Think about a world where you can loan out your cryptocurrency investments and make money in return without doing anything, yet you can still trade them or use them for purchases. This new concept, dubbed liquid staking, is flipping the approach investors take to the crypto market by eliminating the traditional trade-offs involved with staking. With a volatile crypto market, liquid staking allows you to help secure the network and earn rewards without storing your cash in a vault for eternity.

 

With blockchain technology evolving, understanding liquid staking is a must for new investors seeking to join the world of cryptocurrency, as well as for experienced traders aiming to get the most out of their portfolios. In this ultimate guide, we will explain everything you need to know about liquid staking, starting from the basic concepts, and leading you to the best liquid staking platforms that will boom in 2025. By the end, you’ll have enough information to make smart decisions in this rapidly moving corner of decentralised finance.


Liquid staking was a way to work around the issues with traditional staking in proof-of-stake blockchains. It lets people stake assets, like Ethereum, and receive liquid tokens back in return. You can hold those tokens in DeFi protocols, so now you have more options than you did before. The liquid staking platforms are leading the world crypto staking market that is projected to exceed $100 billion by 2026. They have a ton of total value locked: (TVL). This article will teach you how to use Liquid Staking correctly, regardless if you’re new to the world of crypto investing or an experienced user who knows how to use complex strategies. 

Key Takeaways

  • Liquid staking is great for people who are highly interested in earning staking rewards while keeping their assets liquid.
  • Top liquid staking platforms according to Total Value Locked (TVL) include Lido, Binance Staked ETH, Jito, Rocket Pool, and Sanctum. Each of these liquid staking platforms has its own unique set of features that are built to work with different blockchains.
  • There are some pros and cons to liquid staking. For instance, it provides new avenues for higher yield through DeFi, but it also comes with several risks such as slashing and vulnerabilities found in smart contracts.
  • When liquid staking started, it was in 2020 following Ethereum's transition to proof-of-stake. Since then, liquid staking has expanded to other chains which can improve the overall security of the blockchain.

What Is Liquid Staking? 

Have you thought about how you could earn on your cryptocurrency investments and not have your assets locked up for several weeks or months? Liquid staking is here to address this situation. It permits users to stake their tokens on proof-of-stake networks and get liquid staking tokens (LSTs), which can be sold or used in additional ways. It involves putting assets into a protocol which collects the user assets to send to validators and issues LSTs as a representation of the user's staked assets plus yields. For instance in Ethereum, users stake ETH and receive stETH that is valued almost the same and could be used in other protocols like lending or liquidity pools. 


Liquid staking contributes to the existing problem with traditional staking where users have staked assets with no ability to use assets for the duration of staking. This is a loss of opportunity with a so-called "inaction" during staking where assets are not earning additional income in an ever-changing and fast-moving marketplace. Liquid staking enables users to be reactive to the changes in the cryptocurrency marketplace through liquidity without unstaking and risking penalties. The onboarding process and use of a platform automates the process through a use of-and-implementation of smart contracts, resulting in a secure and efficient process for any type of user.


The attraction arises from its ability to combine passive income generation with an active portfolio management strategy. This means it's a significant factor in the beginner crypto investing process. Industry reports indicate liquid staking has seen significant traction, and it's expected that the Total Value Locked (TVL) in liquid staking derivatives will reach over $50 billion by mid-2025, illustrating how it democratizes staking rewards that formerly only accessible to individuals with a significant amount of wealth or technical expertise.

 

For the more advanced user, liquid staking provides the opportunity to apply complex yield farming strategies, utilizing liquid staking tokens (LSTs) in a decentralized finance (DeFi) environment for enhanced returns. However, it is important to understand the reliance on decentralized validators to maintain the integrity of the staking process while yields vary depending on the protocol, typically averaging 4-8% annual percentage yield (APY). An example of this is Ethereum's Beacon Chain integrating liquid staking as a mechanism to help secure the Ethereum network post-merge in 2022.


Liquid staking is making a shift from static assets to dynamic money-making tools in the cryptocurrency ecosystem. Understanding the mechanics of liquid staking can provide a solid foundational experience in deciding to enter the cryptocurrency space, or refining an existing cryptocurrency portfolio.

Historical Background

The concept entered the mainstream around 2020, when Ethereum was in the midst of planning to convert from proof-of-work to proof-of-stake. Before then, staking in proof-of-stake networks such as Cosmos or Tezos has entailed locking up assets for very long periods of time, a barrier that often scared off retail investors who may potentially face illiquidity in a volatile crypto market.


Lido Finance was among the first firms to launch a liquid staking solution for Ethereum 2.0 in December 2020. That allowed users to stake ETH without needing to reach the 32 ETH minimum for solo validators. This game-changing concept democratized staking, reducing barriers, and distributing rewards more fairly. In 2021, the value locked in DeFi reached more than $100 billion globally. 


