Why has liquid staking grown in the bear market?
Despite the challenging times faced by the blockchain industry and the global economy, one area of the crypto market that has shown growth is staking. Liquid staking protocols have experienced a surge in total value locked (TVL), reaching $20 billion, which is close to the levels seen in leading decentralized staking protocols in April 2022. This growth can be attributed to various factors.
Ethereum’s Impact on Staking
Ethereum’s introduction of staking has played a significant role in the rebound of staking valuations. With Ethereum nullifying the criticism of crypto’s carbon footprint by transitioning away from energy-intensive miners, staking has become an attractive option. Ethereum staking provides users with a 3%-4% annualized rate of return, making it a safer choice compared to decentralized and centralized lenders. Additionally, liquid staking allows smaller holders to participate in staking by pledging their ETH to companies or smart contracts, providing an on-chain equivalent of government bonds.
Staking as an Industry Expectation
Staking has become an expected feature in the crypto industry, with prominent cryptocurrencies like Cardano and Solana implementing staking systems. This trend helps to bridge the gap between cryptocurrencies and traditional investments, offering a touchpoint similar to dividend-paying stocks. By grounding crypto in familiar concepts, staking reduces the perceived immateriality of crypto assets and addresses the lack of intrinsic value often associated with the industry.
Hot Take
The growth of liquid staking in the bear market demonstrates the resilience and adaptability of the crypto market. Staking provides investors with an opportunity to earn passive income and participate in the blockchain ecosystem without the complexities and risks associated with other forms of investment. As the industry continues to evolve, staking is likely to remain a significant component, offering stability and familiarity to the ever-changing world of cryptocurrencies.
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