Staked ETH is more capital efficient and more profitable than regular ETH, and liquid staking derivatives are making it even more popular.
users to benefit from rewards previously reserved for miners simply by holding stETH or any other ETH liquid-staking derivative. This has given way to a wave of interest across the industry, from individuals to institutions across centralized finance and DeFi. In the past month, the ETH liquid staking derivatives have received a ton of attention, and titans of the industry — including Coinbase and Frax — have released ETH liquid staking derivatives.
Liquid staking derivatives offer all the benefits of regular ETH while also being a yield-generating asset. That means holders are able to gain exposure to ETH’s price action and maintain liquidity while harnessing staking benefits. Wallets holding stETH will see their holdings gradually increase as staking yields are regularly added to the initial sum.
From a user perspective, there’s little reason to hold regular ETH, where the only potential upside would be an increase in price when they could hold a liquid staking derivative that would boost their prospective profits via staking yield. Project founders have adopted a similar mentality.
For lending protocols, stETH offers the ability to increase yield collateral without having to make risky investment decisions to keep users satisfied. NFT projects are able to establish a source of revenue through their mint proceeds rather than being left with a finite lump sum. By making it easier for Web3 projects to stay afloat and keep their community happy, ETH liquid staking derivatives free up project leaders to move beyond money worries and shepherd true innovation.
Beyond being far more capital efficient, ETH liquid staking derivatives help in maintaining the Ethereum network. stETH and other derivatives represent Ether, which has been deposited into an Ethereum validator to help provide network security.
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