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Top 3 Liquid Staking Protocols You Need to Know in 2023
Learn about LIDO, Coinbase Wrapped Staked ETH, and Rocket Pool.
Proof of Stake blockchains, like Ethereum, rely upon staking for security and transaction validation.
Staking requires token-holders to lock up a certain amount of tokens in a wallet. The main problem with this is that you cannot access your staked assets during the staking period.
That's where Liquid Staking comes in.
Liquid Staking Protocols enable users to stake their tokens while maintaining liquidity. These protocols issue a token representing the staked assets, which can be traded, used as collateral, or utilized within other DeFi apps.
When a user stakes their tokens, they receive a staking derivative token. This is usually on a 1:1 basis.
This derivative token represents the user's staked assets and any potential staking rewards. The derivative token can be freely traded, providing users with the flexibility to access their funds without having to “unstake” their assets.
The top 3 Liquid Staking Protocols and their TVL (Total Value Locked) are:
Lido (TVL = $10.4 billion)
Coinbase Wrapped Staked ETH (TVL = $2 billion)
Rocket Pool (TVL = $1 billion)
Note: Figures are from DeFiLlama as on 23 March 2023 and may be rounded off.
Lido enables staking tokens from Ethereum, Polygon, and Solana.
Users can stake ETH, MATIC & SOL and get stETH, stMATIC & stSOL respectively, and earn yields, and lending & staking rewards.
LDO is an Ethereum-based Governance token for the Lido DAO.
Lido DAO governs multiple liquid staking protocols and LDO holders vote on key parameters such as fees and protocol upgrades.
2. Coinbase Wrapped Staked ETH
Coinbase Wrapped Staked ETH (cbETH) is a utility token representing ETH staked through Coinbase, one of the world's largest crypto exchanges.
Holders wrap their locked staked ETH and receive cbETH.
cbETH can be traded, moved on-chain & used in DeFi dapps. cbETH enables holders to earn passive income from staking without lock-in.
3. Rocket Pool
Rocket Pool is a decentralized Ethereum staking protocol.
Solo Ethereum stakers are required to lock 32 ETH to create a new validator. Rocket Pool nodes, on the other hand, need to deposit only 16 ETH per validator.
This is coupled with 16 ETH from the staking pool which stakers deposited in exchange for rETH to create a new ETH2 validator.