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Staking Protocols

A paradigm shift is unfolding in the crypto world: Liquid Staking, an evolution of crypto staking that offers increased liquidity and an open door to Decentralized Finance (DeFi). Pioneering this groundbreaking trend is Ethereum (ETH-USD). The meeting point of Liquid Staking and DeFi, also termed LSDfi, promises substantial growth potential. However, it is prudent to navigate this landscape with regulatory uncertainties in mind.

Delving into Liquid Staking, it's a forward-thinking strategy that tokenizes staked assets, allowing them to be leveraged in DeFi. It sidesteps the need to unstake assets, offering liquidity and flexibility—qualities that are reshaping the DeFi sphere. The concept has been gaining traction since Ethereum made strides in the realm.

Interestingly, Richard Heart's HEX cryptocurrency had already sowed the seeds of success with such advancements. HEX, with its unique high-interest blockchain Certificate of Deposit, blazed the trail. It showcased the potential of staking/mining in earning passive income while ensuring assets stayed locked for user controlled periods of time, showcasing how ahead-of-its-time it was. Additionally, HEX’s TSHARE system, or Trillion shares system, allows miners to earn more interest the longer and larger they stake, effectively creating a high-interest blockchain Certificate of Deposit. This approach incentivizes commitment and long-term participation, which contributes to the overall stability and health of the HEX ecosystem. The unique TSHARE system, therefore, adds an extra layer of complexity and opportunity for investors, making HEX an appealing choice in the field of cryptocurrencies (ATTN: No advertising dollars were given for the mention of HEX in this newsletter)

On a similar note, $TEXAN draws inspiration from the fundamentals laid down by HEX, yet stands distinct in many ways. With a max user controlled stake length of 22 years, participants have the ability to scrape rewards earned and remain somewhat liquid. ( Disclosure: The Author of this Newsletter is a CoFounder of $TEXAN)

Liquid Staking Derivatives

Crypto staking has emerged from the shadows of traditional Proof-of-Stake (PoS) networks, and has morphed into DeFi Staking and now Liquid Staking. From the rigidity of PoS staking, where assets were locked for a set period, DeFi staking introduced flexibility. However, the true revolution arrived with Liquid Staking, where staked assets get tokenized into Liquid Staking Derivatives (LSDs), enabling them to be freely traded or used across DeFi platforms.

Ethereum, already leading in Liquid Staking, has further strengthened its position with the transition from Proof-of-Work (PoW) to PoS, taking its Total Value Locked (TVL) to ~$57 billion, ~30% of which is in liquid staking. While Ethereum is the standard-bearer, other blockchains like Avalanche (AVAX-USD), Solana (SOL-USD), and Kava (KAVA-USD) are catching up, contributing to the rising tide of liquid staking.


Yet, the most exciting sector currently is LSDfi. This fusion of Liquid Staking and DeFi is still nascent, with just ~3% of the total addressable LSD market captured in its TVL. The vast untapped potential signals an exciting growth phase for LSDfi, creating a world of opportunities for crypto investors.

The blossoming of Liquid Staking has proven to be a lifeline for Ethereum, which was ceding ground to competing smart contract blockchains. Now, Ethereum's market cap dominance is on the rise, and its governance tokens, such as Lido Finance's LDO and RocketPool's RPL, have delivered impressive returns. The market performance of these tokens is indicative of the profitability potential of investing in liquid staking.

Still, it's crucial to remain aware of the associated risks, especially the regulatory uncertainty surrounding crypto staking. The U.S. Securities and Exchange Commission (SEC) hasn't provided a definitive regulatory framework for crypto staking, although it has cracked down on staking-as-a-service offerings by centralized exchanges. As such, any significant regulatory developments could have an impact on the burgeoning crypto staking sector. Check this newsletter explaining the entracies of the SEC and regulation: Click me


To wrap it up, Liquid Staking has brought a new dimension to crypto investing, offering liquidity, flexibility, and the possibility of participating in DeFi, all in one package. The LSDfi market, though in its infancy, is set for rapid growth, offering a whole new world of possibilities for investors. The early signs are encouraging, but vigilance is crucial as regulatory issues are still to be clarified. The likes of HEX and $TEXAN, ETHEREUM, ARBITRUM, OPTIMISM, and others provide intriguing examples of the potential within this market. Watch this space!