Potential of liquid staking in money markets

The deep liquidity and flexible features of the TradFi industry have always been lucrative to users however it’s not the same story with the execution process.

That’s why crypto is following the lead on financial instruments of TradFi (or CeFi) by introducing derivative assets, margin trading, etc. With an added layer of decentralization and blockchain immutability, a new window of opportunity is on the horizon.

One of the primary financial features of the crypto world is staking, it’s a process where users provide their assets to validators or nodes in return for a share of the transaction revenues. In addition, staked assets strengthen the ecosystem’s economy by decentralizing the network.

However, the only problem with this system is that they completely locked up their assets discarding every other money-making possibility.

That’s where liquid staking comes in.

What is Liquid Staking?

Liquid staking is much like normal staking with one key difference. When you stake your asset, instead of completely locking it, you get a new type of liquid asset pegged with your staked tokens.

In the Stader BNB ecosystem, that token is BNBx.

Whenever you stake BNB in Stader, you a set amount of BNBx. The number of BNBx you receive and its total value depends on several external factors, but it solves your problem of compromised liquidity.

By design BNBx increases in value in tandem with the increase of staking rewards.

Now you can take your staked asset to DeFi protocols and earn extra yield

One of the things you can do is invest in money markets.

What is Money Market?

A money market is an open marketplace for lenders and borrowers. In an analog world, every borrower has to find a lender that will lend him money on mutually agreed terms.

This is a time-consuming effort.

Even if that process is digitized, matching one lender with one borrower is a time-consuming and non-scalable system.

That’s where money markets come in to fix the issue, by providing a common place for lenders and borrowers to interact and enter into mutually beneficial transactions

Why mix the two?

Just like Traditional financial markets where leveraged products and derivatives have notional values many multiples more than the market value of the underlying assets, DeFi too can have that with liquid staking and money markets coming together. Here’s how

Liquid staking can boost the borrowing demand for base assets such as BNB because as long as the borrowing interest of these tokens is below liquid staking rewards, users will be incentivized to borrow BNB at a lower rate than its staking rewards.

This can create a positive domino effect where one door will lead to the opening of another creating a market of enormous proportion. This is something to be excited about.

What is Stader’s vision with BNBx?

BNBx can be a great addition to BNB money markets as it will unlock several borrowing use cases including leveraged staking, borrowing other assets with BNBx, and several other trading strategies.

Stader is in talks with several DeFi platforms to offer a diverse range of options for our users.

Our partner OpenLeverage enables you to take leveraged positions on BNB.

Delta Theta allows options trading on BNBx.

We have written in detail about several DeFi strategies that users can use for BNBx to book additional yields along with staking rewards in this article.

You can also read our proposal for the Venus community about adding BNBx here.

In summary, our vision is to make BNBx the most flexible and scalable way for users to earn the best risk-adjusted DeFi yield on their BNB

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