What It Is With the transition to the Proof-of-Stake consensus mechanism, many blockchains are gearing up to introduce liquid staking to their protocols, effectively allowing locked-up crypto to flow back into the market. In the example of Ethereum 2.0, users (called validators) place a minimum of 32 ETH of stake into a deposit contract. However, as of right now, those funds cannot be transacted—locked away until Ethereum 2.0 introduces this functionality. Other blockchains like Solana have warmup/cooldown periods before transacting staked. So, what’s with the illiquidity? For many popular PoS networks, the lock-up feature serves as a safety mechanism, giving a network time to punish bad nodes. In the specific case of Ethereum, withdrawing stake funds is pending on the full transition to Ethereum 2.0. This means that users must depend on trust that their stake custody will return at a later date.
A Dip into Liquid Staking
A Dip into Liquid Staking
A Dip into Liquid Staking
What It Is With the transition to the Proof-of-Stake consensus mechanism, many blockchains are gearing up to introduce liquid staking to their protocols, effectively allowing locked-up crypto to flow back into the market. In the example of Ethereum 2.0, users (called validators) place a minimum of 32 ETH of stake into a deposit contract. However, as of right now, those funds cannot be transacted—locked away until Ethereum 2.0 introduces this functionality. Other blockchains like Solana have warmup/cooldown periods before transacting staked. So, what’s with the illiquidity? For many popular PoS networks, the lock-up feature serves as a safety mechanism, giving a network time to punish bad nodes. In the specific case of Ethereum, withdrawing stake funds is pending on the full transition to Ethereum 2.0. This means that users must depend on trust that their stake custody will return at a later date.