What is the Crypto Asset Governance Alliance (CAGA)?

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.