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Davos Protocol to generate yield using liquid staking on PoS blockchain

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Davos Protocol is using the benefits of liquid staking on Proof of Stake blockchains to generate low-risk yield for its users. 

As blockchain ingenuity takes over the world by bringing radical changes to several industries, technology is witnessing rapid evolution.

For one, its introduction with the Bitcoin network boasted the Proof of Work consensus mechanism that brought decentralization to transacting and storing value. A few years down the line and the Proof of Stake consensus mechanism stands as its successor.

Proof of Stake allows blockchain networks to function sustainably as they scale, doing away with the limitations of Proof of Work networks. Therefore, it is not surprising that most blockchain networks are now relying on Proof of Stake to operate.

Proof of Stake is capital-inefficient

The mechanism requires network participants to stake a certain amount of cryptocurrency to secure the network and gain rewards for doing so. However, the staked cryptocurrency remains locked in the protocol, making it infeasible for network participants to unlock the funds when they need to.

Moreover, the yields offered by DeFi protocols are more incentivizing than the immensely important task of securing blockchain networks.

Liquid Staking makes Proof of Stake capital-efficient

As a solution to the predicament faced by validators on Proof of Stake networks, liquid staking allows users to get involved in securing networks while simultaneously generating DeFi yields.

Liquid staking protocols make funds staked at the blockchain level liquid by offering an equivalent amount of liquid staking tokens.

These liquid staking tokens, being yield-generating, multiply in value and can additionally be used in DeFi farming protocols. So, the possibilities to earn enormous yields with funds that would otherwise remain locked for different purposes are now endless.

Davos Protocol – Generating yields, thanks to Proof of Stake and liquid staking

The capital efficiency thrust into the inefficient usage of funds by Proof of Stake networks breeds several potentialities. One of them is Davos Protocol which leverages liquid staking to bring an avant-garde DeFi ecosystem. Davos generates persistent returns even in the face of unsettling market conditions, allowing users to draw unwavering yields throughout.

Davos Protocol revolves around its capital-efficient stable asset DAVOS, which allows users to stably hold their value in the volatile crypto markets. Beyond just acting as a store for value, DAVOS is deeply integrated into the protocol’s tokenomics.

Users can stake the stable asset to earn assured rewards that can range all the way up to 9% APY. On the lower side, the protocol can still benefit its users with an impressive 7% APY.

But how does Davos generate consistent rewards despite market conditions? That is primarily because of how the protocol uses user collateral deposited to obtain the DAVOS Stable Asset. Since DAVOS is an over-collateralized, decentralized stablecoin, users deposit collateral in the form of MATIC tokens equaling at least 150% of the value they draw out in DAVOS.

The collateral, which is in excess, gets staked in the well-known Ankr Protocol’s MATIC liquid staking service. Ankr uses the staked collateral to secure the Proof of Stake Polygon network.

In return, Davos receives ankrMATIC tokens equivalent to its deposits in the liquid staking service. ankrMATIC tokens, which act as receipts of the staked MATIC tokens, get compounded to generate yields for Davos Protocol as a reward for using Ankr’s liquid staking application.

Furthermore, users who borrow DAVOS against their Polygon-native MATIC collateral compensate for their positions by paying out regular interest payments to Davos Protocol. This in addition to the yields acquired through MATIC liquid staking generates impressive revenues for Davos to subsidize its operations and reward DAVOS holders.

While staking on Davos Protocol’s platform is a foolproof measure to attain universal passive income (UPI), DAVOS holders can benefit from other strategies that demonstrate the protocol’s well-conceived tokenomics.

The positions that users hold with the versatile DAVOS Stable Asset can be used to provide liquidity on various DEXs like Uniswap and Quickswap, enabling the growth of the protocol across the DeFi landscape.

For participating in liquidity provisioning, DAVOS holders can collect yield-generating liquidity provision (LP) tokens from the same DEXs. Additionally, these LP tokens can be staked on yield-farming pools on the DEXs, creating additional layers of incentives.

The Davos Protocol can kindle revolutionary changes in finance

Davos Protocol is pioneering the way in creating sustainable DeFi yields that can bring considerable UPI to users even when the crypto markets are crippled.

All users must do is borrow the DAVOS Stable Asset which, by the way, is a stablecoin soft-pegged to the value of $1. DAVOS’ stability is effectively maintained with over-collateralization, decentralization, and algorithmic control over its economics.

Davos Protocol brings the stability of the world’s most prominent currency to the blockchain, allowing users to transact and store value efficiently on-chain. Consequently, the protocol alongside its stable asset delivers financial inclusivity to the world’s populations.

Moreover, the reward mechanisms on the platform propagate access to low-risk yield-generating strategies capable of creating equitable wealth distribution among the masses.

Learn more about Davos Protocol here – davos.xyz

Disclaimer: This is a paid post and should not be treated as news/advice.

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Ishika is a graduate of Political Science from the University of Delhi. From writing content as a hobby to now pursuing it as a professional career, she has been living and breathing content all her life. Her interests lie in making sure articles are very digestible to a common reader, despite all its technicalities and jargons.
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