Staked HYPE Shares Liquid Staking

Liquid staking enables users to earn staking rewards from proof-of-stake blockchains while preserving the liquidity and tradeability of their assets. Liquid staking protocols issue derivative tokens and users can earn staking rewards without locking tokens or managing infrastructure. LSTs allow users to freely trade or employ their staked assets within DeFi.

Liquid staking tokens come in various types, each with distinct reward distribution mechanisms, which is worthwhile for users to understand before depositing assets. These token types include:

Rebase Tokens - They automatically adjust balances based on deposits and rewards. Rebasing takes place at regular intervals, typically once per day, without any visible transactional activity for token holders. This user-friendly form of liquid staking allows your LST balance to increase as you continue to stake your assets.

Reward-bearing Tokens - Their value increases over time based on exchange rates between the derivative and the staked asset. The ratio dictates LST pricing and earned rewards. The ​​LST balance remains constant, while the rate increases.

Wrapped Tokens - The mechanism describes the transition from rebase tokens to reward-bearing tokens. After wrapping, they stop automatic balance recalculations and transition into reward-bearing tokens where the exchange ratio between underlying assets changes. Wrapped LSTs often garner more popularity in DeFi because they are easier to integrate into protocols.

Dual-token Model - Design where one token maintains a 1:1 ratio with the staked asset, while the other represents rewards, aiming to mitigate risks associated with blockchain technology and exploits.

The protocol rewards generated from the underlying validators minus a fee go to the stakers.

No, both stHYPE and wstHYPE accrue the same staking rewards. The only difference is how they display your balance. stHYPE shows your updated balance directly via rebasing, while wstHYPE reflects your stake through a constant token amount that increases in value over time.

There are a few potential risks when utilizing liquid staking options for HYPE.

Smart Contract Risk: The stHYPE/wstHYPE contracts could contain undiscovered vulnerabilities. Though they are open-source, audited, and thoroughly tested, a smart contract exploit could affect funds in the liquidity pool or Overseer contract.

Validator Slashing Risk: Since Hyperliquid uses Proof-of-Stake, validators can be slashed for going offline or misbehaving. This is considered unlikely but possible. Only professional, high-performance validators are used to reduce this risk.

Unstaking Delay: Unstaking wstHYPE may take 7–8 days, depending on network conditions. Immediate withdrawals depend on available liquidity; otherwise, users must wait for the unbonding period.

Please note that this is not an exhaustive list of all the risks related to staking.