Cardano has liquid staking directly as a feature of the protocol. In the case of many other PoS projects we can hear about liquid staking too, but it has different properties. What is liquid staking and how is Cardano different from other PoS projects?
TLDR
- Early PoS protocol designs included a lockup period during which users cannot transact with their coins. Coins are illiquid.
- Cardano has no lockup periods. ADA coins are liquid during staking.
- In the case of Cardano, we can talk about native liquid staking or protocol-based liquid staking.
- If the PoS protocol has a lockup period, liquid staking can be facilitated through third parties.
- In liquid staking based on a third party, the user receives tokens for coins that the third party will stake. Users can interact with multiple DeFi services earning multiple rewards from one pool of funds.
- Third-party-based liquid staking has many disadvantages for both protocol security and users.
- To achieve the maximum possible degree of decentralization, it is important to balance the economic interests of users with the needs of the protocol.
- The primary mission of PoS consensus is not to reward holders but to decentralize the network based on native coins. Entrusting the coins to a third party and being able to get a reward can be seen as cheating the protocol.
- Is multiple staking on Cardano possible?
This article was prepared by Cardanians with support from Cexplorer.
Read the article: Cardano has native liquid staking, other projects just pretend it | Cardano Explorer