Liquid staking services, despite being relatively new, are poised to revolutionize the digital assets landscape by addressing the liquidity constraints of conventional staking.
The new service allows tokens to be freely traded or utilized in various decentralized finance (DeFi) applications while users continue to earn staking rewards for participating in the validation of the blockchain network. This approach offers increased flexibility and liquidity when compared to traditional staking, in which crypto assets are locked up to maintain the security of the network.
Service providers are expanding into Asia, particularly Hong Kong, which aims to be a leading crypto hub in the region.
Conventional staking usually requires locking up a specific quantity of cryptocurrency to bolster the network's operations and security. In exchange, stakers receive rewards in the form of additional tokens. However, these staked assets remain inaccessible and non-transferable during the staking period.
By eliminating this illiquidity feature, liquid staking services are attracting a growing number of players, especially in the United States. Lido, a prominent provider of ethereum (ETH) staking solutions, has 8.7 million ETH tokens staked on its platform, providing clients with a 3.6% annual percentage rate (APR) of return for their staked ETH assets.
Asia is also considered an essential emerging market for liquid staking solutions. RockX, a Singapore-based trailblazer in blockchain technology in the region, has accrued 5,000 staked ETH tokens from Amber Group in September of this year through its Bedrock platform – a platform designed for institutional-grade ETH liquid staking. The average yield for institutional clients is 4-6%.
Amber Group is one of the leading investors in RockX's US$6 million Series A funding round in 2022.
“If you look at Asia, there are not many staking providers like us. This is the first institutional-facing liquid staking solution that we have brought to bridge the gap between the crypto-native yield and the traditional world,” RockX founder and chief executive officer Zhuling Chen tells The Asset in an interview.
Digital asset management platforms hold the assets and delegate the operational aspect to staking platforms, thus enabling the staking service.
Stressing the security of RockX’s liquid staking platform, Chen notes that his firm does not have access to any user assets or tokens, which remain under the customers' control, effectively eliminating any counterparty or custodial risk.
In expanding into Hong Kong, RockX leverages Amber Group's client base in the city. The firm will also partner soon with a licensed Hong Kong digital asset custody platform to provide liquidity staking services to institutional clients.
“Hong Kong, as the financial hub of Asia, will undoubtedly play a significant role in crypto finance,” says Chen. “Hong Kong will likely support at least bitcoin and ethereum through its banks, brokers, asset management firms, and exchanges. This makes it an interesting market for us. Once people start gaining ethereum exposure, we and Bedrock can help them generate additional yield. By expanding into the broader Asian market, we have at least doubled our staked assets this year.”