Liquid Staking & The Staker’s Dilemma

Liquid staking is a mechanism in which delegations in proof-of-stake blockchains are made liquid and can be transferred, traded, or otherwise utilized.
The goal of liquid staking is to allow delegators to maintain their staked position while simultaneously permitting them to seek out the best returns for their capital. We achieve this by minting an asset representative of the native bonded token at the point of delegation, which can then, in turn, be used by DeFi protocols.
The opportunities for liquid staking are enormous. Taking current Q4 2022 figures of $5.3bn staked over IBC-connected 46 chains and an average bonded ratio of around 60%, there is an opportunity to unlock $5bn in liquidity. At the same time, users not currently staking their assets and contributing to security may do so without sacrificing DeFi yields.
With widespread adoption of liquid staking, we expect that bonded stake of chains should converge near 100%. As such, the security of the Interchain ecosystem may reach its theoretical maximum while maintaining a liquid supply.