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Understanding the Differences: Native Staking, Pooled Staking, and Liquid Staking
Understanding the Differences: Native Staking, Pooled Staking, and Liquid Staking

Learn the differences between Native, Pooled, and Liquid Staking to choose the option that best fits your needs for earning rewards.

Updated over a week ago

Staking allows participants to contribute to network security and earn rewards. However, there are several ways to stake your tokens, each offering different advantages depending on your goals. In this article, we'll explain the differences between Native Staking, Pooled Staking, and Liquid Staking to help you make the best choice for your needs.

Native Staking

Native staking refers to directly staking your assets on the blockchain, using the network's official staking mechanism. When you stake natively, you usually lock up your cryptocurrency in the network for a specified period. In return, you help secure the network and validate transactions, and you receive staking rewards.

Key Features:

  1. Direct Participation: You stake your tokens directly on the blockchain without any intermediaries.

  2. Validator Selection: Often, you either run a validator node yourself or delegate your tokens to a trusted validator.

  3. Lock-Up Periods: Staked tokens may be locked up for a specific duration, making them temporarily unavailable for trading or transfers.

  4. Reward Structure: Rewards are usually proportional to the amount staked and are distributed after each staking period.

  5. Network Risk: Since you are participating directly, there is minimal risk of third-party involvement, but you must trust the network's security.

Pros:

  • Direct control over your assets.

  • No middlemen or additional fees beyond network transaction fees.

  • Typically higher rewards compared to other methods.

Cons:

  • Requires knowledge of validator selection or running a validator node.

  • Locked tokens can't be accessed or traded until the staking period ends.

  • High minimum staking amounts in some networks (e.g: 32 ETH for Ethereum).

Pooled Staking

Pooled staking allows multiple users to combine their assets to stake as a group. This method is useful for users who do not have the technical expertise or enough tokens to meet the staking minimum required by a network. By joining a pool, participants share the rewards according to their contributions to the pool.

Key Features:

  • Collective Staking: Users contribute their tokens into a shared pool managed by a pool operator.

  • Lower Entry Barrier: Users can stake smaller amounts than would be required for native staking.

  • Delegation: Most pools delegate tokens to validators on behalf of the participants.

  • Shared Rewards: Staking rewards are distributed among all pool participants based on the proportion of tokens they contributed.

Pros:

  • Accessible to users with smaller amounts of cryptocurrency.

  • No need to manage or operate a validator node.

  • Flexibility in choosing a pool operator that matches your preferences (fees, reliability, etc.).

Cons:

  • Pool operators usually take a small commission or fee.

  • Risk of operator mismanagement or misconduct (though reputable pools mitigate this).

  • Rewards may be slightly lower due to fees.

Liquid Staking

Liquid staking offers a more flexible option by allowing you to stake your tokens while still maintaining liquidity. In liquid staking, users stake their tokens, but they receive a derivative token in return. This derivative can be used in decentralized finance (DeFi) platforms for trading, lending, or other activities while the original tokens remain staked and continue to earn rewards.

Key Features:

  • Staking with Liquidity: Users can access the value of their staked tokens by trading or using the liquid derivative token.

  • Derivative Tokens: Liquid staking protocols issue a token that represents your staked assets, which can be freely traded or used in DeFi ecosystems.

  • Rewards & Flexibility: You still earn staking rewards, but without the typical lock-up period associated with native staking.

Pros:

  • You don’t lose access to the liquidity of your staked tokens.

  • Ability to use staked assets in DeFi for additional yield (e.g., lending, borrowing).

  • Flexible and efficient for users who want both staking rewards and liquidity.

Cons:

  • Liquid staking often involves third-party platforms, introducing potential risks (smart contract vulnerabilities, platform failure).

  • Rewards may be reduced by the fees charged by liquid staking platforms.

  • Derivative tokens may fluctuate in value depending on market conditions and liquidity.


Comparison Summary

Feature

Native Staking

Pooled Staking

Liquid Staking

Direct Control

Full

Shared with the pool

Managed by liquid staking provider

Minimum Staking

High (varies by network)

Low (based on pool rules)

Low (varies by provider)

Lock-Up Period

Yes

Varies by pool

No

Liquidity

None during lock-up

Limited

High (via derivative tokens)

Fees

Minimal (network fees)

Pool operator fees

Platform fees

Risk

Network risks

Pool management risks

Smart contract/platform risks

Complexity

High (if running a node)

Moderate

Low to moderate


Choosing the Right Staking Method

  • Choose Native Staking if you want full control over your tokens, are comfortable with potential lock-up periods, and can handle the technical requirements or trust a validator.

  • Choose Pooled Staking if you have a smaller amount of crypto to stake, prefer a lower barrier to entry, or want a more hands-off approach.

  • Choose Liquid Staking if you want staking rewards while still being able to use your tokens in DeFi, trade, or maintain liquidity.

Each staking method comes with its own set of benefits and trade-offs. The right option will depend on your goals, risk tolerance, and whether you prioritize liquidity or maximizing staking rewards. Make sure to research the platforms and validators involved to ensure you make informed decisions


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