Liquid ETH staking is a process in which users can lock up their Ether (ETH) tokens in a smart contract and receive tradable liquid tokens in return. At Hord, the liquid token is called hETH and it represents users staked ETH combined with rewards. This makes liquid ETH staking a more liquid and flexible form of staking compared to other crypto staking options.
Liquid staking tokens come in diverse types, each with unique mechanisms:
Rebase Tokens: Like Lido’s stETH, these automatically adjust balances based on deposits and rewards, ensuring a user-friendly, growing balance as you stake.
Rewards-Bearing Tokens: Such as Hord’s hETH, rETH, cbETH, swETH, osETH, and ETHx, these tokens gain value over time as the exchange rate between the derivative and staked assets fluctuates.
Wrapped Tokens: Some rebase tokens, like wstETH and WBETH, have wrapped forms, popular in DeFi and trading for their lack of rebasing.
Dual-Token Model: Implemented by StakeWise with sETH2 and rETH2, and Frax with frxETH and sfrxETH, this model issues two tokens—one maintaining a 1:1 ratio to the staked asset, and the other representing rewards. It's designed to mitigate risks associated with blockchain technology and exploits.
It is crucial to understand the chosen derivative token architecture. Notably, hETH falls into the category of rewards-bearing tokens.