Liquid Staking Tokens otherwise known as LST seems to be catching on in a big way. Primarily we are seeing this large shift happening mainly in Ethereum and other high fee blockchains.
What Is LST
LST is where someone or a entity takes their tokens such as Ethereum and locks them up in another networks token. This new token shows ownership of staked tokens and the network rewards in which it generates.
Normally a person would need to lock up their staking tokens for a period of time normally 7 days or more before being able to unlock the tokens and be able to use them again. This is often for voting and security reasons but this new LST system works around that by giving the person full liquidity of their tokens.
This opens up more freedom and the ability to get at your tokens, transfer them, lock them up and move from from defi to defi quickly instead of unstacking periods. Of course with this we could see massive new security issues.
The Future
It seems like LST's are heating up. Many didn't know about them or understand them but we are now seeing a rather quick explosion of wealth being dropped into them.
As of the last year ETH has proven to produce around a 4% yield on tokens that are staked. With the mix of this not only can one earn that 4% yield but they could also provide the liquidity and usher in a higher yield. This is the largest benefit of these LST tokens. Taking what would have been a 4% and pumping it up into DeFi levels while allowing the owner full flexibility to transfer and move them at any given time.
Now with anything of course there are going to be scams and other methods of trying to cheap people out of their crypto. So be sure you do your own research and only invest what you're ok with losing.
Current Stakes
At the moment two of the biggest powerhouses in Ethereum are Lido
*Image taken from DeFiLlama Lido
and Swell is a quick up and coming platform
*Image taken from DeFiLlama Swell
These platforms combined now hold millions of Ethereum currently and what you'll see is a huge shift into swETH happening at a rather steady rate. This swETH token is the LST token of the swell defi platform.
While there are of course security risks to all of this it would actully be a big benefit to the crypto industry overall and user is massive liquidity back into platforms. No more locked up periods means massive liquidity to go around no longer reducing the active supply by 50%+ This same thing could be applied to any other staked token or perhaps adopted by some layer two options which would have a much easier job at updating how their blockchain works over the core blockchain.
Do you currently use any LSTs?
If not would you? Let me know in the comments below