Blockchains have relied on proof-of-work<\/a> (PoW) validation since their inception. Yet the PoW consensus proved to be unsustainable with its high energy usage and its need for fast, powerful hardware creating high barriers to entry. That\u2019s why blockchains are adopting proof-of-stake consensus algorithms (PoS), where those wanting to earn rewards don\u2019t have to compete against other miners, but can simply stake part of their crypto for a chance to be chosen to be a validator \u2014 and reap the returns.<\/p>\n Everyone who owns crypto on PoS blockchains must want to take advantage of the opportunities staking provides, right? Actually, according to our report<\/a>, while 56% of those surveyed had staked before, many who hadn\u2019t staked or wouldn\u2019t stake again pointed toward the same hesitation: They don\u2019t want their assets locked up in staking, not when those assets could be put to use elsewhere. This is why liquid staking provides the best of both worlds. It allows investors to stake their assets while also allowing them to use those assets in other projects during lock-up.<\/p>\n Despite the fact that this innovation is able to lower barriers to staking, there\u2019s still confusion about what liquid staking is and what it can offer to the crypto community. What follows are some of the misconceptions about liquid staking and what the truth is about this new opportunity.<\/p>\n Related: <\/em><\/strong>The many layers of crypto staking in the DeFi ecosystem<\/em><\/strong><\/a> <\/strong><\/p>\n Staking is changing the way blockchains function. It brings better energy efficiency to blockchain validation, more flexibility to the hardware needed and quicker transaction frequency. But despite its benefits, one of its biggest challenges \u2014 and what\u2019s holding many back from staking \u2014 is the lock-up period. Assets are inaccessible to the holder while being staked, and those owners can\u2019t do anything with them \u2014 like invest in decentralized finance<\/a> (DeFi) \u2014 while they\u2019re being staked. It\u2019s because of this sacrifice that many are hesitant to stake.<\/p>\n However, liquid staking solves this issue. Liquid staking protocols allow holders of staked assets to get liquidity in the form of a derivative token that they can then use in DeFi \u2014 all while the staked assets continue to earn rewards. It\u2019s a way to maximize earning potential while having the best of both worlds.<\/p>\n PoS is also swiftly rising in popularity. PoS protocols account<\/a> for over half of crypto\u2019s total market cap, a total of $594 billion. The opportunities will only increase as Ethereum moves fully to PoS in the coming months. However, only 24% of the total market capitalization of staking platforms is locked<\/a> in staking \u2014 meaning there are many who can stake but aren\u2019t doing so.<\/p>\n![](\"https:\/\/s3.cointelegraph.com\/uploads\/2022-05\/58cbe065-a449-476b-8ca7-f2b662be6cc8.png\")
<\/figure>\nWhat is liquid staking?<\/h2>\n
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