Liquid staking is a way to stake a proof-of-stake coin through a smart-contract pool and get back a tradeable token, called a liquid staking token (LST), that represents your staked coins plus their rewards. You keep earning staking rewards, but instead of your coins sitting locked through an unbonding period, you hold a token you can sell, lend or use as DeFi collateral. The trade-off is extra risk: a smart-contract layer, a token that can trade below its backing, and a provider that controls which validators get your stake.
Key takeaways
- An LST is a receipt: it tracks a claim on coins a protocol has staked with validators on your behalf.
- Some LSTs grow in number (rebasing, like stETH); others grow in value per token (reward-bearing, like wstETH or rETH).
- Nearly every major proof-of-stake chain now has at least one LST, from Ethereum and Solana to TON and Hyperliquid.
- Liquidity is not free: depegs, contract bugs, governance concentration and passed-through slashing are the main costs.
- Exiting through the protocol still respects the chain’s unbonding queue; instant exits usually mean selling on a DEX at the market price.
How liquid staking works, step by step
Native staking ties your coins to a validator. On many chains that means a minimum amount, a validator choice, and a waiting period of days or weeks before you can move the coins again. Liquid staking inserts a pool between you and the validators.
- Deposit. You send coins (ETH, SOL, TON and so on) to the protocol’s staking contract.
- Delegation. The protocol spreads the pooled coins across a set of node operators according to its own rules: a curated list, a permissionless bond system, or a stake-weighted algorithm.
- Minting. The contract mints an LST to your wallet in proportion to your share of the pool.
- Accrual. As validators earn rewards, the pool’s backing grows. The protocol takes a fee (often a share of rewards) and the rest accrues to LST holders.
- Redemption. To get the underlying coins back, you either request a withdrawal from the protocol (and wait for the chain’s unstaking queue) or swap the LST for the base coin on a DEX, which is faster but priced by the market.
The point is composability. The same unit of capital secures the network and can also sit in a lending market, a liquidity pool or a vault. For background on why proof-of-stake chains reward stakers at all, our crypto staking hub covers the fundamentals.
What is an LST? Rebasing vs reward-bearing tokens
All liquid staking tokens pass rewards to holders, but they do it in two different accounting styles. The difference matters for DeFi compatibility, for taxes and for how you read your wallet balance.
Rebasing tokens
A rebasing LST keeps a roughly 1:1 price with the underlying coin and increases the number of tokens in your wallet as rewards arrive. Lido’s stETH is the best-known example: your balance ticks up daily even though you never received a transfer. That is intuitive for holders but awkward for some smart contracts, which expect balances to change only on transfers.
Reward-bearing (value-accruing) tokens
A reward-bearing LST keeps your token count fixed and lets the exchange rate rise instead. One token redeems for slightly more of the base coin over time. Rocket Pool’s rETH, Jito’s JitoSOL and most newer LSTs (including many on TON, Hyperliquid and Monad) work this way. They plug into DeFi more cleanly because nothing changes unless you move it.
stETH vs wstETH
wstETH is simply “wrapped” stETH: the same claim on Lido’s staked ETH, converted from the rebasing format into the reward-bearing format. Wrapping does not change your exposure; it changes the bookkeeping. Bridges and lending markets on layer 2 networks generally prefer wstETH because a token whose balance silently changes is hard to bridge correctly. Our Lido explainer covers the protocol itself, including its node-operator set and governance.
Liquid staking tokens by chain
The table lists representative LSTs on major networks as of October 2026. It is not exhaustive and not a recommendation; check each protocol’s current documentation before depositing, because products merge, rename and occasionally wind down.
| Chain (coin) | Example LSTs | Token style | Notes |
|---|---|---|---|
| Ethereum (ETH) | stETH / wstETH (Lido), rETH (Rocket Pool) | Rebasing / reward-bearing | Largest LST market; ETH exits pass through the beacon chain exit queue |
| Solana (SOL) | JitoSOL, mSOL (Marinade), others | Reward-bearing | Many LSTs share liquidity through stake-pool infrastructure |
| Avalanche (AVAX) | sAVAX (Benqi) | Reward-bearing | Avoids the 2-week-plus minimum native delegation period |
| Cosmos Hub (ATOM) | stATOM (Stride) | Reward-bearing | Check current activity; the Hub caps liquid-staked share of total stake |
| Hyperliquid (HYPE) | kHYPE (Kinetiq), stHYPE (Valantis) | Reward-bearing | Used as collateral on HyperEVM |
| TON (GRAM) | tsTON (Tonstakers), hTON (Hipo), stTON / bmTON (Bemo) | Reward-bearing | Lets small holders skip validator-sized minimums |
| Monad (MON) | gMON (Magma), aprMON (aPriori), shMON (FastLane) | Reward-bearing | Young market; several LSTs add MEV revenue to staking rewards |
| Sei (SEI) | iSEI (Silo) | Reward-bearing | Thin secondary liquidity; protocol exit follows Sei’s 21-day unbonding |
| Chainlink (LINK) | stLINK (stake.link) | Rebasing | Capacity depends on space in Chainlink’s capped staking pool |
On Ethereum the market is maturing rather than consolidating. Lido’s share of all staked ETH fell to roughly 20.7% by June 2026 according to a 4pillars analysis, down from about a third in 2022, even as the amount of ETH it stakes kept rising. Exchange and institutional staking products grew faster. Rocket Pool, covered in our Rocket Pool guide, remains the main permissionless-operator alternative.
