What Is Liquid Staking?
Liquid staking allows you to stake cryptocurrency and receive a liquid derivative token (like stETH for staked ETH) that represents your staked position. You earn staking rewards while maintaining the ability to use, trade, or deploy the derivative token in DeFi protocols.
How Liquid Staking Works
You deposit ETH into a liquid staking protocol like Lido or Rocket Pool. In return, you receive a derivative token (stETH, rETH) that appreciates in value as staking rewards accrue. This token can be traded on DEXs, used as collateral in lending protocols, or deposited in liquidity pools for additional yield.
Why It Matters for Traders
Liquid staking solves the liquidity trade-off of traditional staking. With ~28% of ETH supply staked, liquid staking derivatives are among the most important DeFi primitives. The stETH/ETH peg is a market stress indicator — de-pegging signals liquidity crises.
