Liquid staking
Liquid staking is staking through a protocol that gives you a receipt token for your coins. The coins earn rewards while the receipt can be traded or used in DeFi.
How it works
With regular staking your coins are locked and can only leave through a withdrawal queue. A liquid staking protocol pools coins from many people, assigns them to validators and gives you a liquid staking token (LST). It either rises in value against the base coin or grows in quantity as rewards accrue.
You can sell this token on a DEX without waiting for a withdrawal, use it as collateral or add it to a pool. Handy, but the risks stack: smart contract bugs, validator penalties and a large share of the network's stake sitting with one protocol.
The market price of an LST can drift from the base coin. In 2022, during a panic, a major staked ETH token traded a few percent below ETH for weeks, and people who had borrowed against it with high leverage were liquidated.
You stake 10 ETH with a liquid staking protocol and get 10 units of the LST. At about 3% a year, after a year they are worth roughly 10.3 ETH minus the protocol's fee (often 10% of rewards). If you need cash fast, you can sell the LST on a DEX, possibly at a 0.5–1% discount.
A common mistake is treating an LST as exactly the base coin and building loops: deposit it as collateral, borrow ETH, stake again. If the LST briefly trades below ETH, the position gets liquidated. Keep leverage low or skip it.
Questions and answers
What is liquid staking in simple terms?
It is staking where you get a receipt token for your coins. The coins earn rewards and the receipt can be sold or used elsewhere.
What is the difference between liquid staking and regular staking?
With regular staking coins stay locked until withdrawal. With liquid staking you get a token you can sell at once, but you add smart contract risk and price drift.
Can a liquid staking token be worth less than ETH?
Yes, it sometimes trades at a discount on the market, especially in a panic. Full value is usually only available through the withdrawal queue.
Related terms
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Updated: 2026-10-19