Liquid Staking is the New Money Multiplier
Everyone knows by now that the world of finance today would be completely unrecognizable to even the smartest money analysts from just a few short decades ago.
Not only have traditional fiat currencies been revolutionized by online banking and the fast moving world of fintech, but there’s a whole new game in town too. You may have heard of it — cryptocurrency.
Getting to grips with a game changer
Yet where the crypto world has really changed the rules of engagement — as well as given individuals greater power over their wealth — is through staking. This revolutionary new process has given everyone unparalleled control over their crypto funds in ways never once imaginable — and all while translating into real value that offers a healthier bank balance for everyone involved.
Of course, not everything in the crypto world feels straightforward at first glance, and there’s plenty of new lingo you may need to get to grips with if you’re exploring liquid pools and proof of stake cryptocurrencies.
No need to fret. We’ll not only be breaking down that jargon into actionable ideas today, but we will also be looking at how they compare to traditional financial models — as well as how they outclass them for the better when building wealth in the 21st century.
A crash course on traditional banking
Understanding how staking pools work in cryptocurrency means having a good understanding of how traditional banking has worked for the last few centuries. Once you have a good grasp of these facts, you’ll see why staking has countless advantages in the crypto space — but also why staking pools can outperform banking in multiplying your money.
The similarity between the two processes comes down to that good old fashioned financial term — liquidity. Put simply, liquidity is how big banks and businesses like to define what the rest of us would call discretionary spending money — the cash not being spent on essentials that we can spend on what we want.
Millions of people around the world today have bank accounts, and completely trust their money to them. On the face of it, this is a great idea — banks are regulated, they boast remarkable security protocols, and most countries have safeguards in place in case citizens’ banks fail to protect their wealth.
Yet a bank account isn’t simply a public service that organizations offer you to keep your cash secure out of the goodness of their heart. Banks are in this business to make money, and they do this by using the money they are entrusted with to invest, give out loans and otherwise grow its wealth through dividends and interest.
It’s a tried and tested strategy, albeit one that can occasionally go wrong. When it does, unfortunately it is often in ways that make the 2022 ‘crypto crash’ seem like a splash in a puddle.
Lending and spending customers’ funds
Are banks deceiving customers by investing and spending the cash users add to their vaults on anything they like? Not at all. In fact, although many of us forget this in our daily lives, the capability of banks to do just this is essentially the agreement made between banks and customers whenever an account is opened.
Remember what we said — this isn’t a public service. Banks are run by financiers who want liquidity — there’s that word again — in order to grow the wealth of the business.
Of course, very distinguished banks have often offered customers the chance to join in on building wealth also — but to whose benefit is that, really? Don’t you imagine banks have a vested interest in growing customers’ wealth if it means they have more of their money to play with?
A bank account is essentially an agreement between the bank and the customer to loan cash to said bank — it’s why so many bank accounts pay interest. They are borrowing our money to fund their business ventures. And of course, they are doing so almost always on their terms, because they know people want the financial security and safety from crime that a bank account provides, most of the time.
How banks unlock the money multiplier
It’s simple. Banks lend out money that doesn’t exist. How is that possible?
A bank lends 20K to Joe. Joe spends the 20K to buy a car from Nissan. Nissan deposits the money with their bank. Now Joe owes the bank 20K, and the bank has that 20K in its drawers. What will the bank do? Lend it again, obviously.
At last, we come to how and why this is so comparable to the liquid staking revolution taking place in cryptocurrencies today. Not only have cryptocurrencies and the companies dealing in them been able to pioneer decentralized finance (DeFi) to the extent that peer to peer transactions are now capable of doing what banks do.
How proof of stake cryptocurrency works
Traditionally — and oftentimes expensively — cryptocurrencies like Ethereum and Bitcoin have risen to prominence through a complicated series of computer interactions simply called ‘mining’.
In this endeavor, computers pit their powerful hardware components against difficult mathematical equations, unfathomable numbers of times per second, in order to add new cryptocurrency tokens to their blockchains and to verify transactions around the world — without the need of a central governing authority.
So far, so familiar, and so very transformative. Yet for all the debts of gratitude modern crypto assets owe their forebears, proof of stake cryptocurrencies use a far simpler and more attainable process to validate transactions and create value.
Staking cryptocurrencies backs up their entire blockchain network infrastructure, allowing transactions to be validated in ways that don’t require the expensive mining and coding knowledge of cryptocurrencies like Bitcoin.
In proof of stake cryptocurrency blockchains, new blocks are added to the chain and new transactions are registered as accurate by nodes, rather than by mining rigs. What this means is that users who are staking some of their crypto holdings unlock that value and power to run those processes, often far more simply than throwing code at a mathematical problem and hoping to strike it lucky.
