In decentralized finance (DeFi), staking mechanisms serve as a fundamental component, providing security to blockchain networks while rewarding participants. However, most networks, including Chainlink, place certain constraints on staking.
To address these, Stake.link, a protocol within the Chainlink ecosystem, has moved its liquid staking on Arbitrum, a Layer-2 network that operates atop Ethereum. This introduces a method for LINK holders to engage in staking activities that offer enhanced liquidity and reduced transaction costs.
Liquid Staking on Arbitrum for Chainlink Users
The integration of Stake.link with Arbitrum, announced on Wednesday, February 28, aims to address the challenges associated with high gas fees on the Ethereum network and the liquidity constraints of traditional staking.
The implementation of liquid staking on Arbitrum allows LINK holders to stake their tokens in exchange for stLINK, a liquid staking receipt token. This approach ensures that participants can continue to earn staking rewards while retaining the ability to use their funds.
Moreover, Stake.link’s move to Arbitrum significantly mitigates the transaction costs associated with staking and DeFi interactions. The protocol also introduces the capability to stake its SDL governance token on Arbitrum, further diversifying the staking options available to users.
What Are The Benefits of Liquid Staking on Chainlink?
Stake.link’s liquid staking mitigates the liquidity constraints and withdrawal limitations inherent in Chainlink’s native staking mechanism.
In particular, in version 0.2. In the native Chainlink staking system, the withdrawal process is tightly regulated. Funds are locked for a minimum of 28 days, after which stakers have a seven-day claim window. This setup poses liquidity challenges for stakers needing access to their assets more promptly.
Stake.link’s Priority Pool introduces a more flexible withdrawal mechanism, allowing users to withdraw their staked LINK at any point without entering a cooldown period. This significantly enhances liquidity for stakers, providing them with greater control over their assets.
On the Flipside
Staking with third-party services carries certain risks for users. It is important to only stake with reputable platforms that users trust. The multi-step process of staking LINK, receiving stLINK, and engaging in DeFi is more complex for less experienced users.
Why This Matters
By addressing key barriers such as high gas fees and limited liquidity, Stake.link’s integration with Arbitrum not only enhances the user experience but also contributes to the overall growth and stability of the DeFi ecosystem.
Source : DailyCoin by David Marsanic / Feb 28, 2024