The security and integrity of Umee as a blockchain has been by design from the foundations of its development. From the protocol’s highly programmable nature to the implementation of IBC rate-limiting and minimum gas prices, we take the safety of our users’ lending and borrowing activities very seriously. Liquid staking derivatives are the next step in enhancing the security and liquidity of our network, and in this post, we explain how we plan to do it with stUMEE.
We explain this in detail in our previous blog, but to understand the concept of liquid staking, it is essential to know what staking is. Simply put, it is when Proof-of-Stake (PoS) blockchains require their network validators to commit or lock their capital on the chain to participate in all consensus processes. Liquid staking is when these funds remain accessible, even in their locked state, and users get tokenized versions of their staked assets with which to operate instead. In our case, users can choose to use Stride to stake and receive the stUMEE token.
One of the biggest limitations of traditional staking is the bonding periods which can lock stakers out of access to their funds for anywhere from days to weeks. This rings true for any cryptocurrency, UMEE included. Creating a liquid staking derivative in the form of stUMEE tokens will allow UMEE holders to have access to their staked capital to use in DeFi or for trading within the Cosmos ecosystem.
Enhanced blockchain security
Liquid staking in general promotes further decentralization of the blockchain. The more staking there is on the Umee network, the more robust and secure the whole network becomes.
Increased earning potential
Aside from the ability to participate in consensus, all validators will receive rewards for staking their UMEE token. They will also be able to use their liquid staking derivatives as collateral in lending pools or provide liquidity as LPs on AMMs. Altogether, stUMEE presents a chance for its stakers to increase their yield.
Increased liquidity with none of the associated risk
stUMEE will be a way for users to enjoy the benefits of market liquidity without a lot of the risks associated with staking in general. There will be no bonding periods where you will not have access to your capital. Your liquid staking tokens will essentially represent your assets in DeFi applications.
The success of liquid staking derivatives is not lost on us. It is with a full understanding of the benefits UMEE holders stand to gain that we prepare to launch stUMEE, in collaboration with Stride, a leading liquid staking protocol on the cosmos. Keep an eye out for the stUMEE release airdrop details coming soon, so you don't miss out on getting your tokens!
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