By Joe Lallouz, Head of Coinbase Cloud

Coinbase Cloud is pleased to announce support of liquid staking through a collaboration with the Acala Foundation, starting with KSM liquid staking on Karura.

Liquid staking lets token holders stake their tokens while still putting them to work in DeFi — without being subject to unbonding periods. This offers token holders more opportunities to participate in the crypto economy.

Liquid staking is an important initiative that has the potential to bring even more participants into the growing Polkadot DeFi ecosystem, help unlock more value for token holders, and onboard more users into web3.

The significance of liquid staking

In traditional proof-of-stake networks, users who stake their assets are subject to an unbonding period where they cannot withdraw their tokens before a given time period. This time period is different for each protocol, such as 28 days for Polkadot and 7 days for Kusama. Additionally, even though users are earning rewards on their staked tokens, they are unable to use staked tokens in other applications.

Liquid staking changes that — It lets users earn both staking rewards as well as any rewards that would accrue from using their tokens in DeFi applications.

Through this process of liquid staking, users can stake their tokens and receive a representative L-Token in exchange (e.g. stake DOT and receive LDOT). The L-token represents both the principal staked asset as well as the staking yield that continues to accrue. L-Assets are tradable across all chains on the Polkadot and Kusama networks and are redeemable for…