Liquid Staking
Web3 / defi
Liquid staking is a DeFi mechanism that allows users to stake cryptocurrency (securing blockchain networks and earning rewards) while simultaneously maintaining liquidity and capital flexibility. Instead of locking tokens directly in staking contracts and forfeiting access for extended periods, users deposit assets into liquid staking protocols that issue derivative tokens representing their stake and accrued rewards. These derivative tokens remain tradeable and usable across DeFi applications, enabling users to earn staking yield while simultaneously deploying capital in other yield-generating opportunities—a practice known as recursive yield or "double-dipping." Example: Lido is the dominant liquid staking protocol, allowing users to stake Ethereum without running validators or facing minimum requirements. Lido issues stETH (staked Ether) in a 1:1 ratio, which automatically accrues staking rewards and can be immediately traded, lent, or used as collateral, generating multiple yield streams simultaneously while solving Ethereum's high validator entry barriers. Why it matters for DeFi: Liquid staking democratizes validator economics, removes capital lock-up friction, and amplifies DeFi composability by creating productive assets that can simultaneously generate staking rewards and participate in lending, DEX, and yield farming protocols.
Explore the full Web3 Glossary — 2,038+ expert-curated definitions. Need guidance? Talk to our consultants.