Definition ∞ Liquid Staking is a DeFi mechanism that allows users to stake their cryptocurrency holdings while retaining liquidity. Participants delegate their assets to a staking pool and receive a derivative token representing their staked amount, which can then be used in other DeFi protocols. This process enables users to earn staking rewards and simultaneously engage in other yield-generating activities without relinquishing ownership of their original assets.
Context ∞ Liquid Staking has emerged as a significant innovation within the Proof-of-Stake ecosystem, addressing the capital inefficiency of traditional staking. Current discussions highlight its role in enhancing capital formation and facilitating complex DeFi strategies. Future considerations involve managing the risks associated with derivative token volatility and ensuring the robust security of liquid staking protocols against potential exploits.
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