Liquid staking is a decentralized finance (DeFi) protocol that allows traders to stake their digital assets on proof-of-stake (PoS) blockchains while maintaining liquidity. Instead of locking up crypto and losing access to it until the end of a lock-up period, as is done in traditional staking, users receive tokenized representations of their staked assets (called liquid staking tokens or LSTs).
LSTs are pegged 1:1 to the value of the staked tokens, and investors can deploy them on other DeFi protocols to generate additional staking rewards from yield farming. Aside from earning yields, liquid staking reduces opportunity costs for investors as they can use their staked assets to fulfil other purposes.
Before now, when investors staked their assets, they became illiquid until the lockup period was exhausted. Liquid staking was introduced to address the liquidity issue in blockchains utilizing the PoS consensus mechanism, allowing investors ..
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