Disclosure: The ideas and opinions expressed here are only for the author and do not represent the ideas and ideas of the editorial of Crypto.
In 2024, the liquid became the leading niche in stacking Defy. Without the excessive atherium (ETH), the Crypto industry, providing an opportunity to unlock excess liquidity, reached the top of the Defy Mountains and crossed the threshold. $ 60 Bln In TVL.
This is a little surprised, as the block reward -receiving property is the most productive property in decentralized finance and should be used as a high quality collateral in DEFI. However, despite an increase in the popularity of liquid stacking, its major intervals remain inadvertently. Getting its long-term ability to fully is impossible without recognizing these defects-and taking action to eliminate them.
Risk of derived tokens
Why did liquid stating experience such a rapidly and widely adoption? Locked property does not earn any returns other than stacking rewards for block verification – an integral part of safety of ecosystems but pain for investors who sacrifice their liquidity and are exposed to opportunity costs. In traditional finance, the issue of debt does not earn anything, but the interest was sidelined by the recurrent agreements. Repos represents a traditional claim for assets deposited, which is actually the function of LSTs and LRTS.
However, LSTs and LRTs are subject to the same weaknesses similar to their tradfi counterparts. The value of a liquid-stake token is supported by its collateral, which is ETH pooling the verification node. Ideally, there should be one-to-one peg between the underlying value and the market value of a liquid-stake token. This means that no buyer should question whether the Representation of ETH will eventually be repaid when the locking period is over.
What if it is not? What if a verifier misbehaves and is punished by slashing? What if the liquidity pool for a specific LST pair to the extent that traders are not ready to hold their positions? What if the protocol faces an attack, as it often occurs in DEFI?
A confident drop, a run, and collateral de-pinging-this is the sequence that brought down the notorious anchor protocol of Terra-luluna and ripped Ominely throughout the industry. We are only at the beginning of the rabbit hole of systemic risk: For example, liquid restorating tokens represent a stacked asset claim and it can be used to support the safety layer of several protocols at a time. When correlated slashing – now only a theoretical possibility – becomes reality, the entire Defee industry can be destroyed in flames.
We need diverse risk strategies, continuous code audit and dependence on many tokens and platforms. Otherwise, the growing spine of the DEFI economy will be fragile forever.
Accessibility challenges
While the underlying systemic risk, of course, is a barrier to the long -term capacity of liquid stacking, there are close obstacles to its broad adoption. Liquid stacking as a technique is currently limited to experienced DEFI users, which leads to ordinary crypto enthusiastic and new people of the industry. The list proceeds – the list goes ahead – the list for complex interfaces, high gas charges, lack of onboarding, technical complications, a complex technique. Even the sheer abundance of liquid stacking and resting tokens is misleading, especially when a user accumulates to Abseth, withdraws Zizeth, and gets frustrated and disappointed.
To become inclusive, accessible and user friendly for liquid stating, platforms should focus on spontaneous design, simplified onboarding processes and education. They require a consistent and familiar UI and collateral transparency, as well as provide a complete picture of risk risk and comparable yield matrix to their users. Reducing financial entry threshold through layer -2 protocol can also make it more accessible to small scale investors.
The UX and UI have recently become the industry’s buzzword clich, but it is important to remember that the problem below still needs to be solved. Liquid stating can transition to the financial solution of the mainstream from a niche device, but this will only be when the users are satisfied with it.
Utility expansion and standardization
The main quality of LSTs is a continuous earning block award which they offer. Ethi stacking is securing the economic activity of Etreum through verification nodes. As long as there is a transaction activity on the ETH network, the rewards will be stating.
But staking LST should not be the only option for use: Thousands of monthly active users are looking for utility in holdings with billions of dollars, and their demands should be satisfied. TVL in LST and LRT is growing faster than opportunities to deploy those similar conditions in Defi opportunities. These tokens take time to integrate in borrowed protocols, always trading, etc., as they require business-to-business partnership at the protocol level.
No, imagine whether you are trying to integrate five separate LST and LRT assets with Aave (Aave). This will be a log jam! Soon, if not already, the stacking will turn into betting borrowing.
Nothing is wrong towards this. However, it is incorrect that it is not recognized by users who tolerate the opposition risks and provide liquidity. The industry requires a more diverse range of platforms to accept LST and provide access to real yield to its users – and this must be done safely and transparently. LST-and LRT-oriented platforms can reinforce the Defi economy. As the power money markets, digital asset management, and even the Crypto-foreign hedge funds-as a composition with produce-bearing, LSTs will offer a lot of rooms to adopt the existing Tradfi concepts to the existing Tradfi concepts.
Finally, standardization is important for itself tokens. In addition to the despair and confusion mentioned, they make, another argument for token regulation is more resulting. First, each platform requires maintaining separate liquidity pools for each trading pair. Secondly, if a token collapses, given a individual LST and the underlying risk factors for the wave effect on the entire market, the case is clear for single diverse LST-derived property.
the future is now
In the early days of liquid staking, some people thought it would be possible to reach the current levels of TVL. And even this is only the beginning: liquid stacking can bridge the gap between a powerful innovation and a device for everyday use. For this, however, the DEFI community must work to eliminate poor pieces for the current flaws and systemic risk and lack of systemic risk and utility proposals from poor UX.
The future is now – but it is up to us that it really happens so.
