💧CDP Liquid Staking

Overview

Liquid staking is a unique capability offered by Indigo that allows the staking of ADA collateral within CDPs; enabling users to continue earning ADA rewards from the Cardano network. Cardano utilizes different keys within a wallet for various purposes. When creating a new wallet, for example using Nami, you are setting up two keys with your wallet: a payment key and a staking key.

These keys are then used to derive your wallet address. Addresses in Cardano are split into three parts: a network ID, a payment address, and a staking address. The payment address is used to designate which wallet or smart contract has access to spend the funds. The staking address is used to designate who should receive ADA staking rewards from the Cardano Network for the funds locked at that address.

You can see an example address below:

Indigo utilizes this particular feature when opening a CDP by sending the funds to the CDP contract but applying the user’s staking address to those funds. This means that the CDP contract has control of the constraints in which the CDP funds can be spent while allowing the user to accrue ADA staking rewards from the ADA locked in their CDP.

How to Use CDP Liquid Staking 💸

To use liquid staking, you must first have your Cardano wallet staked to your preferred stake pool. The Indigo Web App automatically attaches your staking key when creating a CDP. All ADA deposited into that CDP will continue to earn staking rewards based on your chosen stake pool and will still also be usable as voting power in Catalyst Funding rounds.

What if I change stake pools? Will I still earn staking rewards?

Yes. If you delegate your wallet to a new stake pool after creating the CDP, the ADA collateral in the CDP will automatically earn rewards from the new stake pool at turn on the new epoch.