Liquid Staking.

Liquid Staking is a method of staking a proof-of-stake asset, such as ETH, through a protocol that mints a liquid staking token (LST) representing the staked position, so the capital keeps earning rewards while remaining transferable and usable elsewhere in DeFi. Instead of running your own validator or locking funds with no way to touch them, you deposit into a staking pool that batches many users' deposits, operates the underlying validators, and issues you a token against your deposit. That token is what makes the arrangement liquid — you hold something you can sell, transfer, or deploy at any moment, even though the actual stake continues validating blocks in the background.

Native Staking vs Liquid Staking

Native staking means running or delegating to a validator directly: you lock the minimum stake and wait through an exit queue when you want it back, with nothing to show in the meantime. Liquid Staking adds a layer on top — the protocol still runs validators, but it hands you a token the moment you deposit, so you are never without a liquid representation of your position.

The Liquid Staking Token (LST)

An LST such as stETH or rETH is a token that tracks the value of your underlying stake plus accumulated rewards. It is minted when you deposit and burned when you redeem, and in between it trades freely on exchanges and inside DeFi protocols. Holding the token is functionally equivalent to holding the staked asset plus its yield, which is why wallets and on-chain explorers treat it as a first-class asset rather than a claim ticket.

Why Liquidity Matters

Capital that cannot move earns the base staking yield and nothing else. Liquid Staking lets the same capital work twice: it earns validator rewards and, because the LST is liquid, it can simultaneously serve as collateral, trading inventory, or a liquidity pool asset — the main reason liquid staking tokens now represent a large share of all staked ETH.

Validator rewards — consensus rewards for proposing and attesting blocks, plus a share of priority fees — flow into the staking pool continuously, and the protocol passes them to LST holders in one of two ways. Both approaches track the same underlying economics described in Ethereum's own staking documentation; they differ only in how the token reflects the growing balance.

Rebasing vs Value-Accruing Tokens

A rebasing LST increases the number of tokens in your wallet over time, so your balance of the token itself grows while its price stays pegged near the underlying asset. A value-accruing LST instead keeps your token count fixed and raises the exchange rate between the LST and the underlying asset, so one token becomes redeemable for slightly more of the base asset each day. Both deliver the same reward, just through a different accounting mechanic, so check which model a given LST uses before integrating it into a tax tool or a DeFi position.

Validator Operations Behind the Token

None of this works without real validators doing real consensus work. Liquid staking protocols distribute deposits across node operators, who run the validators, risk being slashed for misbehavior, and hand back rewards net of a small protocol fee. You are trusting that operator set and the protocol's smart contracts, a different risk profile from running a validator yourself, so reviewing a provider's audit history is part of choosing where to stake.

It helps to place Liquid Staking next to two things it gets confused with. Native staking is the base layer with no token at all. Restaking takes an already-liquid staking token and deposits it again into a separate protocol that secures additional applications with the same capital, in exchange for an extra reward layer. Liquid Staking is the middle step — it is what makes restaking possible, not restaking itself.

Model	What You Hold	Risk Added
Native staking	A validator balance, not a token	Validator and slashing risk only
Liquid Staking	An LST (e.g. stETH, rETH)	Protocol and smart-contract risk on top of validator risk
Restaking	A restaked derivative of the LST	Additional slashing conditions from the services it secures

Why Restaking Adds a Layer, Not a Replacement

Restaking does not replace Liquid Staking — it builds on it. The LST you already hold gets deposited into a restaking protocol, which pledges that same economic value to secure oracles, bridges or other middleware and pays an extra yield for doing so. That extra yield comes with extra slashing conditions defined by whatever service you are now securing, so a restaked position carries more ways to lose value than the plain LST it started from.

Liquid Staking rewards compound continuously, so a rewards calculator is the fastest way to see what a given deposit, APY and holding period actually produce. Enter the amount you plan to stake, the current APY quoted by your chosen protocol, and the number of days or months you intend to hold the position, and the calculator projects the compounding reward on top of your principal.

• Enter the amount of the asset you plan to stake, in the asset's own units.
• Enter the current APY for the LST you are considering — this moves with network-wide staking participation and validator rewards.
• Choose a holding period in days or months.
• Review the projected reward and ending balance, including compounding if the LST rebases or its exchange rate accrues.
• Compare the net figure against alternative uses of the same capital, such as lending the LST instead of simply holding it.

The defining feature of Liquid Staking is that the token keeps working after you receive it. Billions of dollars of LSTs circulate through DeFi, a flow tracked in aggregate on DefiLlama's liquid staking category, and the uses fall into a few recurring patterns.

Lending and Borrowing

Lending markets accept LSTs as collateral because they carry a predictable, yield-bearing value close to the underlying staked asset. You can post an LST as collateral and borrow a stablecoin against it, unlocking liquidity from a staked position without ever unstaking, though this adds liquidation risk on top of the staking position itself.

Liquidity Pools and Collateral

Pairing an LST against its own base asset in a liquidity pool is a common low-volatility strategy, since the two assets should trade close to parity outside of stress events. The same token also serves as margin collateral on some derivatives platforms, letting a staked position back a trade while still earning its underlying reward.

Exiting a Liquid Staking position works one of two ways: selling the LST on the open market for instant liquidity, or redeeming it directly with the protocol through an exit queue. Market selling is immediate but exposes you to whatever price the LST trades at; protocol redemption guarantees the peg but can take hours to days, a process documented for major protocols in the Lido and Rocket Pool documentation.

What Causes a Depeg

An LST can trade below its redemption value when sellers want liquidity faster than arbitrage can absorb, often during sharp sell-offs or a large holder's exit. The gap is usually temporary and closes as arbitrageurs redeem the discounted token for the full-value asset, but the discount can be real for anyone selling at the wrong moment.

No two Liquid Staking protocols run the same way, so the practical differences — fee percentage, decentralization of node operators, audit history, and secondary-market depth for the LST — matter more than the headline APY, which tends to converge across providers close to the base staking rate described on the Ethereum protocol overview. A deeper secondary market means a smaller gap between the LST's price and its redemption value if you need to exit quickly, while a more decentralized operator set reduces the chance a single failure affects a meaningful share of deposits.