The Crypto Asset Governance Alliance (CAGA) is a liquidity staking protocol.
To explain, decentralized finance (DeFi) platforms and protocols need liquidity to function. Liquidity is the ease with which they can convert an asset into ready cash without affecting its market price. Thus, liquidity is a DeFi application’s ability to generate cash fast.
All DeFi platforms need liquidity because speculators and investors want the ability to sell their investments for cash at anytime. If there is no liquidity, a DeFi platform can crash fast as the TerraUSD (UST) stablecoin did in May 2022.
CAGA Liquidity Staking
CAGA supports liquidity staking. Theoretically, liquidity staking lets users unlock the liquidity of staked assets, such as Ethereum (ETH). Ethereum provides liquidity by using Proof of Stake (PoS). In PoS, users deposit ETH on Ethereum nodes and validate transactions.
Ethereum switched to PoS in September 2022 when Beacon Chain organized. Beacon Chain and POS support liquid staking tokens such as stETH and wstETH. CAGA’s whitepaper claims liquid staking grew from 15% to 32.7% between September 2022 and November 2023.
Liquid staking allows users to stake tokens in complex DeFi ecosystems, such as Etehreum’s blockchain and Decentralized Autonomous Organizations (DAOs). CAGA itself is a DAO that lets all users propose investments and vote on them.
They claim CAGA’s staking mechanism allows users to stake CAGA governance tokens and Ethereum (ETH). CAGA then rewards users with Liquid Staking tokens (cgCAGA or cgETH). cgCAGA and cgETH are wrapped tokens. To explain, a wrapped token is a cryptocurrency that makes payment in another cryptocurrency. For example, cgCGA and cgETH make payment in Ethereum, just as stablecoins make payment in fiat currency.
They claim CAGA users can earn a competitive annual percentage rate (APR) through staking. Its website claimed CAGA Crypto (CAGA) was offering a 17.23% APR on 1 December 2023.