Liquid staking emerges as a solution to the inherent limitations associated with traditional staking in blockchain networks.
Traditional staking involves locking up a cryptocurrency to support the network's operations, allowing stakers to earn profits.
However, this process renders the assets illiquid, meaning they cannot be exchanged or transferred for the duration of the staking period.
Liquid staking addresses this issue by lowering the minimum threshold needed to receive block rewards and offering tokenised representations of the staked assets.
This innovative approach allows participants to maintain the liquidity of their staked tokens.
It achieves this through the issuance of a stand-in token, which can be utilised within DeFi protocols to generate additional yield.
In essence, liquid staking provides a way for stakers to engage more flexibly with their assets, enabling them to earn from their staked cryptocurrencies without sacrificing liquidity.