Liquid Staking
Staking tokens while receiving a tradable receipt token, so your capital keeps earning rewards without being locked up.
Liquid staking solves a frustration with normal staking: locked funds. Deposit ETH with a service like Lido and you get a token such as stETH that tracks your stake plus rewards. You keep earning, but the receipt token is free to trade, lend, or use as collateral.
That unlocks composability, since your staked position can work twice across DeFi. It also adds layers of risk. The receipt token can trade below the underlying, as stETH did during the 2022 crunch, and you are now exposed to the staking provider's smart contracts too.
Related terms
Locking up tokens to help secure a proof-of-stake network and earn rewards, similar to interest on a deposit.
Proof of Stake (PoS)A consensus method where validators lock up coins as collateral instead of burning electricity to secure the chain.
ComposabilityThe way DeFi protocols snap together like building blocks, so the output of one can plug straight into another.
DepegWhen an asset meant to track a fixed value, like a stablecoin's $1, slips away and won't snap back.