Before delving into Liquid Staking, it's crucial to understand the concept of staking. Staking involves participating in a blockchain network by locking up your cryptocurrency to support its operations. In return, you receive rewards, akin to earning interest on savings, contributing to network security and functionality. However, staking locks your coins, rendering them illiquid, as they cannot be sold or traded immediately. They undergo an unstaking period before becoming liquid again, which varies across blockchains, typically ranging from 7 to 21 days.
Now, what exactly is Liquid Staking? It's a process where you stake your cryptocurrency assets to earn rewards while retaining their ability to be used elsewhere, such as trading or providing liquidity in DeFi platforms. Unlike traditional staking contracts with withdrawal waiting periods, liquid staking offers flexibility and access to your funds while engaging in staking activities. It's akin to earning interest on savings while having the freedom to withdraw funds whenever necessary.
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