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  • Writer's picturePyxie Funk

Liquid Staking - Explained

Liquid staking stands at the forefront of innovation within the decentralized finance (DeFi) sector, fundamentally altering user interactions with blockchain environments such as Shibarium. Launched by K9 Finance, this method aligns seamlessly with the principle of generating genuine, sustainable returns (real yield) and significantly enhances its benefits, thus creating an ecosystem that is more adaptable, vigorous, and financially resilient.

Understanding Liquid Staking

Liquid staking revolutionizes the conventional staking approach by enabling investors to allocate their digital assets towards bolstering the blockchain's security and consensus protocols, all while maintaining access to their capital's liquidity. In the standard staking framework, participants must lock up their cryptocurrency, supporting the network's security and functionality. However, this immobilization restricts their flexibility to utilize these assets in other DeFi market areas, potentially causing them to miss out on valuable opportunities in a fast-paced market environment.

The innovation of liquid staking lies in its solution to this problem: the issuance of derivative tokens that represent the original staked assets. These derivatives act as a liquid counterpart to the otherwise locked funds, allowing holders to continue participating in other DeFi activities without interrupting their staking contributions. These tokens can be traded on exchanges, used as collateral in lending protocols, or engaged in yield farming strategies, providing a dual benefit of contributing to network security while still permitting asset circulation and yield generation.

Technically, this process involves sophisticated smart contract frameworks that manage the issuance, tracking, and redemption of derivative tokens in alignment with the underlying assets' staking status. This ensures that while the original tokens are staked in the network, contributing to its security and consensus processes, the derivative tokens mirror the staked value and can be actively used by the holder.

This system not only ensures the smooth issuance and management of the derivative tokens but also preserves the integrity and security of the staking process. By facilitating a dual advantage of asset liquidity and participation in the network's security, Shibarium's approach to liquid staking exemplifies the balance between innovation and functionality in the DeFi sector.

Technical underpinnings of Liquid Staking in Shibarium

K9 Finance introduces liquid staking to the Shibarium blockchain through a meticulously designed technical framework that seamlessly integrates with the existing DeFi infrastructure:

  • Derivative token issuance: Upon staking their native tokens (e.g., $BONE in Shibarium), participants receive an equivalent amount of derivative tokens ($knBONE from K9 Finance). These tokens mirror the value of the staked assets but offer the added advantage of liquidity.

  • Smart contract architecture: The process is governed by smart contracts that manage the staking, issuance, and redemption of derivative tokens. This makes everything clear, safe, and efficient, fitting perfectly with the blockchain's goal of being open and decentralized.

  • Integration with DeFi protocols: The derivative tokens are designed for compatibility with various DeFi protocols within Shibarium, enabling participants to engage in lending, borrowing, and yield farming activities without un-staking their primary assets.

Liquid Staking's relationship with Real Yield

Liquid staking and real yield are intricately connected, each amplifying the benefits of the other within the Shibarium ecosystem:

  • Enhanced economic activity: Liquid staking increases the velocity of token circulation within the ecosystem, encouraging broader participation in DeFi protocols. This elevated activity generates more transaction fees and protocol-specific revenues, contributing to the pool of real yield that can be distributed to participants.

  • Sustainability and growth: By allowing users to leverage their staked assets in multiple DeFi protocols simultaneously, liquid staking fosters a more vibrant and robust economic environment. Consequently, this dynamic fosters a magnetic pull, attracting additional users and developers to Shibarium, which fuels innovation and opens up fresh avenues for generating tangible returns.

  • Aligned incentives: The dual benefits of earning real yield while participating in liquid staking ensure that users' incentives are closely aligned with the long-term health and success of the Shibarium ecosystem. This encourages people to put more into the platform and get more involved, knowing that what they do helps earn steady money.

Read more about Real Yield and K9 here

The future of Shibarium: Liquid Staking and Real Yield

The integration of liquid staking and real yield by platforms like K9 Finance represents a significant leap forward in the evolution of DeFi. This interdependent connection skillfully tackles the pressing issues of liquidity and economic endurance, while simultaneously establishing unprecedented benchmarks for user involvement and the generation of value in blockchain networks.

With Shibarium's adoption of these groundbreaking innovations, it stands on the brink of transforming the decentralized finance landscape, presenting a paradigm that harmonizes adaptability, profit potential, and ecological viability. Looking ahead, Shibarium, energized by the combined powers of liquid staking and real yield, envisions a future where the blockchain ecosystem thrives as a vibrant center of economic operations, creativity, and community-led expansion. This positions Shibarium as a foundational pillar in the DeFi realm, signaling a new age of growth and innovation.

Example: Brie ventures into Liquid Staking

Brie, an enthusiastic but relatively new investor in the world of DeFi, had recently turned her attention to the Shibarium blockchain, intrigued by its promise of innovation and real yield opportunities. Her goal was to earn passive income while maintaining liquidity - a balance she found hard to strike in traditional finance.

Upon discovering K9 Finance's liquid staking option in Shibarium, Brie saw an opportunity to explore. With $10,000 worth of $BONE tokens in her wallet, she decided to take the plunge.

The process was straightforward:

  • Staking $BONE: Brie staked her $BONE tokens through K9 Finance's platform. This action was akin to depositing money in a bank, but in this case, she was supporting Shibarium's network.

  • Receiving $knBONE: In return for staking her tokens, Brie received an equivalent amount of $knBONE, a derivative token that represented her staked assets. These tokens were liquid, meaning she could trade them or use them in other DeFi protocols without needing to unstake her original $BONE tokens.

With her $knBONE tokens, Brie ventured further into Shibarium's DeFi landscape. She engaged in:

  • Lending: Brie lent a portion of her $knBONE to other users through a lending platform, earning interest on her loan.

  • Yield Farming: She also used some of her $knBONE to enter a yield farming pool, pairing it with another token to earn farming rewards.

These activities allowed Brie to earn additional yield on her staked assets without sacrificing her initial investment's liquidity. After several months, Brie was pleased to see her digital portfolio grow. Not only had she earned interest and farming rewards, but the $BONE tokens she originally staked had appreciated in value. Liquid staking allowed her to participate actively in Shibarium's DeFi ecosystem, contributing to its liquidity and earning real yield, all while her original investment remained secure and productive.


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