Liquid Staking
Liquid staking lets users stake crypto while receiving a token that represents their staked assets and can be used elsewhere in DeFi.
Liquid staking is a way to participate in proof-of-stake networks without giving up all access to the value of the tokens you stake. Normally, staking involves locking coins with a validator to help secure a blockchain and earn staking rewards. With liquid staking, a protocol stakes the tokens for you and issues a liquid staking token, often called an LST, that represents your staked position and any rewards it may earn.
This matters because the LST can often be traded, held in a wallet, or used in DeFi applications such as lending, liquidity pools, or collateral, while the original assets remain staked. For example, someone who stakes ETH through a liquid staking protocol may receive a token like staked ETH in return, which can be used similarly to other crypto assets. The trade-off is that users take on extra risks, including smart contract risk, validator performance risk, and the possibility that the LST trades at a different price than the underlying asset.
Other terms in DeFi
AMM
An automated market maker is a DeFi protocol that uses liquidity pools and algorithms to price and swap crypto assets without a traditional order book.
Aggregator
A DeFi service that searches multiple protocols to find better prices, routes, or yields for a user’s transaction.
DEX
A decentralized exchange is a crypto marketplace where users trade directly from their wallets using smart contracts instead of a central intermediary.
DeFi
A blockchain-based financial ecosystem that lets people lend, borrow, trade, and earn yield without traditional banks or brokers.