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DeFi Education6 min read

Liquid Staking Tokens (LSTs): Earn While You Stay Liquid

Understand how liquid staking tokens like stETH and rETH work, their benefits, risks, and how to use them in DeFi.

The Problem with Traditional Staking

Staking ETH secures the network and earns ~4% APY, but your ETH is locked. You cannot trade, lend, or use it as collateral while staked. Liquid staking solves this.

How LSTs Work

  • Deposit ETH into a liquid staking protocol (Lido, Rocket Pool, etc.)
  • Receive a liquid staking token (stETH, rETH) representing your staked position
  • Your staked ETH earns validator rewards
  • The LST accrues value or rebases to reflect earned rewards
  • Use the LST freely in DeFi while earning staking yield

    • Popular LSTs

    • stETH (Lido): Rebasing token, largest market share (~30% of staked ETH)
    • rETH (Rocket Pool): Value-accruing token, decentralized operator set
    • cbETH (Coinbase): Institutional-grade, regulated
    • swETH (Swell): Newer entrant with points program
    • mETH (Mantle): Mantle liquid staking solution

    Using LSTs in DeFi

    • Collateral: Use stETH as collateral on Aave to borrow stablecoins
    • Liquidity provision: Provide stETH-ETH liquidity for trading fees + staking yield
    • Leverage: Recursive lending to amplify staking returns (risky)
    • Restaking: Deposit into EigenLayer for additional yield

    Risks

    • Depeg risk: LSTs can trade below ETH value during market stress
    • Smart contract risk: Protocol bugs could affect your staked ETH
    • Slashing risk: Validator misbehavior could slash staked ETH
    • Centralization risk: Lido controls a large share of staked ETH

    Buying LSTs on Alkizen

    Swap any token on any chain directly to stETH, rETH, or other LSTs on Alkizen. No need to interact with staking contracts directly.

    liquid stakingstETHrETHyield