What is Liquid Staking?
Last reviewed 2026-05-03
Used by: Jito Liquid Staking
Entity coverage: 4 protocols, 0 tokens, 0 chains reference this concept.
Liquid staking pools user ETH into validators and issues a fungible receipt token (LST) representing the staked balance. Lido (stETH), Rocket Pool (rETH), Coinbase (cbETH), Frax (sfrxETH), Stader, and Mantle dominate. ~30% of all staked ETH is in LSTs.
How it works
The flow starts with a deposit: you send ETH to the protocol's staking contract and it mints a liquid staking token (LST) to your wallet at the current exchange rate. Behind the scenes, the protocol batches deposits into 32-ETH validator stakes and assigns them to a set of node operators who run the actual validator infrastructure — users never manage keys or hardware.
As validators earn consensus and execution-layer rewards, value accrues to holders in one of two ways: rebasing tokens (like stETH) increase your token balance daily, while reward-bearing tokens (like rETH) keep the balance fixed and let the ETH-per-token exchange rate climb. The protocol skims a fee (commonly around 10% of rewards) split between operators and its treasury. Penalties and slashing are socialized across the pool the same way.
To exit, you either redeem through the protocol — the LST is burned and ETH is returned once the validator exit queue clears — or simply swap the LST for ETH on a DEX for instant liquidity. Because the token is a standard fungible asset, it can simultaneously serve as collateral or liquidity elsewhere in DeFi while still earning staking yield.
Why it matters
LSTs unlocked the staked-ETH wedge for DeFi. Today they are foundational collateral across Aave, Maker, Morpho, Spark, and the LRT stack.
Real-world examples
Lido stETH (~30% of all staked ETH), Rocket Pool rETH, Coinbase cbETH, Frax sfrxETH, Mantle mETH.
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