As the cryptocurrency market continues to grow and evolve, more institutions and corporations are becoming interested in participating in the space. One of the newer and more innovative ways that these entities can get involved is through liquid staking. In this guide, we’ll explore what liquid staking is, its benefits for institutions and corporations, and how they can get involved.
What is Liquid Staking?
Staking is the process of holding a certain amount of cryptocurrency in a wallet to support the network and validate transactions. In return for staking, users receive rewards in the form of more cryptocurrency.
Liquid staking takes this concept a step further by allowing users to stake their tokens while still being able to use them for other purposes. This is achieved by creating a synthetic version of the staked token that can be traded on exchanges or used for other purposes. Essentially, users are able to stake their tokens and receive rewards while still having full liquidity and control over their assets.
Advantages of Liquid Staking
Enhanced Liquidity
One of the primary benefits of liquid staking is enhanced liquidity. Traditionally, staking required investors to lock up their funds for a specific period. This often resulted in reduced liquidity and made it difficult for investors to exit their positions quickly. However, liquid staking eliminates this problem by enabling investors to stake their tokens while retaining full control of their holdings. This means that investors can trade and transfer their holdings as they wish, without having to wait for the staking period to end. As a result, liquid staking offers increased liquidity, which is particularly important for institutional investors and corporations that need to manage their cash flows efficiently.
Lower Risk
Liquid staking also offers lower risk compared to traditional staking. In traditional staking, investors are exposed to the risk of losing their staked tokens due to network issues, hacks, or other security breaches. However, liquid staking platforms use advanced security measures and multi-signature wallets to ensure that investors’ staked tokens are safe and secure. Moreover, liquid staking platforms usually have insurance policies in place to protect investors’ funds in case of any unforeseen events. This means that investors can enjoy the benefits of staking without having to worry about the associated risks.
Higher Returns
Another significant benefit of liquid staking is higher returns. In traditional staking, investors can earn rewards by staking their tokens, but the rewards are usually fixed and often depend on the network’s performance. However, liquid staking platforms often offer higher returns compared to traditional staking, as they can leverage the staked tokens to generate additional revenue. For example, liquid staking platforms can lend out staked tokens to other investors and earn interest on the loans, which can then be shared with the original stakers. This means that investors can earn higher rewards while still maintaining full control of their holdings.
Diversification
Liquid staking also offers diversification benefits. In traditional staking, investors are often limited to staking a particular cryptocurrency or token. However, liquid staking platforms usually support multiple cryptocurrencies and tokens, enabling investors to diversify their holdings easily. This means that investors can spread their risk across multiple cryptocurrencies, reducing their exposure to any single asset. Moreover, liquid staking platforms often offer users the ability to stake multiple cryptocurrencies at the same time, enabling them to earn rewards from multiple sources simultaneously.
Easy Integration
Finally, liquid staking offers easy integration with existing financial systems. This means that institutional investors and corporations can easily incorporate liquid staking into their existing investment strategies and workflows. Moreover, liquid staking platforms often offer APIs and other integration tools that make it easy for investors to interact with the platform and automate their staking activities. This enables investors to streamline their staking activities and reduce the overheads associated with managing their staking portfolios.
Getting Involved in Liquid Staking
Now that we’ve explored the benefits of liquid staking for institutions and corporations, let’s take a look at how they can get involved.
Choose a Liquid Staking Platform
The first step is to choose a liquid staking platform that is reputable and secure. There are several options available, including Ankr, Terra, and Stafi. Each platform has its own unique features and benefits, so it’s important to do your research and choose the one that best meets your needs.
Stake Your Tokens
Once you’ve chosen a platform, the next step is to stake your tokens. This typically involves transferring your tokens to the platform’s staking address and following the instructions provided by the platform. Once your tokens are staked, you’ll start earning rewards.
Monitor Your Rewards
It’s important to monitor your rewards and ensure that they are being distributed correctly. Most platforms provide a dashboard where you can.
