Liquid staking and liquid restaking: expanding staking potential

The evolution of staking continues to unlock new efficiencies and expand opportunities in DeFi.

Staking has long been a fundamental mechanism for securing blockchain networks and earning rewards. However, traditional staking comes with a trade-off: staked assets are locked, limiting their usability. Liquid staking introduced a solution by providing liquid staking tokens (LSTs), which allow users to maintain liquidity while earning staking rewards. Liquid restaking tokens (LRTs) now further extend the use of staked assets by enabling them to secure multiple networks, increasing their overall utility and contribution to blockchain security.

What is liquid staking?

Liquid staking allows users to stake their assets while retaining liquidity. Instead of locking tokens, users receive LSTs (e.g., stETH from Lido) that can be traded, used as collateral or deployed in DeFi strategies, all while still earning staking rewards.

Liquid staking offers key benefits: it unlocks liquidity while staking, enables additional yield opportunities in DeFi and removes staking lock-up periods. This makes it an attractive option for those looking to retain access to their assets while contributing to network security.

What is liquid restaking?

Liquid restaking allows staked assets, including LSTs and natively staked ETH, to be reused for securing additional networks, enhancing blockchain resilience and security.

Liquid restaking enables multi-network participation, strengthens security for new protocols and decentralized applications, and extends the functionality of staked assets across different layers of the blockchain ecosystem.

Key differences between LSTs and LRTs

While both LSTs and LRTs improve asset efficiency, they serve distinct functions. Liquid staking primarily focuses on unlocking liquidity for staked assets, allowing users to participate in DeFi while still earning staking rewards. In contrast, liquid restaking extends the role of staked assets beyond a single network, allowing them to contribute to multiple protocols and reinforcing overall blockchain security.

Liquid staking supports a single blockchain, such as Ethereum, while liquid restaking enables assets to provide security across multiple networks. This means that liquid restaking involves higher risks, as assets are exposed to multiple layers of dependencies, but it also enhances their overall contribution to decentralized infrastructure.

Expanding the role of staked assets

Liquid staking introduced greater flexibility in staking, and liquid restaking takes it further by enabling assets to serve additional functions beyond their original network. While LSTs enhance liquidity, LRTs broaden security contributions across different ecosystems.

As DeFi continues to evolve, the ability to stake, trade and restake assets seamlessly is changing how users interact with blockchain infrastructure. Whether prioritizing liquidity, security or broader network participation, these innovations open up new possibilities for engaged users and developers alike.

Stay tuned for more insights from 1inch as we explore the latest trends in DeFi!