The problem with traditional staking
When you stake ETH natively on Ethereum, your 32 ETH is locked in a validator. You earn roughly 3-5% APY, but you can't use those tokens for anything else. They sit there, earning rewards, but completely illiquid. If you want to sell or use them in DeFi, you have to unstake — which can take days or weeks.
Liquid staking solves this by giving you a receipt token that represents your staked position.
How liquid staking works
- You deposit ETH into a liquid staking protocol (like Lido, Rocket Pool, or Coinbase cbETH)
- The protocol stakes your ETH across validators on your behalf
- You receive a liquid staking token (stETH, rETH, cbETH) that represents your staked ETH + accumulated rewards
- Your liquid token can be used in DeFi — lend it on Aave, provide liquidity on Curve, use it as collateral on MakerDAO
- When you want to unstake, you redeem the liquid token for ETH (plus earned rewards)
The major liquid staking protocols
- Lido (stETH). The largest by far — over $15B in TVL. stETH is the most widely integrated liquid staking token across DeFi.
- Rocket Pool (rETH). More decentralized than Lido — anyone can run a minipool with 8 ETH. rETH is a trusted alternative.
- Coinbase (cbETH). Centralized but convenient. Popular with users who already hold ETH on Coinbase.
- Marinade (mSOL). The equivalent on Solana — stake SOL, receive mSOL.
APY and rewards
Liquid staking APYs roughly mirror native staking rewards minus a protocol fee (usually 10% of rewards). So if native ETH staking yields 4%, liquid staking through Lido yields roughly 3.6%.
But the real advantage is capital efficiency. Your stETH can earn an additional 2-5% in DeFi on top of staking rewards. Staking + lending = compounded returns. This is why liquid staking has captured over 30% of all staked ETH.
The risks
- Smart contract risk. If Lido's contracts have a vulnerability, staked funds could be at risk. Audits help but don't eliminate this.
- De-peg risk. stETH should trade at approximately the same value as ETH, but during market stress (like the 3AC collapse in 2022), stETH briefly traded at a 5% discount. If you need to sell during a de-peg, you take a loss.
- Slashing risk. If validators misbehave, their stake gets slashed. Liquid staking protocols spread this risk across many validators, but it's not zero.
- Centralization. Lido controls roughly 30% of all staked ETH. Some argue this is too much influence for one protocol over Ethereum's consensus.
- Regulatory risk. The SEC has argued that staking services may constitute securities offerings. This could affect how liquid staking protocols operate.
Before you stake
Liquid staking is powerful, but it requires understanding how ETH works, how DeFi protocols interact, and how to evaluate smart contract risk. Korvex helps you build the trading and market fundamentals — understanding ETH price behavior, portfolio management, and risk — before you commit real capital to staking strategies.