When liquid staking first appeared, lending protocols and DEXs had adapted it so you could earn compounded yields with their products. The evolution quickly accelerated after 2022 once platforms began supporting multiple chains, including Solana and Polygon, enabling stroking across more ecosystems. For instance, in 2023, liquid staking locked more than $20 billion in total value locked (TVL) as more institutions began utilizing liquid staking and regulations became clearer in key jurisdictions, such as the EU. The main "big news" from the Shanghai Upgrade was that you could now withdraw ETH which gave users more confidence in liquid staking derivatives.  


In 2024, liquid staking accounted for almost 40% of all staked ETH, and that percentage went to be more than %50 in 2025 with even more protocols going online. For someone who is relatively new to investing in cryptocurrencies, this timeline suggests that liquid staking is a viable and matured tool, not a fad that will go away. And as the technology continues to improve, it should also help unlock more hybrid models of staking alongside other DeFi primitives. This will ensure staking will remain relevant during future blockchain upgrades.

Why Liquid Staking Matters

What if you could secure blockchain networks, receive steady rewards, and also capitalize on abrupt market opportunities all simultaneously? Liquid staking is extremely important because it bridges passive going strategies to active trading. This allows greater flexibility in the fickle world of crypto. One potential positive is that liquidity is preserved. Staked assets are in the form of tradable LSTs, allowing users to sell or lend or provide liquidity without being punished for unstaking, as high as 50% in some networks.


Another advantage is that yields can be reinvested. For instance, if you hold stETH from Lido, you can now take part in Yearn Finance vaults which can lift your APY from 4% to the 10+% through automated strategies. Based on the given 2024 to 2025 data, liquid staking users has seen on average some 20 to 30% higher returns than traditional stakers, courtesy of DeFi integrations. Jito’s liquid staking was stabilizing for Solana’s network post FTX collapse, inflating staked SOL by over 40% in 2023.


Liquid staking is an excellent way for novice crypto investors to begin diversifying their portfolios, with as little as $100 in ETH or so. Sophisticated traders use it to obtain risk-adjusted returns; they use tools like delta-neutral strategies to cap their exposure. It also helps decentralise networks by reducing the barriers to joining. Ethereum, for example, saw its validator count surge — from 400,000 in 2022 to over 1 million by 2025, incentivized in part by liquid staking protocols.

Top 5 Liquid Staking Platforms

Keen to know which platforms are leading the liquid staking revolution, and why their TVL is such a powerful expression of user trust? The top liquid staking platforms in 2025 are ordered by how much value they have had locked into them (TVL), as this is an indication of how many people are using the protocol and how safe it is. Lido TVL is $37.237B; Binance Staked is $14.169B; Jito $2.99B; Rocket Pool $2.774B and Sanctum $2.399B. These are certainly objective measures of size, but they are also a way of capturing just how innovative a company really is when it comes to navigating changes in the crypto markets.


Lido was the first platform on Ethereum to provide liquid staking when it was introduced in 2020. It did this by creating and issuing stETH, which now runs on a number of chains, among them Polygon and Optimism. Its decentralised node operator model ensures lower centralisation risks and it currently holds a market share of over 30% in staked ETH, translating to APYs of between 3% and 5%. 


Second-place Binance Staked ETH leverages Binance’s extensive ecosystem to serve up wbETH that is concentrated around Ethereum and seamless to exchange. Since its launch in 2022, the platform has lured institutional investors in part because Binance’s DEX is cheap and easily tradeable. But as with all things that are centralised, the purists who want everything to be 100% decentralised are concerned about it.


Placing third is Jito, which has its eyes on Solana and has launched jitoSOL with MEV (maximal extractable value) rewards. This might increase yields by as much as 20%. Launched in 2022, it has rapidly grown from the momentum of Solana’s comeback with tools for restaking and appealed to those who engage with high-speed networks.


Rocket Pool is the fourth one that is worth mentioning because it enables any individual to operate a validator on Ethereum without any requirement for permission. Anyone has been able to run validators with as little as 8 ETH following its launch in 2021. The rETH token is tilted towards community governance, so it's perfect for those who value sustainability over size. 


Last but not least, Sanctum on Solana also provides validator-specific LSTs, for personalised staking as of 2023. For premium users, unstaking is even immediate. It is the protocol which makes the network robust by concentrating on validator diversity.


In the case of these four offerings, Lido and Binance do better in TVL because of usability while Jito and Sanctum do better on Solana because of potential returns. With Rocket Pool being the most decentralised in this regard. If you’re new to crypto investing, Lido’s user-friendly setup is a good way to begin. For the more advanced folks, try cross-chain LST arbitrage. Together, these platforms account for more than $60 billion in TVL, showing how liquid staking has taken off in DeFi. 

Step-by-Step Guide to Liquid Staking

You can try liquid staking for yourself, but you're not sure where to begin in a world as massive as the one compsed of all the cryptocurrencies out there? Getting into liquid staking is easy, but you also need to understand the most important steps to gain as much as possible while mitigating the risks associated with the ups and downs of the crypto market. The first step is choosing a wallet that is compatible with your platform’s blockchain, such as MetaMask and Phantom. (MetaMask, and also SolidWallet, which Lido uses for MetaMask and Jito, which Lido uses for SolidWallet, for example, Lido uses Ethereum and Jito uses Solana.)


