Liquid staking, which allows investors to generate extra yield on top of standard rewards for staking or locking coins in a network, is becoming increasingly popular outside of the Ethereum blockchain.
pSTAKE, the liquid staking protocol from the Tendermint-based layer-1 network Persistence, is rolling out a liquid staking functionality for binance coin (BNB), the native coin of the Ethereum rival BNB Chain, the platform announced Monday in a press release shared with CoinDesk.
At press time, BNB was the fifth-largest cryptocurrency with a market capitalization of nearly $53 billion, and the BNB Chain was the world’s second-largest smart contract blockchain. Staking, which refers to the process of holding coins in a cryptocurrency wallet in return for rewards, is essential for decentralized, on-chain governance of the BNB Chain.
Users can stake their BNB via the pSTAKE app while receiving staked BNB or stkBNB, a liquid representative of the BNB deposits initially valued 1-to-1 with the native token. These stkBNB tokens will be directly minted as BEP-20 tokens. They will offer seamless integration with the BNB Chain-based decentralized finance applications, meaning the stkBNB tokens can be used elsewhere to earn additional yield. So, users will have two sources of income: yield generated from lending and borrowing stkBNB and rewards for staking BNB, which will come from transaction fees paid by users of the BNB Chain. There are more than 1,500 decentralized applications on the BNB Chain.
“Even with the market sentiment not being the greatest, In Q2 2022, BNB Chain saw an increase in new addresses created on a daily basis. This shows that there are a lot of new participants entering the BNB ecosystem and there is no better place for them to start than by liquid staking their BNB to earn ~5.5-6% staking rewards and have the opportunity to utilize stkBNB in other yield generation avenues such as liquidity provisioning and borrowing against it,” Mikhil Pandey, the pSTAKE project lead, told CoinDesk.
With traditional staking, investors lose liquidity of their coins and forego yield-generating opportunities. Liquid derivatives like stkBNB solve that problem by unlocking the value of staked BNB, which can be used elsewhere. Therefore, pSTAKE is confident that stkBNB will accelerate the growth of the BNB Chain ecosystem. The company already offers liquid staking products for the Cosmos, Persistence and Ethereum networks.
“This [stkBNB] will incentivize both new and existing BNB holders/users to increase their participation in the broader BNB ecosystem, which means a higher staking ratio and a stronger network,” pSTAKE said in the press release. The value of stkBNB will increase against BNB as the BNB staked through pSTAKE accrues staking rewards in the background.
pSTAKE will allow users to stake any non-zero amount of BNB and bypass the traditional seven-day “unbonding” period when unstaking BNB by trading their stkBNB for another asset at any time. BNB staked on other liquid staking platforms like Ankr and SteakBank are subject to at least a seven-day unbonding period. Further, Ankr requires users to stake at least 1.002 BNB to get started. The unbonding period refers to the amount of time a user needs to hold the staked cryptocurrency before it can be sold or transferred.
Besides, pSTAKE has waived off protocol fees for 90 days, which allows users to earn 100% of the staking rewards.
The BNB liquid staking market is smaller than the one for ether, with just four platforms – Ankr, SteakBank, AtaFi and Stader – offering the supposedly in-demand service at the end of July. As of this writing, eight ether liquid staking platforms, led by Lido, held more than 4.5 million ETH ($7.72 billion), according to Dune Analytics.
Correction: (9:13 UTC): Persistence is a layer-1 network powering an ecosystem of DeFi applications focused on unlocking the liquidity of staked assets. The previous version erroneously mentioned Persistence as India-based trade finance firm. The firm moved away from trade finance last year.