What Is Liquid Staking? LSTs & Restaking Explained

Liquid staking lets you stake a coin and still use it. You deposit a proof-of-stake coin (like ETH or SOL) into a liquid staking protocol, and you receive a liquid staking token (LST) in return. The LST represents your staked coins plus the rewards they earn, and unlike a normal stake, you can send it, swap it or use it in DeFi apps at any time. The trade-off: more moving parts, which means more ways things can go wrong.

This guide explains how liquid staking and LSTs work, what restaking adds on top, the extra risks, and how liquid staking compares with the simpler native staking. If you're new to the topic, start with what is crypto staking. This is general information, not financial advice.

How does liquid staking work?

1. You deposit coins into a liquid staking protocol's smart contract.
2. The protocol stakes them with a set of validators it selects.
3. You receive an LST, a token that represents your share of the staked pool.
4. Rewards build up. Depending on the design, either your LST balance grows over time, or each LST becomes worth more of the underlying coin.
5. To exit, you either swap the LST back to the coin on a decentralised exchange (fast, at the market price) or redeem it through the protocol (at the full value, but subject to the network's unstaking wait).

Your coins are still staked and still helping to secure the network. You just hold a token that stands in for them.

What is a liquid staking token (LST)?

An LST is a receipt you can trade. It has two common designs:

• Rebasing tokens: your token balance increases as rewards come in. One token aims to stay worth about one unit of the staked coin.
• Value-accruing tokens: your balance stays the same, but each token is redeemable for slightly more of the underlying coin over time.

Either way, the LST's value depends on the protocol working as designed and on there being enough buyers if you want to sell it.

Why do people use liquid staking?

• No lock-up feeling. You can exit quickly by swapping, instead of waiting out an unstaking period.
• Use staked coins in DeFi. LSTs can be lent, used as collateral or supplied to liquidity pools, earning a second layer of yield.
• No minimums. You can stake small amounts on networks where running a validator needs a lot (for example, 32 ETH on Ethereum).

What are the risks of liquid staking?

Liquid staking keeps all the normal staking risks and adds several of its own:

• Smart-contract risk. Your coins sit in the protocol's contracts. A bug or exploit could cause losses.
• Depeg risk. An LST can trade below the value of the coin it represents, especially during market stress when many holders try to sell at once. If you need to sell then, you take the discount.
• Validator and slashing risk. The protocol picks the validators. If they're penalised, the loss is shared by all LST holders.
• Governance and operator risk. Someone controls how the protocol is upgraded and which validators it uses.
• Concentration risk. Very large liquid staking protocols can control a big share of a network's stake, which is a concern for decentralisation.
• DeFi stacking risk. Using LSTs as collateral or in pools layers new risks (liquidations, more contracts) on top.

For the wider risk picture, see is crypto staking safe?

What is restaking?

Restaking takes staked coins (or LSTs) and commits them to secure additional services beyond the base blockchain, such as data networks, bridges or oracles. In return, those services pay extra rewards.

The catch is extra slashing conditions: if the restaked coins are used to back a service that is attacked or misbehaves, they can be penalised under that service's rules too. Some protocols also issue a liquid restaking token, adding yet another token layer.

In plain terms: restaking can raise rewards, but it stacks risk on risk. It's an advanced strategy, not a starting point.

Liquid staking vs native staking

With native, non-custodial staking, you delegate directly to a validator on the network itself. The validator can't spend your coins, and there's no extra token to lose its peg. You do have to wait out the unstaking period, which ranges from about one epoch (2–3 days) on Solana to 14 days on Tron. Details: unstaking period explained.

Is liquid staking better than native staking?

It depends on what you want:

• Choose native staking if you plan to hold for the long term, want the fewest moving parts, and are happy to wait out the unstaking period when you exit.
• Consider liquid staking if you actively use DeFi and need your staked position to stay usable, and you've researched the protocol's track record and audits.

For most people starting out, native staking is the simpler and lower-risk choice. If you do try liquid staking, stick to large, long-running, audited protocols and don't put everything in one place.

How does Virtex Wallet handle staking?

Virtex Wallet offers native staking on Solana, Ethereum, Tron, BNB Chain and other supported EVM proof-of-stake networks:

• Non-custodial mode: delegate from your own keys. Your stake is on-chain and verifiable on public block explorers.
• Custodial mode: Virtex manages staking for you. (Not available in the EEA, the UK or the USA.)

Before you confirm, the app shows the estimated rate, commission and unstaking time. Step-by-step guides: how to stake Solana · stake ETH without 32 ETH · stake TRX · stake BNB.

Prefer to keep it simple? Stake natively from your own wallet: download Virtex Wallet on Google Play. This article is general information, not financial advice.