Crypto liquid staking is one of the secrets of making passive income without sacrificing liquidity. The only thing you need to do is to stake the assets without even locking them up and enjoy the rewards accumulating in your wallet. Keep scrolling to learn more about liquid staking and find the best coins for liquid staking with the highest rewards.
What is Staking?
In simple terms, staking is holding your crypto assets in a blockchain wallet for a set period to help the blockchain activities and earn rewards for your participation.
Staking allows you to join a Proof-of-Stake (PoS) platform’s consensus mechanism to put your funds to work and help the blockchain network carry out certain activities. Doing so entitles you to passive income or staking rewards.
The PoS mechanism, i.e., proving your contribution to the network by staking your crypto tokens, was designed as an alternative to the Proof-of-Work (PoW) model, where contributors showed participation by validating transactions and adding them to the blockchain.
Staking comes in various forms, and the following section helps us understand the differences between them.
What are the Different Types Of Staking?
Depending on the blockchain specifications and its consensus mechanisms, staking can be categorized into three main types: Validator (Hard), Cold (Offline), and Liquid (Soft), which we’ll go through here.
- Validator (Hard) Staking: The type of staking used by many PoS networks is Validator. In this type of staking, the stakers are called validators, as they hold and lock up a specific amount of their crypto assets in a set wallet to help validate transactions and add them to the blockchain.
Delegated staking is another form of validator staking, where users delegate tokens to a third-party validator. Delegated staking is better for those with less knowledge of crypto as they don’t have to run their validating node.
- Cold (Offline) Staking: In Cold or Offline staking, the stakers hold their assets in a cold wallet and let a staking pool take care of the staking process.
- Liquid (Soft) Staking: Crypto liquid staking is the easiest type of staking, where users stake their assets without locking them up. Let’s get into the details of liquid staking in the following section.
What is Crypto Liquid Staking?
Many experts believe that crypto liquid staking is the most common and versatile form of staking because it enables users to stake their assets and earn rewards while letting them trade the staked tokens.
This is the main feature that differentiates liquid staking from other types, which require the tokens to be locked up for certain time frames.
Crypto liquid staking can be part of
- Liquidity Pools, and
- Lending/ Borrowing Platforms.
Crypto Liquid Staking in Liquidity Pools
Liquidity pools are networks to provide liquidity (funds) for trading. Stakers can stake or deposit their assets in the pools as a liquidity provider and receive a share of the transaction fees in return.
In the meantime, the stakers have access to their tokens and can trade them. It is possible because the stakers receive the rewards based on the number of tokens they have staked and the period of staking.
Crypto Liquid Staking in Lending/ Borrowing Platforms
Liquid staking is also a part of lending/ borrowing networks where stakers work as lenders who provide funds for borrowers and receive interest for their participation. In this process, too, the stakers can access their tokens and trade them.
Let’s get a bit more technical and learn how crypto liquid staking works.
How Does Crypto Liquid Staking Work?
Crypto liquid staking works by letting the stakers stake their assets into a pool or platform, where their staked assets aid in supporting the network.
In return for their participation in the network activities, the stakers are rewarded a certain number of cryptocurrencies according to the staking period and the amount they have staked.
We mentioned different types of staking in the above sections, and here we’ll compare the two most common staking types: Liquid (Soft) and Validator (Hard).
Liquid Staking vs. Validator Staking
As mentioned earlier, both Liquid and Validator staking enable users to make some easy passive income by holding their cryptocurrencies in crypto wallets. But as you may know, they have similarities and differences; let’s see what they are.
| Feature | Liquid Staking | Validator Staking |
| Required Holding | Requires holding native tokens | Requires holding native tokens |
| Reward Mechanism | Rewards for network participation | Rewards for network participation |
| Consensus Mechanism | Used in PoS networks | Used in PoS networks |
Similarities
- In both types of staking (Liquid and Validator), the stakers need to hold a certain number of the blockchain’s native tokens (i.e., the blockchain of the network they stake on).
- Both staking types reward the stakers for participating in the network and supporting it.
- Both Liquid and Validator staking types are applied in PoS networks.
Differences
| Feature | Liquid Staking | Validator Staking |
| Asset Accessibility | Stakers can access their assets | Stakers lock up their assets for a period |
| Participation Method | Deposit assets into a pool | Run a validator node |
| Security and Maintenance | Pool or platform maintains security | User maintains the node |
| User Expertise | Beginner-friendly | Requires technical and financial knowledge |
Differences
- In Liquid staking, the stakers can access their staked assets, while in Validator staking, the stakers have to lock up their funds for certain time frames.
- In Liquid staking, the stakers deposit their assets in a pool or platform to earn rewards. In contrast, in Validators staking, stakers run a validator node to validate transactions and earn rewards.
- In Liquid staking, the pool or platform maintains the pool and secures the assets, but in Validator staking, the users need to main the nodes and secure the assets.
- Liquid staking is easier to use and is better for beginners, but Validator staking needs more technical and financial knowledge and is used by more advanced users.
All in all, we can’t say one is better than the other as each has its advantages and disadvantages, so you need to choose the one that best suits your purpose and preferences.
Although many consider liquid staking to be the easiest and best staking type, you need to know its pros and cons in detail to make an informed decision. Let’s see what they are.
Liquid Staking Pros and Cons
Liquid staking is favored by many for ease of use and accessibility of the staked tokens. Learning about the pros and cons of this staking type helps you make better crypto investment decisions.
Pros
Crypto liquid staking
- lets the stakers gain rewards while enabling them access to the staked assets; that’s why it’s more flexible and usable.
- adds to the liquidity stability of the crypto market by providing liquidity for DEXs and other networks.
