Acala Launches DOT Liquid Staking on Polkadot

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Acala

5 min readMay 10, 2022

We are excited to announce Acala’s launch of DOT Liquid Staking for Polkadot. Polkadot users will be able to stake their DOT on Acala to earn higher yield and to stay liquid by receiving LDOT upon staking their DOT.

The LDOT staking product brings the following benefits to DOT stakers:

Higher APY than DOT staked on Polkadot
Liquidity to multiply yield in DeFi
Support from world-class validators like Blockdaemon and Coinbase Cloud
Instant unstaking
Only 5 DOT minimum for staking
A decentralized mechanism that continues to secure the Polkadot Relay Chain

Following the launch of AcalaSwap and aUSD, Acala’s multi-collateralized stablecoin, LDOT is yet another core component helping further optimize capital efficiency and DeFi strategies for the Polkadot ecosystem.

Let’s explore what liquid staking is how you can participate to earn additional yield on your DOT.

Challenges with the current staking model

The typical staking process involves a blockchain network rewarding users with a percentage of tokens (producing yield) during the period tokens are locked. However, while the tokens are locked, users cannot use the tokens and engage in additional yield-generating activities.

The unbonding period, a token lock-up period before users can sell or transfer the tokens, adds to the inconvenience of traditional staking. Users cannot extract token liquidity from most staking platforms until the unbonding period passes, ranging from 7 to 28 days, sometimes even longer.

Polkadot users who stake their DOT are subject to such restrictions:

Staked DOT on Polkadot remains locked with no utility beyond earning rewards
Polkadot’s DOT staking unbonding period is 28 days, limiting flexibility and access to capital

Acala’s DOT Liquid Staking product (LDOT) is aimed at helping token holders extract optimal value from their DOT tokens in a user-friendly and efficient manner.

Liquid Staking 101

At its simplest form, liquid staking is like the coat check at a restaurant. You give the person your coat, they tag it, and give you a paper receipt representing your coat. When you come back and are ready to get your coat, you give them your receipt, and you get your coat back. Liquid staking is similar, as a user stakes their asset, receives a liquid staking token as a receipt representing their staked asset, then can do as they please with their liquid staking token. Whenever they’re ready to get their original staked token back, they simply redeem their liquid staking tokens for their assets.

Liquid staking provides increased token utility for locked staked tokens. It allows users to leverage additional DeFi activities using yield-bearing derivatives of staked tokens which otherwise have no utility beyond locking for staking rewards. Users can compound their yield by utilizing the derivative token for engaging in DeFi activities, including things like trading, liquidity providing, or lending. Liquid staking provides a practical and flexible alternative to the traditional staking model by allowing users more control over their funds and greater access to additional income generation.

“What can I do with LDOT?”

After staking DOT and receiving LDOT, there are several use cases to participate in:

Mint aUSD: Use your LDOT as collateral to mint aUSD. This aUSD can then be used to lend, swap, or any other stablecoin use case.
Stake LDOT: Stake your LDOT in ‘collateral staking’ on the Earn tab for additional rewards. Collateral staking enables you to mint aUSD if desired, but is not a requirement for earning rewards.
Trade: utilize Acala’s swap feature to trade in an LDOT/aUSD pair. Other DEX may also support LDOT trading pairs in the future as its utility increases beyond Acala.
Provide Liquidity (LP): LDOT holders can become liquidity providers in the LDOT/DOT pool.
(Soon) Earn more with Tapio’s tDOT: Upon the upcoming launch of the Tapio stableswap protocol on Acala, users can contribute their LDOT tokens to the tDOT pool to earn additional rewards from Tapio swap fees and TAP token incentives
(Soon) Lending: Users will soon be able to lend their LDOT on money markets on Acala or other parachains
HODL: Users can simply hold LDOT to enjoy staking without having income events triggered on-chain while staking

Join the DOT Liquid Staking Launch on Acala

The DOT Liquidity Staking is about to go live! Upon launch, users will access:

Higher APY than DOT staked on Polkadot
Liquidity to multiply yield in DeFi
Support from world-class validators like Blockdaemon and Coinbase Cloud
Instant unstaking
Only 5 DOT minimum for staking
A decentralized mechanism that continues to secure the Polkadot Relay Chain

To prepare for the launch, users must ensure their DOT is unbonded and ready to be transferred to Acala. Acala’s DOT Bridge can be used to transfer DOT to Acala and participate in Acala’s DeFi economy. Once users have their DOT on Acala and the Liquid Staking is live, users stake their DOT, receive LDOT, and leverage additional yield.

Start Staking DOT for LDOT

Head over to the Acala Apps to start staking your DOT on Acala. You can use this guide for getting started.

Get Ready For the LDOT Launch Party — May 11th

🎟 Save your spot for the DOT Liquid Staking Launch Party on Wednesday, May 11th at 9pm UTC. Discover more about DOT Liquid Staking and its benefits, and see a live demo on Crowdcast.

$250M aUSD Ecosystem Fund

If you are a developer interested in building a project that drives yield or utility of the aUSD stablecoin on Acala or any other parachain, apply for funding from the $250 aUSD Ecosystem Fund. The aUSD Ecosystem Fund is part of the broader Acala Ecosystem Program, offering liquidity for new projects, Acala Foundation Grants, engineering support, and other support to ensure the success of the aUSD ecosystem.

Build on Acala

If you’re a team looking to build on Acala, integrate the aUSD stablecoin, get funding from the $250 million aUSD Ecosystem Fund, or receive support from Acala Grants, please get in touch with our team to chat about how we can support you.

About Acala

Acala is a decentralized finance network powering the aUSD ecosystem. The core product, Acala USD (aUSD), is a decentralized, multi-collateral, crypto-backed stablecoin serving as the native stablecoin of the Polkadot ecosystem. Acala’s Ethereum-compatible blockchain has built-in DeFi protocols for application developers to leverage, including a trustless staking derivative (liquid DOT — LDOT), a decentralized exchange, and the EVM+, a hybrid EVM offering a fully Ethereum-compatible development environment plus full compatibility with Substrate.