Glossary · L
Liquid Staking
A DeFi service that allows users to stake a Proof of Stake asset (like ETH) and receive a liquid token representing their staked position (like stETH). The liquid token can be used in DeFi while the underlying asset continues to earn staking rewards.
Last updated
How Liquid Staking works in practice
Liquid staking lets you earn staking rewards without locking capital. A protocol stakes the deposit and issues a transferable token representing the position, so the capital stays usable in DeFi while continuing to earn consensus rewards.
Worked example
Depositing 10 ETH with a liquid staking protocol returns roughly 10 of its staking token. That token continues accruing rewards and can simultaneously be supplied as collateral to borrow against — the same capital doing two jobs.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Assuming the token is always redeemable one-for-one on demand. Redemption depends on validator exit queues, and in stressed markets the token can trade at a discount to its underlying because holders who want out immediately must sell rather than wait.
Learn more
Liquid Staking: common questions
- What is Liquid Staking?
- A DeFi service that allows users to stake a Proof of Stake asset (like ETH) and receive a liquid token representing their staked position (like stETH). The liquid token can be used in DeFi while the underlying asset continues to earn staking rewards.
- How does Liquid Staking work in practice?
- Liquid staking lets you earn staking rewards without locking capital. A protocol stakes the deposit and issues a transferable token representing the position, so the capital stays usable in DeFi while continuing to earn consensus rewards.
- Can you give an example of Liquid Staking?
- Depositing 10 ETH with a liquid staking protocol returns roughly 10 of its staking token. That token continues accruing rewards and can simultaneously be supplied as collateral to borrow against — the same capital doing two jobs.
- What do people get wrong about Liquid Staking?
- Assuming the token is always redeemable one-for-one on demand. Redemption depends on validator exit queues, and in stressed markets the token can trade at a discount to its underlying because holders who want out immediately must sell rather than wait.
- Where can I learn more about Liquid Staking?
- Our full guide, What is Crypto Staking?, covers Liquid Staking in depth with worked scenarios and the risks involved. This glossary entry is the short definition.