If you've been in the crypto space for a while now, you know that liquid staking tokens (LSTs) are a core part of L1 growth and functionality.
In concept, they present users with derivatives of their existing tokens that can then be used in various DeFi operations. The main benefit is that LST holders can gain exposure to additional yield on their assets on top of the staking rewards provided by the chain.
Did you know, however, that liquid staking tokens can vary significantly depending on their design and implementation?
An LST can be a reward-bearing token or a rebase token, and in this post, we'll examine what each represents and which one $rovBTC is.
Rebase Liquid Staking Tokens
If you've ever heard a liquid staking token described as a "rebase token," it is important to understand that it changes its total supply. This feature isn’t specific to liquid staking tokens, either. Some traditional rebase tokens of note include Ampleforth’s AMPL and Ondo Finance’s rOUSG. Here's what we mean by that.
Many cryptocurrency supply values are typically set in stone. This means that if you have 10 Bitcoin, you have...well, 10 Bitcoin. However, if these Bitcoin tokens were rebase tokens, depending on various factors, you could have more than 10 Bitcoin tokens.
Rebase tokens can be considered elastic because their smart contracts contain mechanisms that modify the existing token supply based on changes in deposits and rewards. They can also be affected by current market conditions.
Generally, rebase tokens are designed to help stabilize token values to encourage participation or reduce volatility. Examples of rebase liquid staked tokens you may have already heard of include BETH from Binance and stETH from Lido.
Reward-Bearing Liquid Staking Tokens
While rebase LSTs are dynamic, reward-bearing LSTs function differently. They don't adjust to market conditions but instead accrue value over time while staked on a protocol. By holding reward-bearing LSTs and participating in DeFi, users can earn more rewards than staking alone.
Reward-bearing tokens are generally more straightforward for anyone new to DeFi and LSTs. The number of tokens you stake will remain constant, and you simply earn rewards on top that you can track separately from your initial stake.
For instance, if you put one BTC into a pool that gains 7% every year, in the beginning, you would be exchanging 1 $BTC for 1 Bitcoin LST. At the end of the year, your Bitcoin LST would be worth 1.07 $BTC.
Which Token is $rovBTC?
Given these two distinctions between types of LSTs, $rovBTC is a reward-bearing token. For Bitcoin holders on the Spiderchain, $rovBTC offers a way to earn more BTC by trading, farming, or lending $rovBTC.
We understand Bitcoiners' hesitation when it comes to DeFi. Bitcoin works as intended - why change it? And that’s why we’re so excited to be building on the Spiderchain from Botanix Labs. It opens up DeFi on Bitcoin without compromising the ethos or security of the Bitcoin blockchain. The Spiderchain operates on top of Bitcoin; all value is accrued in actual $BTC.
So, if you've been meaning to dive into liquid staking with $BTC, you can rest easy doing it with Rover, built on the Spiderchain. Because of the value it gains over time, the 1 $rovBTC you get in exchange for staking 1 BTC will be worth more, allowing your assets to work for you!
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