The Future of ETH Liquid Staking

JAN 09, 2023 • 15 Min Read

Joo Kian

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Introduction

Proof-of-stake (PoS) is a consensus mechanism used in blockchains to process transactions, create new blocks, and maintain the chain’s security. In PoS, tokens are staked in order to provide security for the network. In return for staking their tokens, users are compensated with block rewards from the network and fees paid by users. To stake tokens, users have to run validator nodes. Given the technicalities involved with this, validation is typically undertaken by professional node runners.

To increase accessibility to staking and liquidity, liquid staking protocols like Lido and Rocket Pool were developed. These protocols allow users to stake their tokens with validators in exchange for a portion of the interest yield earned. Additionally, these liquid staked tokens can be easily traded on decentralized exchanges, allowing users to convert them back to unstaked tokens (e.g., from stETH to ETH).

In this report, we ana

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