Liquid Staking: How It Works and Why It’s Changing Crypto Rewards
When you stake your cryptocurrency, you help secure a blockchain and earn rewards—but you usually can’t use your coins while they’re locked up. That’s where liquid staking, a system that lets you stake crypto while keeping it usable. Also known as liquid staking derivatives, it solves the biggest problem with traditional staking: losing access to your funds. Instead of sitting idle, your staked ETH, SOL, or other tokens get turned into a tradable token—like stETH or mSOL—that you can use in DeFi, trade, or even pay for goods. It’s like getting interest on your savings while still being able to spend it.
Liquid staking is built on smart contracts that lock your original coins and issue you a receipt token in return. These receipt tokens represent your share of the staked assets and the rewards they earn over time. Platforms like Lido, the largest liquid staking protocol for Ethereum and Rocket Pool, a decentralized alternative with community-run nodes handle the technical side so you don’t have to run your own validator. This makes staking accessible to anyone with a few tokens, not just big investors with technical setups. And because your liquid staking tokens are ERC-20 compatible, they work across most DeFi apps—lending, borrowing, or trading without needing to unstake first.
Why does this matter? Because it turns passive income into active capital. In 2025, over $50 billion in Ethereum is staked, and nearly half of it flows through liquid staking protocols. That’s not just convenience—it’s reshaping how people think about crypto ownership. You’re no longer choosing between earning rewards and using your assets. You can do both. And as more chains adopt proof-of-stake, liquid staking will become the default for anyone who wants to earn without locking up. Below, you’ll find real-world examples of how people are using liquid staking to boost returns, avoid scams, and navigate DeFi safely—whether they’re holding ETH, SOL, or newer tokens on emerging networks.
What is StakeWise Staked ETH (osETH)? A Simple Guide to Liquid Staking on Ethereum
osETH is a liquid staking token from StakeWise that lets you earn Ethereum staking rewards while keeping your assets liquid. Unlike stETH, it's overcollateralized to protect you from slashing risks.
- December 13 2024
- Terri DeLange
- 20 Comments