Liquid Staking Derivatives: What They Are and Why They Matter in Crypto
When you stake your Ethereum or other proof-of-stake tokens, you help secure the network and earn rewards—but your tokens get locked up. That’s where liquid staking derivatives, tokens that represent your staked assets and let you trade or use them while still earning rewards. Also known as LSTs, they solve a big problem in DeFi: the trade-off between earning yield and staying liquid. Instead of sitting idle, your staked ETH can now power loans, trades, or yield farms—all while continuing to accrue staking rewards.
This shift is changing how people interact with blockchain networks. Lido, the biggest liquid staking protocol, issues stETH tokens that mirror your staked ETH and can be used across dozens of DeFi apps. Rocket Pool, another major player, lets users stake with smaller amounts and earn rewards through a decentralized node operator network. These aren’t just theoretical—they’re live, used daily, and backed by billions in locked value. You’ll find them in the same DeFi ecosystems that power Aave, Uniswap, and Curve, which is why they show up in posts about TVL and yield strategies.
Liquid staking derivatives also connect directly to real-world crypto behavior. People don’t want to choose between earning passive income and jumping on new opportunities. With LSTs, you can stake your ETH, get stETH, then use that stETH to borrow USDC on Aave or provide liquidity on Curve—all without waiting weeks to unstake. That’s why these tokens are now a core part of yield farming, collateral strategies, and even cross-chain bridges. They’re not magic, but they’re close: a practical fix to one of crypto’s oldest friction points.
What you’ll find in the posts below are real examples of how these systems work, who uses them, and where things can go wrong. You’ll see how staking rewards tie into TVL numbers, how protocols like Lido dominate the market, and why some tokens lose value after launch—not because the tech failed, but because demand dried up. This isn’t about hype. It’s about understanding the mechanics behind the numbers.
Understanding Liquid Staking Derivatives: How LSDs Unlock Yield Without Locking Up Your ETH
Liquid staking derivatives let you earn Ethereum staking rewards while keeping your ETH liquid. Discover how stETH, rETH, and cbETH work, their risks, top providers, and how to start earning yield on yield in DeFi.
- June 11 2025
- Terri DeLange
- 11 Comments