Liquid staking vs staking: four ways to earn
“Liquid staking vs staking” is really a choice among four models with different custody, liquidity and risk profiles.
| Model | Who holds keys | Liquidity while staked | Extra risk layers |
|---|---|---|---|
| Native delegation / solo staking | You | Locked through the chain’s unbonding period | Validator performance; slashing where the chain has it |
| Exchange staking | The exchange | Depends on the platform; some offer instant redemption from their own balance sheet | Counterparty, platform freezes, regional restrictions |
| Liquid staking | You hold the LST; a contract holds the stake | Tradeable token | Smart contracts, depeg, provider governance |
| Restaking (and liquid restaking) | Contracts at several layers | Tradeable if you use a liquid restaking token | Additional slashing conditions plus everything above |
Restaking reuses staked ETH (often in LST form) to secure extra services; our restaking explainer walks through why that stacks risk rather than removing it. For a deeper look at Ethereum-specific routes, including solo validators and pooled options, see the Ethereum staking guide.
Liquid staking risks
Liquid staking does not reduce the risks of staking. It keeps them and adds new ones in exchange for flexibility.
A concrete example of these risks is in our Ankr (ANKR) explainer, which covers the December 2022 aBNBc exploit and how Ankr handled repayments to affected pools.
Depeg risk
An LST is worth its backing only if you can redeem it. When many holders rush for the exit at once, the DEX price can fall below the redemption value, sometimes for days, because the protocol’s own withdrawal path is throttled by the chain’s unstaking queue. That gap hurts most when an LST is used as collateral: a temporary discount can trigger liquidations even though the underlying stake is intact.
Smart-contract risk
Every LST depends on contracts that mint, account for and redeem tokens. Audits lower the odds of a bug, but they do not eliminate it. Newer LSTs on younger chains carry more of this risk simply because their code has less time in production.
Governance and concentration risk
Someone decides which validators receive deposits and can often upgrade the contracts. That might be a token vote, a multisig or a foundation. If one provider controls a large share of a network’s stake, its operator set becomes a centralization point for the whole chain, a concern Ethereum researchers raised repeatedly as Lido grew.
Slashing pass-through
On chains that slash misbehaving validators, losses flow through to the pool. Spreading stake across many operators dilutes any single failure, and some protocols hold insurance funds or operator bonds, but LST holders ultimately share the hit.
Fee and yield drag
Protocols take a cut of rewards, typically expressed as a percentage of staking income rather than of your deposit. Compare the net rate shown in the protocol’s app or on its dashboard rather than any headline figure.
Regulation and tax notes
In the United States, the SEC’s Division of Corporation Finance issued a staff statement on August 5, 2025 saying that certain liquid staking arrangements, and the receipt tokens they issue, do not involve the offer and sale of securities. The view is narrow: it covers providers performing administrative functions without discretion over whether or how much to stake and without guaranteed returns. It is a staff position, not a rule, and it does not address restaking.
Taxes are less settled. The IRS position in Revenue Ruling 2023-14 is that staking rewards are ordinary income when you gain control of them. How that applies to rebasing balances, reward-bearing exchange rates and the initial swap of a coin for an LST is not spelled out, and tax professionals disagree on whether depositing ETH for stETH is itself a taxable exchange. Keep records of every deposit, wrap, unwrap and redemption. This is general information, not tax or legal advice; consult a qualified professional for your situation.
Best liquid staking: how to compare providers
There is no single best liquid staking protocol, but a short checklist filters most of them:
- Redemption path: Can you redeem through the protocol, and how long does it take on that chain?
- Secondary liquidity: How deep are the DEX pools against the base coin? Thin pools mean big discounts on exit.
- Operator set: How many validators, how are they chosen, and is there a cap per operator?
- Admin powers: Who can upgrade contracts or pause withdrawals, and is there a timelock?
- Track record: Time in production, audits, and how the token behaved during past market stress.
- Fee: The share of rewards retained by the protocol and its operators.
FAQ
What is an LST in crypto?
An LST, or liquid staking token, is a token you receive when you stake coins through a liquid staking protocol. It represents your share of the staked pool and its accumulated rewards. You can hold it, trade it or use it in DeFi, and later redeem it for the underlying coins through the protocol’s withdrawal process or by swapping it on an exchange.
Is liquid staking safer than regular staking?
No. Liquid staking keeps the base risks of staking, such as validator underperformance and slashing, and adds smart-contract risk, depeg risk and dependence on the provider’s governance. What it improves is flexibility, not safety. Native delegation from your own wallet has fewer moving parts, although your coins are locked during unbonding.
What is the difference between stETH and wstETH?
Both represent ETH staked through Lido. stETH rebases, so your balance grows daily while its price stays close to ETH. wstETH wraps the same position so your balance stays fixed and each token’s ETH value rises instead. You can convert between them in Lido’s app. wstETH is generally easier to use on bridges and in DeFi.
Can a liquid staking token lose its peg?
Yes. An LST can trade below the value of the coins backing it when sellers outnumber buyers and the protocol’s own redemption queue is slow. Discounts have usually narrowed once redemptions catch up, but they can force liquidations for anyone borrowing against the token. Check pool depth and the redemption timeline before using an LST as collateral.
Crypto is volatile and risky; this is education, not financial advice. Do your own research.
