Dual Staking

Definition ∞ Dual staking is a mechanism where participants commit two different types of tokens to secure a network or provide liquidity, often to earn rewards in both. This process typically involves locking up two distinct digital assets within a protocol to support its operations, such as validating transactions or facilitating trading pairs. It aims to incentivize deeper liquidity or enhance network security by requiring a broader commitment of capital. Participants receive compensation for their contributions.
Context ∞ Dual staking is a developing strategy in decentralized finance and proof-of-stake networks, designed to optimize liquidity provision and network stability. Debates concern the risk profiles associated with holding and staking two assets, including impermanent loss and exposure to multiple token price fluctuations. Future innovations may involve more complex reward structures and improved risk management tools for participants in dual staking arrangements.