Liquid Staking

Liquid staking is a service that stakes your tokens on your behalf and issues a tradable receipt token representing your staked position, so you keep liquidity while still earning staking rewards. Ordinary staking locks tokens up, often with a multi-day or multi-week exit period; liquid staking removes that constraint by letting you sell or use the receipt token at any time.

The best-known example is Lido on Ethereum: deposit ETH and you receive stETH, a token whose balance or value grows as staking rewards accrue. You can hold stETH, trade it back to ETH on a decentralized exchange, or use it as collateral in lending protocols — effectively earning staking yield while your capital stays usable. Rocket Pool's rETH works similarly.

A common misconception is that the receipt token is always worth exactly the underlying stake. It usually trades close to it, but the peg depends on market liquidity and confidence — during the stress of 2022, stETH traded at a noticeable discount to ETH because holders wanted out faster than the exit mechanisms allowed. Liquid staking also adds smart contract risk and concentrates stake with large operators, which raises decentralization concerns when a single protocol controls a large share of a network's validators. The convenience is real, but it layers new risks on top of ordinary staking.