Liquid staking [1], [2], [3]

Liquid staking service providers address the challenge of illiquidity by introducing a novel approach: they create a new token that represents a claim on the underlying staked asset. This new token can be freely traded or utilized within Decentralized Finance (DeFi) protocols. For instance, an individual might deposit their ETH into a staking pool like Lido (opens in a new tab) or Rocket Pool (opens in a new tab) and receive in exchange a liquid staking token “LST” such as stETH or rETH that can be deposited into platforms like Aave (opens in a new tab) to generate additional yield. Essentially, liquid staking innovates upon traditional staking models by unlocking liquidity for staked assets, enabling users to access their funds for further financial activities.

[1] “Liquid Staking: What It Is and How It Works.” Accessed: Mar., 2024. [Online]. Available: https://crypto.com/university/what-is-liquid-staking (opens in a new tab)
[2] “What Is Liquid Staking? | Chainlink.” Accessed: Mar., 2024. [Online]. Available: https://chain.link/education-hub/liquid-staking (opens in a new tab)
[3] “What is a Liquid Staking Token (LST)? | Learn about crypto and DeFi | Get Started with Bitcoin.com.” Accessed: Mar., 2024. [Online]. Available: https://www.bitcoin.com/get-started/what-is-a-liquid-staking-token/ (opens in a new tab)