The Problem with Traditional Staking before Liquid Staking(LSD) emerged, Staking ETH to secure the network was a painful trade off. You had to Lock your ETH. That capital became dead weight, untradeable, unusable as collateral. You earned a safe yield 3 to 4% but missed every other opportunity in the market.
๐ธ Liquid Staking solves this with a simple yet genius metaphor:
Check the Coat (Staking) ๐ You bring your expensive coat (ETH) to the cloakroom. You hand it to the attendant.
Get the Ticket (Minting LST) ๐ The attendant hands you back a ticket or receipt (stETH Token).
This ticket represents ownership of the coat. Whoever holds the ticket can claim the coat. In the DeFi world, this ticket (stETH) has liquid value equivalent to the real coat. You can sell the ticket, use it as collateral for a loan, or rent it out.
Retrieve the Coat ๐ When you want your ETH back, you burn or return the stETH ticket to the protocol and receive your original ETH + accumulated interest.
๐ธ The reason Liquid Staking becomes the foundation of DeFi is the Double Benefit
You still earn Ethereum Staking yield (3 to 4% APY) from the underlying ETH.
You take the stETH token and deposit it into DeFi protocols to earn extra Farming yield ( 5 to 10% APY).
๐ As a result your capital works in two places simultaneously.
๐ธ Besides the dual benefits, Liquid Staking also brings the Risk of Peg Loss
The ticket (stETH) usually trades 1:1 with ETH. But during market panic, people mass dump these tickets.
The stETH price can drop below ETH. If you panic sell, you realize a loss. But if you trust the coat in the vault is safe, you can buy discounted stETH and wait to redeem it for ETH to profit (Arbitrage).
๐น In the modern DeFi era, holding naked Native ETH in a wallet is a waste of resources. Liquid Staking turns stored assets into dynamic capital.
Are you letting your assets hibernate in a safe, or have you turned them into money printing tickets?
News is for reference, not investment advice. Please read carefully before making a decision.