Then acquire the native token, which is ETH for most platforms, and connect your wallet to the protocol’s interface. So for example, on Lido users can deposit ETH and receive stETH immediately, in amounts as small as 0.001 ETH. It provides an easy way for newcomers to crypto investing to get started. Look at the APY, which varies depending on how much demand there is on the network. The average is estimated between 3% and 7%, in order to be on the best platforms, in 2025.


Once you stake your LSTs, you can use them in DeFi, when you become a liquidity on Uniswap for more fees or when you lend LSTs on Compound in order to make more money. In the actual world, someone who locked $10,000 in ETH with Rocket Pool in 2023 earned more than $1,500 in rewards by 2025 by putting up rETH as collateral as the market fell.


For the more experienced, explore restaking options such as EigenLayer, which earns additional yields on your LST but gets a bit more complicated. Always check petrol fees. They reached $50 at the height of the bulls in 2021, but have been trading in a much calmer range since the upgrades in 2023.


So you should minimize your risk by spreading your investments onto many different platforms. More than 20% of your portfolio in any one protocol is not recommended. Monitor TVL in real time via tools like Dune Analytics. According to statistics, new users in 2024 and 2025 pushed the use of liquid staking up 50%. This was thanks to educational resources and mobile apps.


Should you follow then steps, not only are you making money in a passive way, you are also contributing actively to the economy.

Risk Management in Liquid Staking

Liquid staking holds a lot of benefits, but there are also risks that you will have to be aware of and manage if you want to safeguard your investments at times of high volatility in the market for crypto currencies. One of the biggest dangers is slashing. Validators can be slashed for being offline or misbehaving, and you could lose as much as 5–10% of the value of your stake at the very worst on networks like Ethereum.
Another major issue is that smart contracts can get hacked. For example, the 2022 Ronin Bridge hack demonstrated that other DeFi protocols could be hacked, leading to more than $600 million in losses.


Furthermore, LST prices could become unpegged during times of market pressure. For example, briefly in June 2022, stETH tokens traded at a 5% discount to ETH, which means sellers were losing money for that brief period. Furthermore, if only a handful of operators owned a large portion of the network, security might be weaker. 


One way to mitigate that risk would be to diversify your investments across a variety of protocols - such as both Ethereum-based and Solana-based protocols like Rocket Pool or Sanctum designs. You could also utilize stop-loss orders on your LST trades, or insurance protocols like Nexus Mutual - which has paid very substantial claims, over $10M, by the end of 2025.


If you are new to investing in crypto in general, never invest what you can’t afford to lose. And become familiar with the whitepapers (based on research) that describe the risk of certain protocols and LST designs. The more sophisticated among us will be comfortable utilizing hedging strategies if market volatility occurs within LST trade. 2024 data indicated well-managed liquid staking portfolios outperformed 15% compared to traditional. This highlights the importance of understanding risk, or simply being aware of it.

Future Outlook and Trends

What are the upcoming concepts that will change liquid staking as we move through the decade of decentralized finance? It seems that the future of liquid staking is promising. At the rate that trends are heading, technological advancements will become soon visible in the future. The total value locked in liquid staking is also going to exceed $100 billion by the end of 2026, spurred by institutions' interest and regulations in the like of the U.S. and Asia, and then some often overlooked region that is becoming one of these, institutional trading being basically a direct product of neutral exchanges, liquidity provision, etc. 


Restaking is developing into a massive trend and EigenLayer, "the first decentralized restaking protocol" began doing it as far back as 2023 but this was a few years behind, or at least we were just beginning to investigate restaking at fully decentralized levels of the protocol.


A new area of development is cross-chain liquidity. It is now simple to move LST between ecosystems due to protocols like LayerZero, etc., therefore avoiding virtual fragmentation, which this was becoming a large term/phenomenon in 2024. It is already moving rapidly within the real world...for this example let's consider, in 2025 the larger banks like JP Morgan were looking at some of the pilots and were suggesting that it is all becoming commonplace. 


One complication is that the S.E.C. may deem L.S.T.s to be securities after 2025, forcing companies to create new strategies to adhere to the regulations. 


In total, the future trajectory of liquid staking seems likely to be one toward greater efficiency and inclusion, putting it at the vanguard of the next wave in the evolution of cryptocurrency. 

Bottom Line

Liquid Staking is a game changer in the cryptocurrency space as it provides the double duty of security contributions and unmatched liquidity for participants at all levels. To do well, you’d want to calculate how much risk you’re comfortable taking, and spread your money over top platforms such as Lido and Jito so you can avoid the typical ebbs and tides of the crypto market. Newcomers should use only a modest amount of money on interfaces that are easy to use. Then, as they become more comfortable, they can layer in DeFi for even higher returns.” There is also always a place of audited protocols. Remember too: frequent monitoring and thought-out decisions can make liquid staking a secure route to earn money while doing nothing. 

 

This article is contributed by an external writer: Obed, Obed Ukeme.

 
Disclaimer: The content created by LBank Creators represents their personal perspectives. LBank does not endorse any content on this page. Readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.