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In this article, we will explore how liquid staking with Yala works, its advantages, and how it opens up new possibilities for Bitcoin holders to engage in DeFi without losing exposure to their Bitcoin investments.
Whether you're looking to maximize yields, diversify your portfolio, or simply make your Bitcoin work harder for you, Yala's liquid staking provides a robust gateway into the dynamic world of decentralized finance.
Understanding Liquid Staking
Staking is a process that allows cryptocurrency holders to participate in network security and operations, typically earning rewards in the form of additional tokens. However, traditional staking has a significant drawback: staked assets are locked and can only be used for other purposes once the staking period ends. This means users miss opportunities to use their holdings in other profitable ways, such as trading or collateralizing in DeFi protocols.
Liquid staking addresses this limitation by offering a more flexible alternative. When users stake their assets through liquid staking, they receive a tokenized representation of their staked assets—like yBTC for Bitcoin on Yala—that can be used while the original asset remains staked. This dual functionality allows users to earn staking rewards while using the tokenized version of their assets across different DeFi ecosystems, effectively letting their assets work in multiple places simultaneously.
How Liquid Staking Works
The process of liquid staking on Yala is straightforward and user-friendly:
- Staking the Original Asset: Users start by depositing their Bitcoin into the Yala Protocol. These Bitcoin deposits are securely stored, using MPC vaults to ensure the safety and integrity of the assets.
- Tokenization and Issuance of yBTC: Once the Bitcoin is staked, Yala issues yBTC, a tokenized version of the staked Bitcoin. This yBTC represents the user's stake and is fully backed by the original Bitcoin deposit, ensuring its value is tethered to the underlying asset.
- Using yBTC in DeFi Protocols: yBTC can then be used as collateral within Yala protocol, allowing users to access DeFi services such as minting $YU, trading, or participating in liquidity pools across different blockchains like Ethereum, Botanix, and others. This opens up various possibilities for yield generation and portfolio diversification.
Benefits of Liquid Staking with Yala
With liquid staking, Bitcoin holders can maximize their asset’s productivity by participating in yield-generating activities across multiple DeFi platforms. This transforms Bitcoin from a passive investment into a dynamic, income-generating asset without the need to sell.
Key Benefits of Liquid Staking with Yala
- Increased Capital Efficiency: Liquid staking with Yala allows Bitcoin holders to earn staking rewards while using yBTC as collateral for additional financial activities. This dual utility maximizes Bitcoin's capital efficiency, allowing users to earn yields.
- Cross-Chain Flexibility: The ability to mint $YU across various ecosystems gives users the freedom to engage in diverse DeFi opportunities. This cross-chain functionality ensures that Bitcoin liquidity is not confined to a single blockchain but can flow seamlessly across different networks, enhancing the overall composability of the DeFi ecosystem.
- Risk Mitigation: By diversifying the use of yBTC across multiple platforms, users can spread their exposure and reduce the risk of relying on a single protocol or blockchain. Yala’s platform is designed to manage and optimize these risks, providing a balanced approach to yield generation.
Use Cases of Liquid Staking with Yala
- Yield Farming and Liquidity Provision: Users can provide liquidity using yBTC as collateral. Users can earn trading fees and incentives by minting $YU and pairing it with other assets in liquidity pools, enhancing their overall returns.
- Lending and Borrowing: With yBTC, users can participate in lending and borrowing markets across integrated DeFi platforms. Users can borrow other assets by staking yBTC as collateral, creating leverage or accessing additional capital for other investments.
- Access to Diverse DeFi Strategies: Yala’s platform offers access to a wide range of DeFi strategies, from conservative, low-risk options to more aggressive yield farming opportunities. This flexibility allows users to tailor their investments to their risk appetite and financial goals.
Revenue Streams for yBTC holders
Once users bridge their Bitcoin and receive yBTC, they can use yBTC as collateral within the Yala protocol. This collateral enables users to mint $YU, Yala’s yield-bearing stablecoin.
- DeFi Yield Opportunities: yBTC holders who mint $YU can also benefit from several DeFi yield strategies, which include:
- Lending Markets: By engaging with established lending platforms, $YU holders can lend their stablecoins to earn interest, leveraging existing DeFi liquidity needs for stable yields.
- AMM Liquidity Pools (LPs): Providing liquidity in AMM pools enables $YU holders to earn trading fees. Yields can be generated from both stablecoin-focused pools and pools that combine stablecoins with more volatile assets, depending on users' risk preferences regarding impermanent loss.
- Staking & Composability: Advanced yield farming strategies allow $YU holders to stack yields from multiple DeFi sources. These strategies include staking, interest markets, and derivatives trading, catering to users with higher risk tolerance and a more sophisticated understanding of the DeFi landscape.
- $YU Yield-Bearing Stablecoin Strategies: Yala integrates other yield strategies to earn revenue for $YU holders:
- Yala Savings Rate (YSR): holders can stake $YU in the YSR module, a feature designed to offer stable and predictable returns. Through YSR, users can earn passive income as they participate in Yala’s ecosystem. The YSR provides consistent yields sourced from Yala’s protocol fees and other revenue-generating activities.
- Real World Assets (RWAs): Real World Assets, such as highly-liquid short-term fixed income instruments and other income-generating assets, offer stable and predictable yields that can complement DeFi returns.
For more detailed insights into the various revenue streams and yield-generation strategies available to $YU holders, explore our article on yield generation.
What's Next?
Yala’s liquid staking allows users to unlock the full potential of their Bitcoin holdings by converting BTC into yBTC, which can be seamlessly used as collateral across multiple DeFi ecosystems. With the liquid staking process, users can easily leverage their tokenized Bitcoin to mint $YU or access various yield-generating opportunities, all while retaining exposure to Bitcoin’s price movements.
To stay updated on the progress, follow our developments on GitHub.
Keep an eye on Yala as we continue to push the boundaries of innovation and shape the future of the DeFi space.
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Yala is a Bitcoin-based asset protocol designed to channel Bitcoin liquidity into multiple ecosystems using $YU, a Bitcoin-collateralized stablecoin pegged to USD.