The open-source blockchain protocol Hydra has announced the launch of a significant new feature - an ERC20 token called LYDRA, or Liquid HYDRA. The LYDRA token will allow HYDRA holders to free up staked coins for other uses without giving up staking income.

On December 12th, the protocol opened its first LYDRA/HYDRA liquidity pool on its native decentralized exchange (DEX), marking the full rollout of this new dual-token model.

LYDRA is designed to provide liquidity for staked HYDRA, the protocol's native Proof-of-Stake token, while still allowing the staked HYDRA to earn rewards. 

Here is how it works

First, HYDRA holders can lock up any amount of their tokens, consolidating UTXOs in their wallet. This removes the HYDRA from circulation but mints an equal amount of LYDRA ERC20 tokens to the wallet.

The LYDRA can then be freely transferred and traded, providing liquidity while the staked HYDRA continues to earn staking rewards in the background. At any time, HYDRA holders can burn the same number of LYDRA to unlock their staked HYDRA.

Essentially, LYDRA allows staking participants to have their cake and eat it too - earning compounding passive income on their HYDRA while also freeing up capital with LYDRA for other uses.

The feature is completely opt-in. HYDRA holders can still choose to stake normally without interacting with LYDRA. But for those seeking liquidity or leverage, LYDRA unlocks additional opportunities.

Given the possibilities unlocked by LYDRA, wider usage and trading activity of both LYDRA and HYDRA tokens is expected.

While the 1:1 minting ratio ensures parity between both assets at the protocol level, LYDRA prices on secondary markets can diverge. The exact ratio between both will remain dynamic based on market supply, demand and opportunity cost.

Nonetheless, analysts are bullish on the latest move by the Hydra protocol. The ability to mint liquid LYDRA tokens while staking HYDRA unlocks all new utility for network participants. It opens up wider flexibility for users, allowing return optimization and improved liquidity. We foresee both LYDRA and HYDRA gaining broader usage due to this update.

How to follow their news? 

As the Hydra protocol continues rapidly building out capabilities and utility around its innovative staking model, the launch of the LYDRA token marks a major milestone. With the new opportunities and flexibility unlocked by being able to produce a liquid staking derivative, the project aims to further boost accessibility and real-world application.

For the latest ongoing developments from the Hydra developers as they push to expand functionalities across governance, DeFi, Web3 apps and more - be sure to follow the project updates via its Telegram channel, community Telegram group, and Twitter account.

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