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Ethereum's network growth has been marred by scalability issues, leading to slow transaction times and elevated fees. Staking has emerged as a solution; users lock up their tokens to secure the network and, in return, receive rewards. This incentivizes users to hold and lock up their tokens, consequently decreasing token supply and escalating their value. This dynamic draws more investors and users to the platform.
Nevertheless, staked tokens are immobilized; they cannot be traded or transferred until the staking period concludes, creating a liquidity challenge. Liquid Staking Derivatives (LSD/LST) solutions like Lido, Rocketpool, and FraxETH present more flexible and liquid staking options. Still, these solutions may inadvertently lead to liquidity fragmentation and could potentially attract less trust from some users. The rise of these solutions underscores the increasing demand for flexible staking options to further foster the growth and development of the Ethereum network.