Over the years, many projects different are rumored to be " killer )” in the future, many projects will subvert from the throne and claim the title of top digital asset. That day seems to have come when Staked Ethereum (stETH) – a liquid token from Protocols and other liquidity staking derivatives are said to have the ability to make Ether () as an obsolete property.

The conversion from Proof-of-Work (PoW) to Proof-of-Stake (PoS) enable decentralized finance users () daily benefit from rewards previously available to miners simply by holding stETH or any other liquid staking derivative of ETH. This has created a wave of interest across the industry, from individuals to institutions across centralized finance (CeFi) and . Over the past month, ETH liquidity staking derivatives have received a lot of attention, including industry giants including and Frax.

Liquid staking derivatives provide all the benefits of regular ETH while also being a profitable asset. That means holders can gain exposure to ETH's price action and maintain liquidity while harnessing staking benefits. Wallets holding stETH will see their holdings gradually increase as regular staking profits are added to the initial total.

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While most staking strategies require locking coins in a validator, liquid staking derivatives allow users to maintain liquidity while still benefiting from staking profits. ETH locked in staking validators will not be available for withdrawal until an unclear time in the future, possibly with the Shanghai update. While stETH is still trading slightly lower than ETH, this gap is expected to close once withdrawals are activated. Simply put, ETH liquidity staking tokens are just more capital efficient than standard ETH or traditional staking methods.

From a user perspective, there is little reason to hold ETH, where the only potential profit would be bullish as they can hold a liquid staking derivative that will increase returns through staking. The project founders adopted a similar strategy. From DeFi to non-fungible token projects (), many teams on Web3 have integrated stETH into their protocols, giants like and making it easier for DeFi users to integrate stETH into their investment strategies.

ETH has become obsolete after The Merge

For lending protocols, stETH provides the ability to raise collateral without having to make risky investment decisions to keep users happy. The projects can establish a revenue stream through proceeds rather than leaving a finite sum. By making it easier for Web3 projects to survive and keep their communities happy, ETH liquidity staking derivatives help project leaders move beyond money worries and toward true innovation. .

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In addition to being more capital efficient, ETH's liquid staking derivatives also help maintain the Ethereum network. stETH, and other derivatives representing Ether, have been deposited into the Ethereum validator to help provide network security.

The concentration of staked ETH has become a cause of criticism for the consensus model , with Lido taking over 80% market share of liquid staking derivatives while controlling over 30% staked ETH. However, the recent proliferation of alternatives is poised to quell such anxieties as market share becomes expansive among disparate institutions. Swapping ETH for liquid staking derivatives is a means for users to support decentralization while still generating profits.

As the benefits of staking continue to be introduced in the press, liquid staking derivatives will inevitably become a central part of even the simplest DeFi strategies. offering “cbETH” means that even retail investors will be familiar with this strategy. Protocols that accept liquidity staking derivatives will become explosive as users begin to flock to essentially free returns. Before long, many DeFi users may be holding ETH only to cover their gas fees.

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The rise of liquid staking derivatives will help to increase the amount of ETH deposited into various validator systems, enhance network security, while also providing profits for the financial benefit of backers. . ETH's days appear to be numbered. In addition to the nominal gas subsidy, any ETH that is not converted into a liquid staking derivative means you have not been able to take advantage of the available advantages resulting in missing out on a great bargain. The long-heralded Ethereum killer will emerge, although it looks like it will only increase the security of Ethereum and its supporters' funds.

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