Traditional vs. Flash Unstaking: Understanding the Difference
February 14, 2023
3 min read
Although staking is seen as one of the most reliable ways to earn yield in crypto, the unstaking process is by far the most robust and costly process. Flash unstaking is a disruptive innovation that unlocks capital efficiency for your liquid staked assets.
What is a Flash Pool and how does it make use of ankrBNB?
The structure of the Flash Unstake Pool includes two main tokens - BNB and ankrBNB - to support instant redeemability against Ankr’s ankrBNB token to reduce liquidity risk while finding alternatives for ankrBNB Decentralized Exchange Liquidity Pools.
Flash Pools are the next step in Ankr’s vision for supporting liquidity for our Liquid Staking tokens in a sustainable way. The first pool is geared towards reward-bearing ankrBNB and BNB tokens that we hope will further reduce ankrBNB’s liquidity risk and token price volatility.
The core of the Flash Unstake BNB pool will be to offer a fixed swap between ankrBNB and BNB matching the redemption price of ankrBNB with funds available immediately – something that was not possible before. The Pool will be further improved to accommodate dynamic fees and earn lending interest on BNB not used by Flash unstaked yet.
Starting with a fee of 0.5%, we are optimistic about lowering it in the future once the concept of the Flash Unstake pool has been fleshed out and the size of the pool has stabilized. For the time being, this fee is still pretty competitive when you factor in the lack of slippage and swap fees usually present on DEXs. Whenever there is a price discrepancy between two Decentralized Exchanges (DEX), flash loans can help borrowers magnify their profits by seizing a successful arbitrage opportunity.
Adding flash loans to the equation opens another avenue for users to engage with the pool and for Ankr to earn from the applied fee. For example, if users have borrowed BNB, they can swap their collateral from BNB to Ankr’s reward-bearing ankrBNB token.
Advantages of Flash Unstaking
First let’s get clear on how the traditional unstaking process work with Ankr’s liquid staked tokens. As with any type of staking there is an unbonding period. In the traditional unstaking process your liquid staked tokens are burned and the original asset is unstaked which requires an unbonding period of a few days to over a month.
In contrast, flash unstaking doesn’t involve unbonding periods because it utilizes the advantages of having the liquid staked token and the original asset in a liquidity pool. With flash unstaking your liquid staked tokens are exchanged for the original asset. Then, the original asset then instantly shows back up in your wallet.
The Risks of Traditional Unstaking
The biggest downsides of traditional unstaking is that the unbonding period you have to wait is also the amount of time that your missing out on other opportunities in the DeFi ecosystem that you would have if your assets were liquid. This means that you miss opportunity cost when your assets are locked.
Furthermore, when your assets are locked you have no control over your assets. Which, given the volatile nature of the crypto market, means that you could potentially lose quite a bit of money if the token decreases radically in price.
Unpacking the Utility
Flash unstaking takes the staking process one step closer to a fail-proof crypto savings around. Now you can both stake your assets immediately with liquid staking capabilities and unstake them immediately with flash unstaking. Thus, you can compound your earnings through the power of staking and you can have your original assets back in a moments notice.
That being said, flash unstaking is an exciting new addition to the Ankr repertoire of services. With flash unstaking you can now circumvent all the downsides of lengthy unbonding periods for the low cost of a 0.5% fee. BNB is the first token that we’re enabling this feature on – stay tuned!