The Ethereum merge was successful, ETH staking should continue to pick up speed. Interest rates for Ethereum staking have shot up from 4 to 5.2 percent since the merger on Lido Finance. A major disadvantage of this, however, is that the coins remain blocked for the foreseeable future. A problem for those who not only want to stake their cryptos, but also want to continue working with them. A wide variety of staking operators offer users liquid ETH tokens. A project on Ethereum takes a completely different approach. The return for providing your own tokens is paid directly in advance.
Instant returns thanks to flash staking
The Flashstake protocol allows users to instantly cash out a pre-calculated return for staking their tokens. At the start of the platform it was even up to 15.64 percent. The return is paid out in a mixture of Ethereum and FLASH tokens.
The principle of flash staking is simple. First, your own wallet is connected to the app. You then select the number of tokens to be staked and the duration of the staking period. This determines how long the tokens remain locked in order to earn the corresponding rewards. The protocol then calculates the rate of return. With one click, this is paid out together with FLASH tokens and is immediately available. The deposited coins are then blocked for the predefined period of time.
In the background, the app transfers the deposited tokens into an Aave liquidity log, where it generates back the previously withdrawn return over the lock-up period. After the blocking time has expired, you return to the log and have the originally deposited tokens withdrawn again.
For some DeFi users, this can have many benefits. Unlike other Ethereum staking protocols, such as Lido Finance, the payout date of the rewards and the original amount is certain. If you don’t sell your FLASH tokens immediately for a profit, you can use them to get your original deposit back even early. Users also do not need to be afraid of the deposited tokens being liquidated, as on Aave or Compound, since Flashstake is not a lending protocol.
However, the whole thing is not entirely free of disadvantages. Above all, the lack of liquidity of the FLASH tokens represents an economic risk. Anyone who wants to exchange or sell large quantities of them on a decentralized exchange is threatened with a price drop when trading (slippage).
Many users are likely to decide to sell the tokens after flash staking in order to realize their returns. Massive sales of FLASH tokens would also reduce the returns of stakers who still hold their tokens or use them in other ways.
That being said, like other DeFi protocols, there are general risks that users should be aware of before staking. This includes errors in the code of the smart contract as well as (still unknown) exploits of the protocol functionality. As with all platforms, a front-end hack of the app website is also possible.
With the necessary adaptation of the protocol, the liquidity pools of the FLASH tokens should fill up quickly. This form of staking could thus develop into a plausible alternative for Ethereum Hodler. The beloved ETH coins do not have to be given up indefinitely. Also, the user does not have to surrender to the threatening centralization of the staking infrastructure.
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