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Liquid staking is making its way into IOTA’s decentralized finance (DeFi) ecosystem, promising to enhance liquidity and capital efficiency. On May 7, 2025, the liquid staking protocol Swirl officially launched on the IOTA (MIOTA) mainnet, marking a significant milestone as the first liquid staking solution on IOTA’s Layer 1 network.

What is Liquid Staking on IOTA?

Liquid staking allows users to earn staking rewards while maintaining the liquidity of their assets. With Swirl, users can stake their IOTA tokens and receive stIOTA, a liquid token that can be traded, redeemed, or used in DeFi protocols. This innovation provides a dual benefit: earning staking rewards while keeping assets accessible for other uses.

How Does Liquid Staking with Swirl Work?

When users stake their IOTA tokens through Swirl, they receive an equivalent amount of stIOTA. Over time, rewards accumulate in the staking pool, offering an annual percentage yield (APY) of up to 10%–15%. These rewards are auto-compounded, meaning they are automatically reinvested, eliminating the need for manual intervention.

At any point, users can redeem their stIOTA for the underlying staked IOTA or use stIOTA in secondary markets and DeFi applications. One key feature is that while staking increases the amount of IOTA over time, the quantity of stIOTA remains fixed. This causes the value of stIOTA to appreciate proportionally to the staking rewards.

For example, if a user stakes 100 IOTA and receives 100 stIOTA, after one year with a 10% APY, they can redeem their 100 stIOTA for 110 IOTA.

Why Liquid Staking is a Game-Changer for IOTA

Liquid staking is poised to unlock new growth opportunities for the IOTA ecosystem. By introducing tools like Swirl, IOTA aims to expand its DeFi capabilities and encourage sustainable capital growth strategies. Liquid staking not only enhances liquidity but also provides users with more flexibility in how they utilize their staked assets.

Strategic Vision from the IOTA Foundation

Dominik Schiener, Co-Founder and Chair of the IOTA Foundation, highlighted the significance of this development, emphasizing the potential for long-term growth and innovation in the network:

“Our partnership with Swirl enables new forms of utility through DeFi. By equipping the IOTA ecosystem with tools that users need to pursue sustainable capital growth strategies—and doing so with the right partners who share our commitment to decentralization, security, and user experience—we are setting new standards for the future of decentralized finance,” said Schiener.

Key Benefits of Liquid Staking with Swirl

  • Earn Passive Income: Users can earn up to 10%–15% APY on their staked IOTA tokens.
  • Maintain Liquidity: stIOTA tokens allow users to trade, redeem, or use their assets in DeFi applications at any time.
  • Auto-Compounding Rewards: Rewards are automatically reinvested, simplifying the staking process.
  • Flexible Asset Management: stIOTA can be used as collateral, traded on secondary markets, or redeemed for the underlying IOTA.
  • Value Appreciation: stIOTA’s value grows over time as staking rewards accumulate.

The Future of IOTA’s DeFi Ecosystem

The launch of Swirl on the IOTA mainnet represents a pivotal moment for the network. By integrating liquid staking solutions, IOTA is positioning itself as a competitive player in the DeFi space. This innovation not only boosts liquidity but also aligns with the growing demand for decentralized and user-friendly financial tools.

As the IOTA ecosystem continues to evolve, liquid staking is expected to attract more users and developers, further strengthening its position in the broader cryptocurrency market. For those looking to explore opportunities in DeFi, IOTA’s liquid staking solution could be a promising avenue to consider.

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