Liquid staking in the DeFi sector is doing really well. It’s gone up by a huge 292% to reach $20 billion, which is close to the highest it’s ever been.
In the world of cryptocurrencies, something called “liquid staking” has made an incredible comeback. While the overall cryptocurrency market wasn’t doing so great, liquid staking stood out. People put a lot of money into these liquid staking services, and it went up by a huge 292% to $20 billion. This is a big bounce back from a problem they had in June 2022.
Liquid Staking Thriving in the DeFi Sector
Liquid staking has become the most popular part of decentralized finance (DeFi), even more than lending. Some liquid staking services like Lido and Rocket Pool were doing really well in April last year, with over $21 billion in assets. But then, they went down because of problems with a stablecoin called TerraUSD and a big drop in the cryptocurrency market.
Now, even though the prices of big cryptocurrencies are not as high as they were in 2021 and 2022, liquid staking is making a strong comeback, according to Bloomberg.
Liquid staking became more popular after Ethereum, a big cryptocurrency, started using it as part of some updates last year. People who help Ethereum transactions by locking up their Ether tokens can now earn an extra 4% in coins every year. Other cryptocurrencies like Solana and Cardano have also started giving rewards for staking.
The number of people who do this kind of staking in Ethereum went up by almost 40% after some big improvements in April, says Steve Berryman from a staking service company called Attestant.
Staking normally involves complex software, hardware, and a lot of money. But liquid staking makes it easier. You can put in smaller amounts of money, and you get a version of your coins that you can still use for other things.
Assessing the Risks
Kunal Goel, who works as a researcher at Messari, says that these services are a bit like “government bonds” but on the blockchain. He means they are safer and haven’t had any big problems like hacks or attacks.
This renewed interest in liquid staking is happening at a time when governments are starting to watch cryptocurrencies more closely. In the United States, for example, regulators are looking at staking products offered by big cryptocurrency exchanges. Some of them, like Kraken and Bitstamp, have even stopped offering these services because of these concerns. Hong Kong and Singapore have also had similar worries.
Right now, Lido is the biggest DeFi service with $14 billion locked in it. The value of its own token has gone up by 60% this year, which is more than the 27% increase in a group of the 100 biggest cryptocurrencies.
More Projects Joining Liquid Staking
The Cosmos Hub, a part of the cryptocurrency world, is thinking about making some big changes to its software. They want to use something called the Liquid Staking Module (LSM) to make liquid staking safer for everyone on the Cosmos Hub.
HashKey Capital, which is a big crypto fund in Asia, recently wrote a report about something called Liquid Staking Derivatives (LSDs) in the DeFi market. They said that this part of the market is growing a lot.
The report also talks about how Distributed Validator Technology is making things better and how there could be more growth in the LSDfi sector. But, they also say that as more people start doing this kind of staking, the rewards might not be as high.
Important:Ā Please note that this article is only meant to provide information and should not be taken as legal, tax, investment, financial, or any other type of advice.
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