The Science Of Liquid Staking & How It Has Become A New Passive Income Strategy

Innovations continually arise, offering opportunities for both seasoned and new investors. Liquid staking combines staking rewards with liquidity, transforming passive income strategies in the crypto space.

Traditional staking in Proof-of-Stake (PoS) networks involves locking up cryptocurrency to support network operations like validating transactions. In return, stakers earn rewards in the form of additional tokens. However, this ties up staked assets, making them illiquid and unavailable for other uses. Liquid staking addresses this liquidity issue by allowing users to stake their assets while retaining their value for other DeFi activities.

This is achieved by issuing derivative tokens representing the staked assets. For instance, staking cryptocurrency grants an equivalent amount of a liquid staking token, tradable or usable as collateral in DeFi applications. As investors seek passive income and leverage crypto market liquidity, liquid staking is emerging as a viable option. And bemo is looking to provide additional flexibility to investors going forward. We interviewed Pavel Altukhov, Founder and CEO, to learn about their vision and unique approach to optimizing staking:

• What differentiates bemo from other liquid staking protocols?

Simply put we are the highest liquid staking yield in TON. It is not only the staking yield our users get but the share of bemo itself. 

We share the application with every user giving out the $stXP, points for using the app. In November all $stXPs will be converted into $BMO, the platform’s native utility token.

$stXP is listed on a DEX, so it’s pretty straightforward how everyone can quantify the yield premium that our platform provides. As of mid-June, the staking yield our users receive is 3.44% annualized. What’s important is not the APY projection, but the 90-day average realized return on staked capital in the app net of fees, that is what you as a user practically get. On top of it you receive a minimum of  4.47% in $stXP based on the current exchange rate of $stXP to $TON. You get an incentive multiple up to 9,8% if you hold $stTON longer and also if you have a large amount staked. To summarise, your platform allows every user to receive almost 8% annualised yield on $TON staked. 

The second differentiator is the yield farming strategies we provide in a comprehensible format right within the app. You can choose the way to further extend the yield by providing liquidity on DEXs or leveraging staking using the lending protocol. Users can get a 20% annualized return benefiting from different incentives TON and its apps are providing right now. 

• As passive income demand grows, what passive income do you think the DeFi space could provide to investors?

Staking native tokens has become a popular strategy for earning passive income in the crypto world, and liquid staking has only expanded these opportunities. This is evidenced by the rapid growth of liquid staking on Ethereum in 2022-2023 and the popularity of platforms like Lido, which is now the top platform by TVL in all of DeFi. The development of this trend has led to the emergence of many DeFi projects built on liquid staking, known as LSDfi. These projects have increased the utility of liquid staking tokens and provided additional income. All this offers many opportunities to earn passive income in DeFi.

Another direction could be the emergence of synthetic stablecoins, such as Ethena. Such a stablecoin is backed by liquid staking tokens, with their position hedged by perpetual futures. The result of this strategy will be earnings from staking and from the futures position (funding rate). The main feature of this strategy is that it is market-neutral, meaning it does not depend on market movements, making it possible to build a stablecoin like USDe which can earn passive income. The demand for this strategy is confirmed by the rapid growth of the Ethena project, whose TVL has already exceeded $3 billion.

DeFi is actively evolving, and the emergence of more advanced applications and derivatives will foster the development of new strategies. Additionally, trends such as restaking and RWA are gaining momentum, which can also provide passive income for investors.

We actively monitor all trends in DeFi and are constantly considering the possibility of using stTON in other projects to increase the utility and profitability of users.

• How do you see the regulatory landscape changing with liquid staking?
  

Regulation in the crypto industry is largely uncertain, and liquid staking is no exception. 

Our team is constantly monitoring the latest changes and trends in crypto industry regulation and consulting legal experts to ensure that all of this is considered in the future development of our platform. We aim to create the most open and legal setup for our products.

• What protocols have you put in place to safeguard investor funds?

bemo is a non-custodial liquid staking platform. This means that our application’s smart contract ensures that only you have access to your TON tokens.

Security is the most important aspect of everything we do here. That is the reason we have undergone two audits by Certik and Tontech and have a third one coming in August. In addition to that we have been privately audited by several whale $TON investors and blockchain development contributors.

Our code base is not open-sourced until the audits are finalized and the recommendations are implemented. This approach underpins our strict security standards and differentiates us from others within the ecosystem.

• What decisions informed your choice of a base blockchain to operate?

We believe TON partnership with Telegram makes blockchain technology finally available to the massive audience of the messenger. That seems as the most probable way of delivering the value of the blockchain tech and its applications to hundreds of millions of non-crypto users worldwide. Bet on that to eventually happen made our choice of the blockchain obvious.

Conclusion 

Liquid staking offers DeFi users both liquidity and asset utility, and as the market evolves, it is expected to significantly enhance investment opportunities for crypto users.