// GLOSSARY -- DEFI

What is Liquid Staking?

1 min read Updated

Liquid staking is a mechanism that lets users stake cryptocurrency while receiving a tradeable derivative token representing their staked position — maintaining liquidity while earning staking rewards.

WHY IT MATTERS

Traditional staking locks your tokens — you can't use them until you unstake (which can take days). Liquid staking solves this: stake ETH, receive stETH (Lido) or rETH (Rocket Pool), and use that receipt token across DeFi while still earning staking yields.

Liquid staking tokens accrue value as staking rewards accumulate. stETH gradually becomes worth more than 1 ETH in underlying value. This means your 'staked' position can simultaneously be lending collateral, LP provision, or trading capital.

Lido dominates with ~30% of staked ETH, raising concentration concerns. Rocket Pool and other alternatives provide more decentralized options.

FREQUENTLY ASKED QUESTIONS

Is liquid staking safe?
Smart contract risk exists (Lido and Rocket Pool are heavily audited). Depeg risk is possible but rare for major protocols. Validator slashing risk is pooled and minimized.
stETH vs rETH?
stETH (Lido): largest, most liquid, rebasing model. rETH (Rocket Pool): more decentralized, value-accruing model. Both are solid choices with different tradeoffs.
Can I use liquid staking tokens in DeFi?
Yes — that's the point. stETH and rETH are widely accepted as collateral in lending protocols, liquidity provision, and as trading assets.

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