What is liquid staking?

Liquid staking is a DeFi product designed to make staking more convenient.

At its core is a staking pool – a smart contract where users deposit their tokens. The pool periodically transfers these tokens to validators, who stake them along with their own assets and return the rewards to the pool.

When users deposit tokens into a liquid staking pool, they receive Liquid Staking Tokens (LST). These tokens represent users’ shares in the liquidity pool and are backed by the staked tokens. Their value in the main asset increases over time as rewards accumulate with each staking cycle.

LST can be used in other DeFi protocols and products to earn additional rewards while still receiving staking rewards.

Liquid staking is called “liquid” because LST ensures the liquidity of staked assets, enabling users to use them in other DeFi-protocols to get additional rewards, while receiving staking rewards simultaneously.