Staking

While there are no deposits in the traditional sense in the DeFi ecosystem, a very similar mechanism – ‘staking’ – exists. Staking refers to the process of locking up digital assets for a fee, and as such is comparable to depositing money at a bank. Just as a bank deposit represents a short-term loan that is given to the bank, staked cryptocurrencies can be seen as a short term loan to a protocol. For the time that assets are staked, they earn a small income, but cannot be sold or otherwise used by their owners. Rather, digital assets locked up in this way are used for adjacent processes, such as supporting the transaction validation mechanism of the underlying blockchain network.