This is also why proof of stake cryptocurrencies are often easier, faster and cheaper to send and receive.
Why is this advantageous, besides simply making it far easier for anyone to participate in the crypto ecosystem without advanced and pricey hardware? The beauty comes in the unlocked DeFi potential, and in the capacity to earn via staking pools that pay out for successful transactions and guaranteed liquidity.
This is a whole new money multiplier, and it’s far more effective than banks scurrying around with our cash and trying to grow it with loans and investments. Liquid staking places the power of finance back into everyone’s hands — meaning unlike your bank, it’s up to you if your hard won money should go towards staking or not, and how that should happen.
With a bank account, meanwhile, you simply don’t get a choice — nor do you earn much but a pittance of interest when they do it on your behalf.
Staking is more than nodes and numbers
If this proof of stake system sounds far too complicated to want to get involved with, that’s entirely okay. In fact, countless cryptocurrency holders feel the same way, and that’s why DeFi has unlocked so many powerful ways for staking to yield high returns for different tokens.
If there is one thing cryptocurrencies and blockchain technologies do well, it’s innovation. In recent years there have been numerous tremendous breakthroughs in proof of stake blockchain frameworks, all of which have unlocked tremendous potential to multiply money on behalf of their users.
Staking pools
With Bitcoin, Ethereum and Monero, it’s all about the mining pools — sharing multiple computers’ resources to crack the code and solve the problem on the blockchain that yields big rewards.
The same logic applies in staking pools, which are designed to let users who are staking their crypto tokens the chance to watch that investment grow — and potentially compound over time.
Naturally, staking pools share their rewards in similarly democratic ways that crypto mining pools do — but of course, users don’t have to spend thousands of dollars on computer hardware just to get involved.
How does this compare to traditional banking? Firstly, you are deciding on your own terms if you wish your money to be placed in a staking pool — there’s no automatic enrolment in dishing your money out to everyone upon entry like a bank does.
Secondly, you multiply your cryptocurrencies through decent yields, if you choose your staking pools well — and the interest amounts are often far beyond what even the most generous of traditional banks can offer. That’s the power of DeFi.
Staking on cryptocurrency exchanges
Many of both the biggest and most niche cryptocurrency exchanges are beginning to offer ever more opportunities for liquidity staking. What this means is that users have the advantages of a powerful and vast network of nodes at their disposal, which can make for a more secure and validated way in which proof of stake cryptocurrencies can function.
Of course, some cryptocurrency enthusiasts believe that exchanges are a touch too much like banking institutions in their own right — but it’s fantastic to know that the option exists and is becoming more widespread. Any means by which staking can happen only opens more options to cryptocurrency holders — and choice is always a good thing.
Remember, even if cryptocurrency exchanges seem more centralized than the ethos of decentralization empowering many of the coins they trade in, they often offer decent liquid staking yield percentages that — at the risk of repeating ourselves — still far outclass the interest rates on most bank accounts.
Why should anyone consider liquid staking?
The idea of handing our money over to be used by strangers and to power projects behind the scenes might seem outlandish — yet it’s actually something almost all of us do every day, each time money enters our bank accounts.
The difference with both proof of stake cryptocurrencies and platforms like staking pools is that they bring the control of one’s finances back into their own hands. People opt into staking their crypto — when they open a bank account, they hand over their cash to be loaned out and spent often without ever realizing it.
That utility and liquidity in your money shouldn’t be the price you pay for the convenience of secure accounts. With liquid staking, although you do face the risk of cryptocurrency volatility, you have the chance to participate in powerful new projects, advanced technologies, value exchanges — or just the chance to let your cash earn you some passive income.
Staking crypto isn’t complicated
Once you break down the jargon — and find out how much better a money multiplier liquid staking is versus traditional banking and investing — staking your cryptocurrency becomes an often appealing proposition.
Successful staking pools often pay out their regards in liquid tokens (LTOKENS) — a more liquid form of crypto asset that can more easily be funneled back into the staking ecosystem.
Naturally, anyone receiving LTOKENS can very simply and transparently exchange them back into the tokens of their chosen cryptocurrency in order to cash out. But the real money multiplier comes with adding LTOKENS back into staking pools to keep raising their value over time — all completely passively.
While financial choices like investments and traditional banking nonetheless have their place, the powerful money multiplying capabilities of proof of stake crypto has completely leveled the playing field.
Will the future of money go fully crypto? It’s almost impossible to say. One thing is for certain, however — liquid staking has unlocked powerful new ways for anyone, no matter their background or level of proficiency with cryptocurrency, to put their assets to work on their behalf.
In the future, the relationship between money and tireless work is only set to get ever more divorced. Is staking the future? Maybe, maybe not — but it’s a powerful first step in money multiplication today.
