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Liquid Staking (LST) and Staking of Other Assets

· 6 min read

In this lesson, we’ll explore the concept of Liquid Staking Tokens (LSTs) and see how staking works across different blockchains beyond Ethereum.
We’ll review several real-world examples of protocols that implement liquid staking, explain how yield is generated, and show how users can unstake or use their LSTs in decentralized finance (DeFi) applications.

What Is Liquid Staking?​

Liquid staking represents a token issued by a protocol built on top of regular consensus staking.
For example, in the Ethereum network:

  1. You stake ETH with a liquid staking provider (like Lido).
  2. The provider delegates your ETH to validator nodes.
  3. You receive a Liquid Staking Token (LST) in return — such as stETH.
  4. This token reflects both:
    • The base value of your staked ETH, and
    • The accumulated staking rewards over time.

The principle is the same for every blockchain that supports staking.
The LST grows in value or balance as staking rewards accrue.

Major Liquid Staking Providers​

The largest and most recognized liquid staking provider is Lido Finance, which dominates the Ethereum market.
Other notable platforms include:

  • Rocket Pool
  • Coinbase Staked Ethereum (cbETH)
  • Binance Staked Ethereum (BETH)

Each provider charges a commission on staking rewards, typically between 10% and 25%.
For instance, Coinbase takes around 25%, while Lido takes about 10%.

These services differ mainly in their fee structure and decentralization level, but they all operate on the same core logic — delegating user funds to validators and issuing LSTs that represent staked assets plus yield.

The term LSD (Liquid Staking Derivative) is sometimes used instead of LST.
Both mean the same thing — a derivative token that represents a staked asset and its rewards.

Ethereum Dominance in Liquid Staking​

Currently, around 95% of all liquid staking activity happens on Ethereum.
That’s because Ethereum’s Proof of Stake system provides a large, stable yield base and hosts the majority of DeFi integrations.

To explore all existing providers, you can use DefiLlama, which has a dedicated Ethereum Staking section listing all active LST protocols and their market share.

Despite Ethereum’s dominance, liquid staking has also spread to other blockchains.

Liquid Staking on Other Blockchains​

Solana (SOL)​

The Solana network supports multiple liquid staking protocols, including:

  • Marinade Finance
  • Jito
  • BlazeStake

Each of these platforms issues its own LST token — for example, JitoSOL or mSOL — whose price gradually increases relative to SOL, reflecting staking rewards.
The annual yield typically ranges between 8–10%.

Avalanche (AVAX)​

Avalanche offers liquid staking through:

  • Benqi
  • Yield Yak Finance

When you stake AVAX on these platforms, you receive sAVAX or similar LSTs.
These tokens follow the same principle — their value appreciates relative to AVAX over time.

For example:

You stake 100 AVAX and receive 86.69 sAVAX.
After one year (with ~5% yield), those 86.69 sAVAX will be worth approximately 105 AVAX.

This model reflects yield through price growth, not token quantity.

Two Models of Liquid Staking Rewards​

Across all networks, there are two main ways liquid staking rewards are represented:

  1. Increasing Token Balance — as in stETH

    • Your token count increases automatically over time.
    • Example: 10 stETH → 10.3 stETH after one year.

  2. Increasing Token Price — as in wstETH or sAVAX

    • Your token count stays constant, but its value rises.
    • Example: 1 wstETH → 1.05 ETH after one year.

The second model (price appreciation) is the standard for most modern blockchains.

Unstaking in Practice: AVAX and SOL Examples​

When unstaking your liquid-staked tokens, there are two options:

1. Official Unstaking via the Protocol​

You can unstake directly from the liquid staking provider.
Each blockchain has its own unbonding period:

  • Ethereum (Lido): ~2 hours for small amounts
  • Solana (Jito): ~1 hour
  • Avalanche (Benqi): ~15 days

If you wait for the official period, you receive the full amount, including rewards.

2. Instant Swap via DEX Aggregators​

You can also sell your LST instantly on decentralized exchanges (DEXs) such as:

  • 1inch
  • VirtUs Swapper

This provides immediate liquidity, but usually at a small discount (1–2%).
That discount represents the remaining unbonding yield you forgo by exiting early.

Example:

  • Official unstake: wait 15 days → receive 100 AVAX + yield
  • DEX swap: instant exit → receive ~98–99 AVAX

Thus, waiting earns maximum yield, while swapping offers faster liquidity.

Example: Staking SOL via Jito Network​

Let’s look at a practical example on Solana using Jito Network:

  1. Open the Jito Network app.
  2. Click Stake, connect your wallet, and select the amount of SOL.
  3. Confirm the transaction — the system issues JitoSOL, your liquid staking token.
  • JitoSOL automatically increases in value relative to SOL.
  • The current annual yield is 8–10%.
  • You can unstake directly through Jito (1-hour wait) or swap instantly on a DEX.

Example:

Waiting for the full hour gives 11.80 SOL, while an instant swap might yield 11.78 SOL.
The difference is minor but always present.

Liquid Staking on the TON Blockchain​

The TON (The Open Network) blockchain also supports liquid staking, offering around 17% annual yield.
The mechanism is identical to Ethereum or Avalanche:

  • You stake 100 TON → receive a liquid staking token (e.g., stTON).
  • The token’s value gradually increases relative to TON.
  • When you unstake, you receive slightly more TON than you initially staked, representing your staking rewards.

Although I don’t currently use TON, the staking process is straightforward and follows the same logic.

Using Liquid Staking Tokens (LSTs) in DeFi​

The key advantage of liquid staking is composability — the ability to use your LSTs across different DeFi applications while still earning staking rewards.

Here are some common use cases:

  1. Liquidity Provision:

    • Add your LST to trading pairs (e.g., ETH/stETH) to earn transaction fees.

  2. Lending and Borrowing:

    • Use your LST as collateral to borrow stablecoins or other assets.

  3. Yield Farming:

    • Deposit your LST into farming pools for extra rewards.

  4. DeFi Aggregators:

    • Use protocols like Meteora, Curve, or Balancer to compound staking yield with liquidity incentives.

In short, liquid staking allows you to earn dual income:

  1. From base staking yield, and
  2. From DeFi participation using your LST as a productive asset.

Summary​

  • LSTs (Liquid Staking Tokens) represent staked assets plus accrued rewards.
  • They can increase in quantity (stETH) or in price (sAVAX, wstETH).
  • Ethereum accounts for about 95% of all liquid staking activity.
  • Solana, Avalanche, and TON also support liquid staking with similar principles.
  • Official unstaking gives maximum yield, while DEX swaps provide instant liquidity at a small cost.
  • LSTs can be used across DeFi protocols for additional yield, offering flexibility and compounding opportunities.

In the next lesson, we’ll explore how and where to use liquid staking tokens (LSTs) to generate yields even higher than traditional staking rewards.

These materials are created for educational purposes only and do not constitute financial advice.