The Principal–Agent Problem in Liquid Staking

ePrint Report: The Principal–Agent Problem in Liquid Staking

Apostolos Tzinas, Dionysis Zindros

Proof-of-stake systems require stakers to lock up their funds in order to participate in consensus validation. This leads to capital inefficiency, as locked capital cannot be invested in Decentralized Finance (DeFi). Liquid staking rewards stakers with fungible tokens in return for staking their assets. These fungible tokens can in turn be reused in the DeFi economy. However, liquid staking introduces unexpected risks, as all delegated stake is now …

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