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Ankr Liquid Staking

Liquid Staking solves the problem of locked up liquidity when staking assets on Proof-of-Stake networks.

Staking rewards from Proof-of-Stake networks can be one of the most stable streams of income available (in percentage terms). However typically you have to wait until the end of the staking period to get your staking rewards.

Liquid Staking provides instant liquidity for staked assets in the form of Liquid Staking tokens.

Liquid Staking tokens represent the value of your staked assets but the tokens are portable, accessible and thus liquid. They can now be utilized in a number of ways.

For example,

  1. Provide liquidity on Decentralized Exchanges Pairs of tokens for example Liquid Staking token aAVAXb and native AVAX can be deposited in liquidity pools on a number of DEXs such as Uniswap. By providing liquidity, you can earn additional rewards. As more people trade, you can earn a share of transaction fees (Liquidity Mining), on top of your AVAX staking rewards from aAVAXb.

  2. Receiving additional tokens from DEXs By providing liquidity, you also have the possibility of receiving farming rewards or tokens on top of Liquidity Pool tokens, representing your share of a liquidity pool on a DEX.

  3. Earn more yield You can harvest the farmed tokens and stake those tokens as well to earn more yield, or simply sell them to buy more AVAX and aAVAXb to generate more yield. Repeating this operation periodically can add a compounding effect to yield.

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Types of Liquid Staking tokens

There are two types of Liquid Staking tokens: reward earning tokens and reward bearing tokens.

Reward earning tokens

Reward earning tokens, aka rebase tokens, represent the staked asset. They resemble stablecoins, in the sense they both have price targets. However, unlike stablecoins, reward earning tokens have an elastic supply. Rewards occur through the rebasing process where more tokens are issued to the stakers' wallet, increasing the number of tokens without changing their price. The rebasing process happens routinely, every 24 hours.

For example, if you stake 1 ETH, you are issued 1 aETHb. Every 24 hours your aETHb balance increases — a portion of aETHb is added to your wallet, according to your stake amount and the current yield value.

Reward bearing tokens

Reward bearing tokens represent the staked asset plus all future staking rewards. They don't grow in number but grow in value. For example, the fair value of 1 aETHc token vs. ETH increases over time as staking rewards accumulate, i.e. 1 aETHc becomes worth increasingly more than 1 ETH.

How do I get Liquid Staking tokens?

Liquid Staking tokens are automatically issued to your Ankr Staking Dashboard when you successfully stake assets such as ETH, AVAX, FTM, BNB.

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For example,

  1. AVAX Liquid Staking tokens - aAVAXb and AVAX pairs can be used to provide liquidity to aAVAXb/AVAX liquidity pools on Decentralized Exchanges (DEXs). As more people trade, you can earn a share of transaction fees (Liquidity Mining), on top of your AVAX staking rewards from aAVAXb.

  2. By providing liquidity, you also have the possibility of receiving farming rewards on top of Liquidity Pool tokens, representing your share of a liquidity pool on a DEX.

  3. You can harvest the farmed tokens and stake those tokens as well to earn more yield, or simply sell them to buy more AVAX and aAVAXb to generate more yield. Repeating this operation periodically will add a compounding effect on my yield.

Liquid Staking benefits

The benefits of Liquid Staking depend on your choice of staked asset.

1. Liquidity

When you stake ETH and receive Liquid Staking tokens (aETHb, aETHc) the main benefit is the liquidity as it is not possible to unstake ETH for the moment until phase 1.5 of Ethereum 2.0.

2. Elastic supply

For chains that allow unstaking such as Avalanche, the beneift is the elastic supply of Liquid Staking tokens.

Elastic Supply Tokens work in such a way that the circulating supply expands or contracts to offset changes in a token's price via rebasing. When you stake AVAX and receive Liquid Staking tokens aAVAXb, the circulating supply of aAVAXb increases. When you want to unstake your AVAX, you must return your aAVAXb to Ankr Staking. Your aAVAXb is burnt and AVAX is returned to you.The circulating supply of aAVAXb decreases.

3. Price stability

The Elastic supply feature of liquid staking has an important impact on the price stability of Liquid Staking tokens.

ETH liquid staking price stability is based mainly on the amount of liquidity in DEXs. However, with AVAX liquid staking, the price stability is less dependent on the amount of liquidity in a DEX because any price deviation of aAVAXb creates a trading opportunity for other users. Other users can buy aAVAXb at a discount and then return aAVAXb to Ankr Staking(unstake) to claim the aAVAXb fair value. In doing so, a gain can be realized once the unstaking lock-up period, of 28 days for aAVAXb has passed.

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