Staking vs. Liquid Staking
Last updated
Last updated
As the same as the concept of the existing staking of dPoS blockchain, holders of the native staking token of the chain, which is CRE in Crescent Network can become validators and can delegate tokens to validators, ultimately determining the effective validator set for the system. This is the staking. Once the tokens of a user are delegated via staking, those are locked and the user cannot swap/transfer/deposit the staked tokens. This means, the user's staked token is not liquidable anymore for a while.
For the users to also enjoy many utilities (swap/transfer/deposit) with their assets while staking, Crescent Network introduces the concept of liquid staking. Once a user stakes CRE through liquid staking module, the staked CRE is locked but the user receive bCRE (pegged staked representative tokens) instead.
When the delegators want to unstake bCRE, the module will burn the bCRE and give them CRE back, which will be larger amount of CRE thanks to the liquid staking rewards during delegation period.
Liquid staking solves the problem of assets remaining dormant by expanding secondary investment opportunities while still giving the user the same power of voting and delegation. This minimizes opportunity cost of traditional staking, which negates an unnecessarily high staking reward rate to pursue more capital-efficient CRE inflation usage for the whole ecosystem:
Liquid staking results in diversified delegations to liquid staking validators with predefined power weights
Liquid staking validator group is managed by community governance process
