Liquid Staking Becomes Second-Largest DeFi Sector, Analytics Show
Liquid staking has overtaken DeFi lending to become the second-largest crypto sector in decentralized finance (DeFi) based on Total Value Locked (TVL) analytics as of February 28, 2023, reported on DeFiLlama. The upcoming Ethereum Shanghai upgrade, which will allow crypto investors to withdraw their staked ETH tokens and their accumulated staking rewards, has driven exponential growth in interest from crypto investors in both native staking and liquid staking opportunities.
Planned for release in the second half of 2023, Ethereum’s newest upgrade will provide ETH stakers with the ability to stake, withdraw, and re-stake their rewards at a much higher frequency than currently allowed, thereby creating more opportunities to maximize yield on their staked digital assets. The Binance Research team recently published a detailed report on Ethereum’s Shanghai upgrade.
What is liquid staking?
Liquid staking has gradually emerged to become one of the most sought-after investments in the DeFi space. It works similarly to regular native staking in that crypto investors deposit their digital assets in a smart contract to help facilitate transactions on a Proof-of-Stake (PoS) blockchain, and generate a yield on their staked assets for participating and securing it. While staking helps investors earn passive income by making their assets work for them, its drawback stems from making those assets illiquid by locking them for the entirety of the required staking period.
Through liquid staking, digital asset owners receive the native token equivalent of the protocol used to stake their assets, pegged 1:1 to the amount originally deposited. This process then allows investors to use the native token for other purposes on other decentralized platforms and earn additional yield while continuing to receive rewards on their staked assets. Popular liquid staking protocols include Lido and pSTAKE Finance, whom Ceffu has recently partnered with to secure their digital assets and integrate $PSTAKE into our institutional-grade infrastructure.
Optimizing the security of your digital assets
While decentralized finance presents attractive opportunities for crypto investments, security remains a major roadblock to institutional adoption. A total of $3.8 billion was stolen in 2022, making it the biggest year for crypto hacking to date, primarily driven by hacks in DeFi protocols according to research by Chainalysis.
Third-party institutional custodians provide the assurance needed for investors to secure their assets within an insured, compliant, audited platform built specifically for institutional size and needs. Our Qualified Wallet solution enables institutions to fully secure their crypto assets and generate yield on select supported tokens while they remain secure in their segregated cold wallet.
Contact us to learn more about our staking solutions.
Ceffu is a compliant, institutional-grade custody platform offering custody and liquidity solutions that are ISO 27001 & 27701 certified and SOC Type 1 & Type 2 attested. Its multi-party computation (MPC) technology, combined with a customizable multi-approval scheme, provides bespoke solutions allowing institutional clients to safely store and manage their digital assets through its insured, segregated cold storage solution, Qualified Wallet. Institutions also benefit from Ceffu’s secure gateway to a wide range of liquidity products within the Binance ecosystem as Binance’s institutional custody partner.