Nexo experiments with liquid staking of client assets in hunt for DeFi yield (by Timccopeland)
While it’s a low percentage of its business, it looks set to increase going ahead.Crypto lender Nexo is ramping up the level of client funds it allots to liquid staking DeFi protocols as it seeks to boost returns.
About a year ago, Nexo began experimenting with liquid staking as a way to not only generate more yield but to free up liquidity, particularly for ether. Since then, it has expanded its range of liquid staking platforms across different blockchains and increased the amount of capital allocated to such protocols.
Here’s an example of the dilemma. Say one of Nexo’s customers deposits ether and Nexo stakes it on Ethereum to get the staking yield. If the customer wants to remove their funds from the platform, Nexo has to give them back their ether. Yet for Nexo, it’s still stuck on Ethereum. “So that's again, a huge problem, right? When it comes to ETH, if you're making 5% a year, a 1% discount is a very big concern,” he said.Nexo primarily uses Lido Finance, the largest liquid staking provider on Ethereum , which Nikolov described as battle tested. He added that Nexo tries out newer liquid staking protocols on other chains but starts with small sums and builds up over time as the protocol shows it’s safe.
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