What is liquid staking?

Liquid staking is a way to stake crypto while keeping a tradable token that stands in for your locked coins. With ordinary crypto staking, your coins are tied up until you unstake them. Liquid staking hands you a receipt token in return, so you can still move or use that value.

How do liquid staking tokens work?

On Ethereum, running a validator takes 32 ETH, so pools let smaller holders combine funds. Some pools use smart contracts that issue a receipt token, according to ethereum.org. That token is an ERC-20 that represents a claim on the staked ETH and its rewards.

There are two common designs. A rebasing token grows your balance as rewards come in. An exchange-rate token keeps your balance fixed, but each token becomes redeemable for more ETH over time. To exit, you either redeem through the protocol, which depends on the exit queue, or sell the token on the open market.

What is Lido stETH?

Lido is the protocol behind stETH, one of the most widely used liquid staking tokens. According to Lido's documentation, you receive stETH one-to-one when you stake ETH, and your balance is recalculated daily based on validator results. Lido also offers wstETH, a wrapped version whose balance stays fixed while its value in stETH rises. Many DeFi apps and layer 2 bridges use wstETH because it does not rebase.

Lido takes 10% of staking rewards, split between node operators and its treasury, and its DAO can vote to change that. Withdrawals go through a first-in, first-out queue before ETH can be claimed.

What are the risks of liquid staking compared with regular staking?

Liquid staking adds risks on top of normal Ethereum staking. Ethereum.org and Lido both list several:

• Smart contract risk, since a bug could affect the contracts holding deposits.
• Slashing risk, where validator failures lead to penalties that are usually shared across all token holders.
• Price risk, since the token can trade below the value of the ETH behind it when withdrawals are slow or demand drops.
• Centralization and governance risk, since a few large operators or token votes can change how the pool works.

Using an LST as collateral elsewhere, for example in crypto lending, stacks another protocol's risks on top.

What did the SEC say about liquid staking, and is there a liquid staking ETF?

On August 5, 2025, staff in the SEC's Division of Corporation Finance said certain liquid staking activities, and the receipt tokens issued for them, do not involve the offer and sale of securities. The view only covers set facts, such as the provider not choosing how much to stake and not guaranteeing rewards. Restaking is outside its scope. The staff noted the statement has no legal force.

In October 2025, The Block reported that VanEck filed for a Lido Staked Ethereum ETF that would hold stETH, pending SEC approval. As of October 2026, check the SEC and fund issuer for current status.

Rules differ by country and change often. Check the regulator or a qualified professional for your own situation.