Types of Liquid Staking Tokens. Proof-of-stake (PoS) is a consensus… | by Edwin Fernández Grau | BLID | Coinmonks | Sep, 2023


Edwin Fernández Grau | BLID

Proof-of-stake (PoS) is a consensus mechanism used in blockchains to process transactions, create new blocks, and maintain the chain’s security. In PoS, tokens are staked in order to provide security for the network. In return for staking their tokens, users are compensated with block rewards from the network and fees paid by users. To stake tokens, users have to run validator nodes. Given the technicalities involved with this, validation is typically undertaken by professional node runners.

To increase accessibility to staking and liquidity, liquid staking protocols like MetaPool were developed. These protocols allow users to stake their tokens with validators in exchange for a portion of the interest yield earned. Additionally, these liquid staked tokens can be easily traded on decentralized exchanges, allowing users to convert them back to unstaked tokens (e.g., from mpETH to ETH).

Liquid Staking Tokens (LSTs) may seem similar at first glance, but they possess unique differences🧐

Each protocol has a unique derivative token that accrues or processes rewards differently. They also have different fee and commission structures that impact net rewards to holders.

Let’s take a closer look at the main types of liquid staking tokens.

1. Rebasing Token

They have a total elastic supply that can increase or decrease; the change in supply is distributed proportionally across token holders.

📌 Gains are automatically reflected in the QUANTITY of tokens you own.

2. Reward-Bearing Token

Accumulates rewards within the token’s value. The token’s VALUE, denominated in $ETH, increases each day.

👉 Unlike Rebasing Tokens, they do not have an elastic supply that changes frequently.

The $mpETH token from MetaPool serves as an example:

Meta Pool is a liquid staking ecosystem in DeFi. Its solutions includes: Liquid Staking Tokens, Liquidity Pools , Launchpad, Bond market, Multi-chain solutions, actually living in Ethereum, DAO and governance, for the whole protocol.

3. Dual Token Model

Involves having one token linked to ETH as a derivative and another that varies in price/quantity based on staking rewards.

👉 Provides flexibility but is more complex to manage and given that two liquidity pools are required, this results in segmented liquidity and potentially higher slippage.

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