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What Is Liquid Staking?

Liquid staking protocols issue a token that represents assets deposited into a staking protocol. For example, a protocol may issue a liquid staking token that can be held, transferred, swapped, or used in compatible DeFi applications while the underlying assets participate in staking.

Key characteristics include:

  • Transferable representation: The liquid staking token represents a claim or position in the protocol, subject to that protocol's redemption rules.
  • DeFi compatibility: Some applications accept liquid staking tokens for swapping, lending, collateral, or liquidity provision.
  • Protocol-specific rewards: The token's balance or exchange rate may change to reflect staking rewards, depending on its design.
  • No guaranteed liquidity: A token may trade below the value of the underlying asset, and selling can involve slippage or limited liquidity.
  • Additional risk: Smart-contract vulnerabilities, protocol failure, validator slashing, depegging, and third-party integrations can affect value or access.

Liquid Staking Use Cases​

Depending on protocol and application support, a liquid staking token may be:

  • Held while staking rewards accrue.
  • Swapped through a supported liquidity source.
  • Supplied to a lending or liquidity protocol.
  • Used as collateral where an application accepts it.
  • Sold instead of waiting for a protocol redemption, although a buyer and sufficient liquidity are not guaranteed.

Liquid Staking Protocols​

Examples of third-party liquid staking protocols include:

These are external protocols, not Gem Wallet validators. Availability, terms, and supported assets can change. Research a protocol and verify its official website before connecting your wallet or swapping for a liquid staking token.