Liquid Staking Guide
Liquid staking solves the biggest problem with traditional staking: locked capital. Stake your crypto and receive a tradeable token that earns rewards.
What is Liquid Staking?
- Deposit tokens (ETH, SOL, etc.) into protocol
- Receive liquid staking token (LST) in return
- LST represents your staked position + rewards
- Use LST in DeFi while still earning staking rewards
Traditional vs Liquid Staking
| Feature | Traditional | Liquid |
|---|---|---|
| Lock-up | Days to weeks | None (sell anytime) |
| DeFi usage | No | Yes |
| Exit speed | Unbonding period | Instant (via DEX) |
| Smart contract risk | Minimal | Yes |
Popular Liquid Staking Protocols
Lido (stETH, stSOL, stMATIC)
- Largest liquid staking protocol
- ~30% of all staked ETH
- stETH balance increases daily
- 10% fee on rewards
Rocket Pool (rETH)
- More decentralized alternative
- Permissionless node operators
- rETH value increases vs ETH
- ~14% fee on rewards
Marinade (mSOL)
- Liquid staking for Solana
- Automatically delegates to validators
- Can unstake instantly for small fee
Rebasing vs Value Accrual
stETH: Your balance increases daily. rETH: Your balance stays same but each rETH becomes worth more ETH over time. Both end up the same value.
How to Use Liquid Staking
Step 1: Get LST
- Deposit directly with protocol (stake.lido.fi)
- Or buy on DEX (often same price)
- Receive liquid staking token
Step 2: Choose Your Strategy
- Hold - Simplest, just hold in wallet
- DeFi - Use in lending, liquidity pools
- Leverage - Use as collateral to borrow
DeFi Strategies with LSTs
Lending (Low Risk)
- Deposit stETH in Aave
- Earn staking rewards + lending yield
- Use as collateral without selling
Liquidity Providing (Medium Risk)
- Add stETH/ETH to Curve pool
- Earn trading fees + staking rewards
- Minimal impermanent loss (same asset)
Leverage Staking (High Risk)
- Deposit stETH as collateral
- Borrow ETH
- Stake borrowed ETH for more stETH
- Repeat for amplified yield
Leverage = Liquidation Risk
Recursive staking amplifies both gains and losses. If stETH depegs from ETH, leveraged positions can be liquidated.
Risks of Liquid Staking
Smart Contract Risk
- Protocols can have bugs
- Lido/Rocket Pool are battle-tested
- Newer protocols are riskier
Depeg Risk
- LST can trade below underlying value
- stETH briefly traded at 0.93 ETH in 2022
- Usually temporary but can trigger liquidations
Centralization Risk
- Lido controls ~30% of staked ETH
- Could become systemic risk
- Rocket Pool is more decentralized
LST Comparison
| Token | Chain | Protocol | TVL |
|---|---|---|---|
| stETH | Ethereum | Lido | $15B+ |
| rETH | Ethereum | Rocket Pool | $2B+ |
| mSOL | Solana | Marinade | $500M+ |
| stMATIC | Polygon | Lido | $100M+ |
Best Practice
For long-term holding, liquid staking is excellent. For DeFi strategies, understand the additional risks you're taking on.