Polkadot is bringing Liquid Staking to its blockchain network, enabling cryptocurrency holders committed to supporting the Proof-of-Stake (PoS) network to increase their income streams by generating additional revenue in decentralized financial applications (DeFi).
Moonbeam, a connectivity layer between the Ethereum blockchain and services built on Polkadot, is partnering with Lido, a staking derivatives platform that allows Ether (ETH) and other cryptocurrencies tied up in staking contracts to be used elsewhere.
The move to bring Liquid Staking from Lido to Polkadot was also facilitated by blockchain audit and staking specialist MixBytes, the companies announced Tuesday. In February, the same group introduced Liquid Staking on Kusama, Polkadot's so-called canary network, an experimental version of the blockchain.
In Liquid Staking, cryptocurrency holders who have committed to supporting proof-of-stake (PoS) networks by dedicating their tokens to the process receive a type of stacked IOU token. This token can then be invested to generate returns in DeFi apps.
The Lido integration allows holders of Polkadot's native cryptocurrency DOT to invest their assets in the form of xcDOT (cross-chain DOT), in exchange for which they receive a stDOT token (staked DOT). Both xcDOT and stDOT are XC-20 tokens, a token standard created by Moonbeam for compatibility between the Ethereum Virtual Machine (EVM) and the Substrate framework that powers Polkadot.
Moonbeam, which launched in January after raising more than $1.3 billion to secure a parachain slot on Polkadot, has built the infrastructure and tools needed to harmonize activities across multiple blockchains, according to the platform's CEO Derek Yoo. Lido, with about $8 billion in locked value on Ethereum alone, is an important integration, he added.
"Liquid Staking is really a fundamental building block of the ecosystem," Yoo said in an interview. "We're positioning Moonbeam as the best place to build multichain apps because we believe there's a shift from people deploying apps on a single chain to deploying them on multiple chains, which is part of why we decided to build on Polkadot."
In addition to the smart-contract-based app running on Moonbeam, there is also a component running on the Polkadot relay chain, the money-enforcing center of the ecosystem that specifically handles blockchain security and staking services, Yoo explained.
"Behind the scenes, these specialized components are combined to present a simple application to the user," he said. "That's a bit of our thesis: apps are built with multiple specialized chains, but at the same time, the complexity is kind of hidden."
Part of Lido's concept as a decentralized autonomous organization (DAO) is that any team can create Liquid Staking on any chain, said Lido CEO Konstantin Lomashuk. Still, Liquid Staking on Polkadot was difficult, Lomashuk added, pointing out that Polkadot's cross-chain communication format (XCM), which was used in the integration, was deployed just three weeks ago.
"It was quite hard to develop because you have these two different blockchains communicating with each other, the relay chain and the parachain, and you also have to redistribute the deployment to different validators," Lomashuk said in an interview. "So it took a lot of research, but it's a great addition to our product line, where institutional and retail users can get liquid stakes of the same quality on Polkadot as on Ethereum."