There are multiple ways in Defi to earn cryptocurrency. The most common ways are farming in liquidity pools and staking native tokens to strengthen the chain's ecosystem. But there are also other ways of earning cryptocurrency. A mixture of both staking and farming pools can occur now.
Over on Terra chain it is happening for many months and maybe even over a year now. It is with tokens such as aUST and LunaX that can be used in liquidity pools and be staked. How so you maybe wondering?
Terra Ecosystem
On Terra in order to protect and help the main blockchain's transactions validators stake Luna tokens. The Luna tokens are locked for at least 21 days upon unstaking. In return for staking Luna investors earn a % yield of air drops and additional Luna over the time they stake their Luna.
Over on Staderlabs they have developed a way to stake Luna and also include a receipt token for the investor to use in other methods to earn yields. This method of staking is call liquid staking. Staderlabs takes the Luna from investor and stake it to the main chain, and in return investors hold LunaX. The LunaX essentially increases in value over time with the yield earned in main chain. This conversion is noticable when investors trade LunaX for Luna. There will be more Luna for the investor to trade out when they hold LunaX longer. This is a form of yield bearing cryptocurrency.
In addition LunaX can be used in farming pools since it can act as a token. Over on Astroport and Loop investors can pair LunaX with Luna to earn a yield.
So you can see how the yield bearing assets can be attractive.
Another familiar asset that is very similar to LunaX is UST's staked asset aUST. Over on Anchor when investors put UST into EARN they collect a yield. What is really happening is their UST is converted into aUST.
The aUST appreciates over time at the rate of the interest rate yield in EARN. For now it is close to 19.5% APY. In addition to having more aUST as time elapses investors can use aUST to farm in pools just like LunaX.
Conclusions
This is how liquid staking works at its core. An asset that is staked in turn provides investors another receipt asset that appreciates in value over time.
Benqi which is a lending and borrowing platform over on Avalanche provides liquid staking of AVAX, and the receipt asset is known as sAVAX. It is worth mentioning that in the very near future Anchor will be allowing sAVAX be used as a form of collateral to borrow UST.
None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!
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