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Blockchain industry relies on three major factors that the technology promises to serve—decentralization, scalability and security. Although all three are crucial, yet security has its own place within the space. There is so much discussion all around regarding interchain security.
Several protocols are working towards the concept, for example Cosmos Hub. Yet the interchain security still needs to cover a long journey. During the conversations, liquidity staking is considered as one such innovation that could possibly bring interchain security to a whole new level.
Primarily, liquidity staking stands for the liquidity of staked assets in any proof-of-stakes blockchain or some other staking pools. Considering the possibility that the staked asset’s liquidity remains untested, liquidity staking becomes more crucial. Crypto users are restricted to hands on their staked assets available in any decentralized finance (defi) protocol. This restrains the users from creating favorable yields.
In liquidity staking, users are allowed to take benefits of both staking their assets and defi at the same time, while offering the staked assets’ tokenized derivatives. Such benefits act as add-ons to the advantages alongside maximizing yield.
In many instances, this approach seems to be significantly focused entirely on money. Well, this is only when someone takes a look at it from a critical point of view.
Interchain Security as Additional Benefit of Liquid Staking
Liquid staking protocols’ underlying mechanism that enables locked values to get free works towards boosting the interchain security. Take the situation for instance where a Cosmos-like well established proof-of-stakes blockchains allow their validators to verify the transactions taking place over the smaller consumer chains.
Taking such an approach ensures that the validators on the protocol do not behave illicitly. In case they do so, their locked asset on the chain is prone to get diluted and they tend to lose it automatically.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
