What is Liquid Staking

The Problem

Traditionally, staking in Proof-of-Stake (PoS) based chains involves locking token for an extended period of time to receive staking rewards in return. While this process guarantees bond-like returns for stakers, it prevents them from other profitable DeFi opportunities like lending, investing or margin trading on exchanges.

Staking on PoS protocols also requires stakers to either run their own validator, which involves significant friction, or delegate this responsibility to other validators.

The Solution

Liquid staking protocols issue Liquid Staked Tokens (LSTs) that represent the native token staked on that protocol. This allows stakers to earn staking rewards and simultaneously trade or invest in other opportunities via their LSTs.

LSTs remove the complexities of traditional staking, eliminating the need to run a validator or select a delegate.