- offers more use cases like lending, borrowing, and governance.
- is more suitable for beginners and less advanced users as it doesn’t require high levels of crypto technical knowledge.
Cons
- Liquid staking rewards are less than Validator staking.
- Stakers don’t have complete control over the assets and security of the pool, as the pool or the platform controls these matters.
- Networks and liquidity pools set a minimum limit for deposits and have varying terms of service and fees the stakers need to take into account.
- Reward distribution and tracking of the rewards are not so transparent in Liquid staking.
Now that you know all the basics of staking and liquid staking, it’s time to find some coins for staking. To help save you time, we’ve handpicked the best coins for liquid staking with the highest rewards. Keep scrolling!
The Best Coins For Liquid Staking With The Highest Rewards
The following table depicts the best coins for liquid staking with the highest staking rewards. Remember that
- different platforms have varying fees, rules, and reward options and reward you based on the number of tokens you stake and the staking period.
- staking rewards change over time and with inflation.
In the section following the table, we’ll go through the best platforms for crypto liquid staking.
The Best Platforms For Liquid Staking
Because of liquid staking’s ease of use, various platforms offer it, but of course, with various fees and conditions.
The following table summarises the best platforms for crypto liquid staking. It’s no secret that you need to choose them based on your needs and preferences.
Now that we’re discussing the best platforms for liquid staking, let’s go through Polygon, Near, Cosmos, Osmosis, Ankr, Avalanche, Polkadot, and Fantom.
Polygon Liquid Staking
Polygon was designed to solve Ethereum’s scaling issue by using sidechains to maximize throughput and minimize fees on the Ethereum main chain.
Polygon provides a staking pool for the users to deposit their funds and add liquidity to earn staking rewards. Polygon rewards MATIC stakers with more MATIC tokens.
Stakers help secure the Polygon network and participate in governance activities in exchange for the funds they deposit.
Near Liquid Staking
Near was aimed to be a decentralized blockchain and a fast, less expensive, and scalable network for dApps (Decentralised Applications). Near uses the Nightshade consensus mechanism, a form of PoS mechanism.
Participants need to stake NEAR tokens in the Near staking pool to help validate transactions and earn participation rewards, i.e., more NEAR tokens.
In addition to liquid staking, the Near protocol offers Delegate staking, which we explained in this article’s early sections.
Cosmos (ATOM) Liquid Staking
Cosmos was developed to improve interoperability between various blockchain networks. Its consensus mechanism is called “Tendermint BFT”, which is a sister-like variant of the PoS model.
In the Cosmos network, the users can stake the network’s native token – ATOM – to support blockchain activities and earn ATOM tokens as a reward.
Validator and delegated staking are also available on the Cosmos ecosystem. It also offers governance rights to ATOM token holders.
Osmosis Liquid Staking
Osmosis is a PoS decentralized and cross-chain AMM network, developing OSMO as its native token. This platform enables developers to build and deploy customized AMMs.
To provide cross-chain transactions, Osmosis uses Inter-Blockchain Communication (IBC). It also lets stakers deposit their tokens, provide liquidity, and swap the native tokens of the platforms supporting Tendermint IBC.
Osmosis provides superfluid staking, which lets stakers deposit their funds and, at the same time, use them to provide liquidity for the Osmosis liquidity pool.
Ankr Liquid Staking
As a decentralized blockchain network, Ankr lets deploy and run customizable blockchains. Its consensus mechanism is called Proof-of-Stake-on-Demand (PoSOD), another common form of the common PoS mechanism.
ANKR is the native token of the Ankr network, which is staked and rewarded to the stakers.
Avalanche Liquid Staking
As a decentralized blockchain, Avalanche enables its users to create and control various independent subnets, i.e., virtual chains, in a larger network.
Avalanche utilizes the Avalanche-X consensus mechanism, a customized PoS mechanism.
Participants of the Avalanche platform can stake its AVAX tokens to support the network and earn staking rewards.
Polkadot (DOT) Liquid Staking
Another famous multi-chain platform is Polkadot (DOT), which enables transactions among blockchains. Its version of the PoS mechanism is called the NPoS consensus mechanism.
Polkadot lets its users stake its DOT tokens to participate in network activities and gain governance rights, plus staking rewards.
Fantom Liquid Staking
Another secure blockchain platform that offers liquid staking is Fantom, which strives to be a high-performance, modular network.
Mass adoption of dApps is among the goals of the Fantom network, and to achieve it, Fantom provides fast and low-cost transactions.
Its consensus mechanism is called Lachesis, a form of the Practical Byzantine Fault Tolerance (PBFT) mechanism.
To earn staking rewards on Fantom, the users need to stake FTM tokens and gain governance rights in addition to providing liquidity to the platform’s liquidity pool.
Summary
Liquid staking is an easy method of earning passive income favored by many crypto enthusiasts, both beginners and more advanced users.
Before choosing any token or platform for staking, you need to do your own research and know the investment risks. Although staking is known to be a less-risky crypto investment, it’s not risk-free, and fraud and hacking are two common dangers of cryptocurrency investments, among others.
FAQ
Read the following Q&As to find answers to any possible questions about crypto liquid staking.
What is Soft Staking?
Soft staking or Liquid staking is a process of holding a certain number of cryptocurrencies in a network for a set period to provide funds for the liquidity pool and earn staking rewards in return. In soft staking, you can access your staked tokens, and there is no lock-up period.
What is Validator Staking?
Validator staking is a more technical type of cryptocurrency staking. It includes holding your tokens in a platform and locking them up for a certain timeframe to validate transactions and earn staking rewards.
