The Advantages of Liquid Staking for Blockchains
Liquid staking allows for large proof-of-stake (PoS) blockchains to help secure smaller ones, providing benefits that would be advantageous for the entire industry.
Looking back, it is clear that Bitcoin's debut was a pivotal moment in the history of technology. For the first time, blockchain technology was put to use in a real-world setting, demonstrating its potential for revolutionizing industries. Today, blockchain-based projects are springing up all over the world, and it is clear that this technology is here to stay. Thanks to Bitcoin, we are on the brink of a new era of transparency, security and trust.
It's incredible to think about how far the crypto industry has come in such a short amount of time. In just over a decade, the industry has gone from being virtually unknown to thriving with a total market capitalization of $3 trillion. And with more than 300 million users worldwide, it's showing no signs of slowing down. Forecasts suggest that the number of crypto users could reach 1 billion by December 2022, which would be an incredible milestone. Although the industry has come a long way, it's clear that this is only the beginning of its journey.
The blockchain and cryptocurrency industry has seen success thanks to key features of the underlying technology, including decentralization, trustlessness and data security. These features have made leading blockchain networks like Bitcoin robust, with miners providing hashing or computational power to secure the network. Ethereum is set to adopt a proof-of-stake consensus mechanism soon, which will see validators staking digital assets to secure the network.
It is clear that the security of a blockchain network is paramount. However, it is also important to note that the size and scale of a network can also play a role in its security. For example, larger and more established blockchains benefit from having more miners or validators, which in turn increases security. On the other hand, emerging blockchains often lack the resources to fully secure their networks, regardless of their innovative potential.
It is evident that blockchain technology is still in its early developmental stages. Despite this, the potential for blockchain to revolutionize how data is managed and exchanged is huge. One of the key issues that needs to be addressed in order for blockchain to reach its full potential is security. Bolstering interchain security frameworks is one way of solving this rather pertinent problem. Moreover, with innovations like liquid staking, bigger PoS blockchains can help secure the emerging ones, ultimately facilitating a safer and stabler industry overall.
Interchain security matters for all blockchains
I believe that sharing validators between different blockchains is a positive development. It shows that the industry is willing to cooperate in order to promote mass adoption of blockchain technology. This is important because blockchain technology has the potential to revolutionize many industries. By working together, different blockchains can help each other to reach a wider audience and achieve mass adoption.
I believe that PoS blockchains are more vulnerable to majority attacks than PoW-based blockchains. As Billy Rennekamp of the Interchain Foundation pointed out, "If one can control one-third of a network, they can do censorship attacks and if they control two-thirds of the network, they can control governance and pass a proposal for a malicious upgrade or drain the community pool with a spend proposal." I think that this is a major problem with PoS blockchains and something that needs to be addressed.
There is no doubt that the move from proof-of-work (PoW) to proof-of-stake (PoS) is a welcome one. Not only will it reduce the massive energy consumption and environmental impact of PoW chains, but it will also make the industry more secure. However, this change could also cause an industry-wide security crisis if proper measures are not put in place. Thus, enhancing interchain security is a win-win approach and, indeed, the need of the hour.
Liquid staking optimizes interchain security, making it more reliable and efficient.
There is no doubt that interchain security is a hot topic in the cryptocurrency world. The Cosmos Hub is leading the way in terms of actual implementation, but there is still much room for improvement. Liquid staking is one possible innovation that could take interchain security to the next level.
Liquid staking is a crucial development for the cryptocurrency and blockchain industry, as it unlocks the liquidity of assets that would otherwise be locked up in staking pools. This allows users to generate optimal yields by using their staked assets in decentralized finance (DeFi) applications, and also opens up new possibilities for yield maximization beyond staking alone.
If you're looking at liquid staking protocols from a purely financial perspective, then you're missing out on a key advantage – enhanced security. These protocols allow validators on established PoS blockchains to verify transactions on smaller 'consumer' chains. This means that validators have a financial incentive to behave in a way that protects the interests of both chains.
The main significance of liquid staking is that it makes it possible to share validators across multiple chains. This means that the value of assets staked on one chain can be used to secure another chain. This is a big deal because it makes it possible to use the same validators for multiple chains, which makes it much easier to keep track of and manage security for multiple chains.
This article is for general information purposes only and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
