Single-sided staking is a mechanism that allows users to stake a single type of token in a staking pool and earn rewards.
Uniswap v2 liquidity pools expose the user to impermanent loss, and it may be risky, especially when the pair of tokens aren’t locked in a close trading ratio, which is what happens with newly launched tokens.
This is where single-sided staking is a good option for those who want to earn passive income with zero risk.
Depending on the protocol, single-sided staking is usually a very flexible process, allowing for a large leeway of freedom when it comes to locking periods.
Some protocols even allow locking and withdrawing tokens without any time constraints or penalties, which means that payouts are given out daily.
Other protocols have time constraints that are measured in days, weeks, months, or even years. Some apply penalties for unstaking; others don’t. There may be a progressive rewards system where staking for longer with a larger number of tokens will earn more rewards. And here comes to mind HEX.
The staking pool distributes rewards to participants based on the amount of tokens staked. The rewards are typically distributed proportionally to each participant’s stake in the pool.