Staked Derivative Token

Definition ∞ A Staked Derivative Token is a digital asset that represents a claim on an underlying cryptocurrency that has been locked or “staked” in a proof-of-stake blockchain network. These tokens permit users to retain liquidity and participate in other decentralized finance activities while their original assets remain staked to secure the network. They typically accrue staking rewards and can be traded or used as collateral. This mechanism provides utility for otherwise illiquid staked capital.
Context ∞ Staked derivative tokens are gaining significant prominence in the decentralized finance ecosystem, especially with the rise of liquid staking protocols. News often covers the growth of these markets and the associated risks, such as smart contract vulnerabilities or de-pegging from the underlying asset. Their development is crucial for improving capital efficiency and participation in proof-of-stake networks.