The popularity of liquid staking is growing fast. The topic has seen somewhat of a resurgence in light of Ethereum’s Shapella upgrade. The long-awaited ETH liquidity benefits liquid staking providers, with users now able to leverage underlying staked ETH. But which platforms are safe and secure choices, and which offer the highest yields? If you’re keen you participate in liquid staking, here are the top seven high-yield platforms with the BeInCrypto seal of approval.
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What is liquid staking?
Simply put, liquid staking is a way to stake a cryptocurrency by creating an equivalent token that you do not have to “lock up.” They are sort of like futures or options contracts, without deadlines.
In proof of stake (PoS) blockchains, users stake their coins by locking them in a smart contract. Subsequently, the protocol chooses who will validate blocks based on who has staked their coins.
In previous years, many blockchain protocols did not allow you to move these coins or tokens while they were staked. They are effectually locked in the protocol. The advent of liquid staking platforms created a way to hold an equivalent of the staked crypto, which means that your funds no longer have to sit idle.
7 best liquid staking platforms
Lido Finance
Lido Finance is a liquid staking platform. It relieves users of the burden of running their own nodes. However, users can run their own nodes as well. Nodes operators are added to the protocol via the DAO.
Rocketpool
Rocketpool is an Ethereum based staking platform. It allows users to stake with less than 32 ETH. This allows users to run nodes themselves, what Lido calls “Minipools.”
Users do not have to stake with Rocketpool directly. As long as you hold rETH, you are staking. To continue, you only need 8 or 16 ETH to create a Minipool.
7.08%
- Decentralized
- Minipools
- Has a DAO
- Smart contract risk
Benqi
Benqi is built on the Avalanche blockchain. It is a liquid staking platform, but also allows you to supply, borrow, and earn crypto. It is an algorithmic liquidity market.
Stakeholders can deploy a fully operational node and begin validating subnets with as little as 25 AVAX and 197.5 AVAX in QI collateral, thanks to BENQI Ignite. This enables users to earn P-Chain validating rewards without running a full node or locking up AVAX on a validating node.
Up to 7.2%
- Decentralized
- Borrowing and lending
- Open-source
- Smart contract risk
Marinade Finance
Marinade Finance is a Solana-based non-custodial liquid staking protocol. Marinade allows you to stake your SOL tokens using automated staking strategies and receive tokens (mSOL). You can then use these tokens in DApps.
In addition to Marinade Finance’s staking platform, it also offers NFTs. Marinade NFTs allow holders to gain access to MarinadeDAO and exclusive channels, as well as participate in DAO governance. MNDE is the governance token, and it can be obtained from any of the Solana decentralized exchanges.
6.64%
- Non-custodial
- NFTs
- Multi-signature
- Smart contract risk
Parallel DeFi Super App
Parallel DeFi Super App is a borrowing and lending market. Users can also stake and receive sDOT or sKSM. You can then take the LSD tokens and use them in the Money Market Protocol on the Parallel DApp.
Yields are variable, and can be as high as up to 20%
- Multiple DeFi services
- High yields
- Counterparty risk
- Smart contract risk
Stakewise
Leading node operators built and run StakeWise Pool, a non-custodial network of validators, on behalf of stakers using ETH deposited into the Pool. StakeWise utilizes institutional-grade infrastructure along with special tokenomics to give its users the highest staking yields possible.
Deposits and rewards received by those staking in the Pool are tokenized by StakeWise. It creates sETH2 (staking ETH) and rETH2 (reward ETH), which are 1:1 representations of users’ deposits and rewards. You will receive rETH2 to your address as a reward for staking as long as you hold the sETH2 that represents your deposit. Stakewise has a DAO, and SWISE is its governance token.
4.23%
- Pooled staking
- Multiple protocol native tokens to speculate on
- Counterparty risk
- High fees
StaFi
Stafi is a one-stop shop for staking services. The platforms exists on multiple blockchains including Cosmos (its native chain), Ethereum, BNB, Kusama, Polkadot, Solana, and Polygon.
The foundation of StaFi’s entire ecosystem is rTokens (such as rETH), which make liquid staking possible. Stake your tokens to get rTokens in return. The app also offers a DEX, pools for liquidity mining, and a bridge.
-ATOM: 23.17%
-KSM: 16.63%
-DOT: 17.23%
-SOL: 6.11%
-ETH 5.50%
-MATIC: 4.00%
-BNB 3.83%
- Audited by Peckshield
- Multichain support
- Counterparty risk
- Smart contract risk
What are the advantages of liquid staking?
The most obvious advantage of liquid staking is that it offers a way for stakers to use their tokens while earning staking rewards. Some blockchains have un-bonding periods. Validators may have to wait up to a month before they can withdraw their staked crypto, depending on the protocol.
With liquid staking, you can keep your crypto staked. Instead of going through a lengthy un-bonding period, you can take your LSD and use it how you please.
Another advantage of liquid staking is the ability to arbitrage. Arbitrage is the simultaneous purchase and sale of cryptocurrencies in different markets or derivative forms in order to profit from price differences for the same asset.
For example, the par value of ETH is $2,000. Let’s say that there is an LSD equivalent of ETH called sETH (i.e., staked ETH). sETH trades for $1,800 on a liquid staking protocol. You can trade one sETH for one ETH and make a $200 profit.
Let’s go even further. Holding sETH allows you to claim the rewards associated with staking ETH on the Ethereum blockchain. Instead of staking directly, you can purchase an LSD for the opportunity to claim staking rewards (typically in the form of more LSD).
Perhaps the most interesting advantage of liquid staking is the ability to earn yield through DeFi strategies. You can take your LSD and lend or stake it to earn a yield on other platforms.
In summary, the advantages of liquid staking are:
- Arbitrage
- Yield farming
- Earn staking rewards
- “Unlock” your crypto
What are the disadvantages of liquid staking?
While liquid staking platforms may come off as a panacea, they do have some risks. The largest one is counterparty risk. Instead of running a node yourself, you stake your crypto with a liquid staking platform.
In turn, they run the nodes for you in your stead. Therefore, you must rely on the platform to have near-perfect uptime, avoid attestation penalties, and avoid slashings altogether.
In the event that the platform does not perform, you could potentially lose your stake. This leads to the next point. You must rely on the platform to payout earnings.
Are LSD platforms the future?
Liquid staking platforms provide a unique niche in the marketplace. They function similarly to traditional derivatives and allow holders to speculate and gain exposure to the underlying asset they are derived from.
However, the practice is young and may present a contagion risk. Many platforms are springing up, offering LSD, accepting them as collateral, and borrowing and lending them.
If the underlying asset collapses, the LSD tokens collapse. Imagine what happens when these types of tokens are used to prop up the price of other assets. On a more positive note, that risk is reduced as long as you are simply staking.
Frequently asked questions
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