonly known as the non-custodial method and creates a wide space for design.
Synthetic Liquid Staking
In this category, the use of smart contracts to maintain deposited assets and control accounts from different blockchains using cooperation protocols and cryptographic techniques such as multiparty computing (MPC) security is used.
Custody Cash Deposit
Refers to an approach where a centralized entity issues escrow tokens in exchange for staking by controlling and monitoring the wallets of staking participants and accessing their wallets.
Platforms to make money with liquid staking
By buying digital currency, you can lock your cryptocurrencies with a small capital in the form of staking and earn money from them.
This method is known as a convenient and easy choice for the general public. Because in this method, you don’t need complex technical knowledge about blockchain, accurate digital currency price analysis or high-speed and uninterrupted internet, and you don’t need to have a lot of capital in digital currencies.
With the help of exchanges, staking pools or smart contracts providing indirect staking services, you can easily participate in this method.
To participate in this method, you leave part of your capital to a staking pool so that your assets become a validator node.
As a reward, the counterparty pays you an amount of interest. Also, sometimes pools or validators charge you some fees for the conditions they have provided for you.
In addition to this method, there are other similar methods in decentralized finance (DeFi) platforms that allow you to earn profits with little capital.
In the following, we mention the platforms for earning money with Liquid Staking:
Lido platform
The Lido platform has created a one-to-one connection for staked Ethereum by issuing “stETH” tokens, also known as Staked ETH. This Ethereum digital currency platform locks users into the Beacon Chain, a platform for validating and securing transactions on the Ethereum blockchain.
As a result, it collects the rewards from these operations and distributes them among the number of users who put their Ethereum on the platform.
StakeWise platform
The “StakeWise” platform is a powerful tool to earn money through liquid staking on the Ethereum network. StakeWise allows users to put their ETH into a shared pool and mix with other users.
As a result, more ETH is pooled and more validators are added to the network. This increases the probability of receiving rewards by users.
One of the highlights of StickWise is that it uses ETH2 as a new standard. In this method, deposits are converted to sETH2 one by one, and staking rewards are paid using the rETH2 token.
These conversions and payments are done automatically without the need for user interaction, which makes the user experience more convenient.
Frax Finance platform
The Frax Finance platform or “Frax Finance” is a decentralized finance (DeFi) protocol that allows the use of liquid staking to monetize digital assets. This protocol is based on the Ethereum network and uses smart contract technology to make the staking process automatic and transparent.
One of the main assets that are staked in Frax Finance is an asset called FRAX. FRAX is a cryptocurrency based on the Ethereum network that acts as a stablecoin and aims to maintain the stability of the digital currency price. In the Frax Finance scheme, FRAX is used as a mineable asset to earn money and gain value.
