Chihuahua Stories: Liquid Staking Derivatives & Alliance Module
You may be familiar with them and have used them previously, or you may not. It doesn’t matter because today you’ll discover more about the Chihuahua Network’s Liquid Staking Derivates and their potential position as Alliance assets in blockchains other than Chihuahua!
Contents
Let’s talk about LSDs
Lysergic acid diethylamide, commonly known as LSD, also known colloquially as acid, is a potent psychedelic drug and you should never use them; they are not in our interest. We’ll speak about Liquid Staking Derivatives, which are something you should think about using!
Liquid staking is the act of delegating your tokens to a service that stakes for you without losing access to your funds. Liquid staking allows you to access your funds even when you’re staking them. The funds remain in escrow, but aren’t “locked” and inaccessible and you do not have to wait 21 days for them to become liquid again.
Liquid staking offers the best of both worlds: a passive income and access to your staked funds.
Stafi Hub, Eris Protocol, and BackBone Labs are the existing platforms enabling liquid staking on Chihuahua. You will choose a service (or more) after conducting your own research. We can’t pick just one because they’re all fantastic!
Why are you telling me to conduct my own research? Are there any risks?Yes there are and this is why you should be careful.
Liquid Staking Derivatives risks:
- Security risks. When assets are staked, they are typically locked away in a smart contract or other secure environment, where they cannot be easily stolen or misused.However, always keep in mind that your assets are in the hands of a third party, which always adds a level of counterparty risk.
- Low liquidity risk. That being said, if the TVL in the liquidity pools runs dry then the token can lose its peg which also causes a high slippage when trying to swap between the assets.
- Validator Slashing. LSDproviders are responsible for maintaining the infrastructure and technology that supports the staking process. If there are any operational issues, such as system downtime, network outages, or other technical problems, the staked assets could be at risk.
- Hacks. In this case, the assets held as collateral could be stolen. For example, let’s say you mint liquid staked Huahua from a protocol. When you provide your Huahua they will hold it in a smart contract and mint an equal amount of liquid staked Huahua. The risk here is that if the protocol got hacked then your original Huahua could be stolen.
I hope we didn’t scare you. LSDs have many advantages, but they are not coming without dangers. Going all in Liquid Staking, much alone all in on on one Liquid Stake provider , is never a wise idea.
If you want to know more about how you can utilize these $HUAHUA LSD’s then be sure to check out the following:
The Liquid Staking Derivatives role in the Alliance Module
The alliance module is something truly unique in Web3, and it could only exist in the Cosmos ecosystem. The alliance module will enable the staking of several assets on a chain and the development of cross-chain cooperation. Imagine being able to stake your $HUAHUA on ChihuahuaChain but on another chain as well! Awesome? You will be able to gain Huahua’s staking APRas well as a “Chain’s B” staking apr (for this alliance asset)! You can increase your passive revenue while securing one more chain.
What are the benefits?
- Diversifying and Augmenting Staking Yield. Users can diversify and boost their yield by staking on one chain, bridging their LSD to the allied chain, and staking it — thereby earning a second yield in the form of that chain’s native token (as stated above).
- Attracting Users, Liquidity, and Developers. A blockchain can attract new users and liquidity from allied chain participants who bridge and stake their assets within their ecosystem.
- Incentivizing Application Developers. Alliance can offer L1 staking yield to app token stakers in the ecosystem — thereby allowing users of the most promising apps to be rewarded directly from fees and inflation of the underlying L1.
Final thoughts
If you never knew about Liquid Staking, now you know! It is certainly something you should not be ignoring but you should always use with caution. However, the Chihuahua Network is lucky enough to have three great providers!
The general concept of LSDs is nicely suited to the Alliance Staking. Some of the advantages mentioned previously make it a highly anticipated feature in Chihuahua and some promising new chains such as Migaloo Zone!
Woof woof!
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