Key Takeaways
- Liquid staking is an efficient and flexible way to stake your crypto
- There are many platforms that provide liquid staking, all with different yields, fees, and supported tokens
- It’s important to do your research before picking a liquid staking platform
In this article, we cover the top liquid staking platforms. Liquid staking has become all the rage in the last few years as more blockchains move to proof-of-stake (PoS) mechanisms.
Since liquid staking tokens are platform-specific, it’s important to pick the correct platform so that your staked crypto is not at risk and you’re maximizing your rewards.
Top Liquid Staking Platforms
- Lido:Best for Beginners
- Stader Labs: Best for Ease-of-Use
- Rocket Pool: Best for Communities
- ANKR:Best for Multi-Chain Staking
- Marinade Finance:Best for Solana Staking
- Coinbase Prime:Best for Institutional Staking
| Lido | Ethereum Polygon Solana | 4.4% 6.3% 6.7% | ETH MATIC SOL | stETH stMATIC stSOL | 10% |
|---|---|---|---|---|---|
| Stader Labs | Ethereum Polygon Binance Hedara Fantom Near Terra 2.0 | 5.7% 4.74% 3.52% 7.65% 4.7% 8.75% 15.84% | ETH MATIC BNB HBAR FTM NEAR LUNA | ETHx MATICx BNBx HBARx FTMx NEARx LUNAx | 10% |
| Rocket Pool | Ethereum | 3.93% | ETH | rETH | 5% - 20% |
| ANKR | Ethereum Polygon Binance Fantom Avalanche Polkadot | 3.55% 3.73% 2.55% 1.98% 7.26% 13.44% | ETH MATIC BNB FTM AVAX DOT | ankrETH ankrMATIC ankrBNB ankrFTM ankrAVAX aDTOb | 2% - 10% |
| Marinade Finance | Solana | 6.79% | SOL | mSOL | 6% |
| Coinbase Prime | Ethereum | N/A | ETH | lsETH | 15% |
4.8
Founded in 2021, Stader Labs has been an innovator in crypto staking, bringing point-and-click liquid staking solutions to chains like Polygon. The protocol now supports seven assets, including Ethereum. One unique feature is the ability to stake MATIC on the Polygon chain, where fees are much lower.
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4.5
4.5What is Liquid Staking?
Liquid staking is a special type of staking. Rather than simply locking up your crypto to earn rewards, you can actually receive a liquid token in return for staking that you can then use in place of your original crypto.
For example, in traditional staking, you lock up your SOL (Solana) for some period of time in order to earn some annual percentage yield (APY). During this time, your SOL cannot be used for anything else — if you unstake or move your SOL, you will stop earning interest.
Liquid staking fixes this by issuing you a liquid token any time you stake. When you stake your SOL, for example, you will receive a “liquid” token such as mSOL in return that you can trade and sell just as if you had your original SOL. This allows you to earn even more in rewards using your mSOL by lending it out or using it across DeFi (decentralized finance).
Liquid Staking vs. Staking
We’ve already covered the basic differences between liquid staking and traditional staking — namely, liquid staking gives you a new “liquid” token that you do not receive with traditional staking.
While traditional staking is supported natively by many blockchains, such as Ethereum and Solana, third-party platforms must be used to facilitate liquid staking. Services such as Lido, Rocket Pool, and others make liquid staking possible by issuing their own liquid tokens in exchange for your staked cryptocurrencies (such as ETH and SOL).
This means that while normal staking only exposes you to the blockchain itself, liquid staking also exposes you to a third-party platform. If Lido or Rocket Pool were to get hacked or go bankrupt, your liquid staking tokens would also go down with them, so it’s important to be mindful when choosing between these platforms.
Want a full rundown of crypto staking?Check out our full guide.
Helpful Definitions
Explaining liquid staking involves lots of jargon. Check out the dropdown below for some helpful definitions before reading on.
Staking Definitions
- Liquid Staking Derivative Token:When you stake a cryptocurrency, such as ETH or SOL, through liquid staking, you will receive a “liquid” token in return. This token will usually have a prefix, such as “stETH” or “mSOL.” It usually represents your underlying staked cryptoplus the accrued interest from staking.
- Validators: In proof-of-stake (PoS) blockchains such as Ethereum and Solana, validators are the trusted parties used to run the blockchain. By staking a certain amount of tokens (such as 32 ETH), validators receive data from the blockchain and verify that all transactions are correct.
- APY: In return for staking the crypto necessary to run the blockchains (like the 32 ETH), validators will be awarded an “annual percentage yield” (APY). This is a reward that they get on top of their staked ETH for their service of helping to validate the blockchain.
- Commissions/Fees: Many liquid staking platforms will take a commission or a fee out of the APY paid out to stakers. If a blockchain pays 6% APY to stakers, for example, your liquid staking platform may take 10% of that APY as a fee for providing you with a liquid token.
Liquid Staking Benefits
Liquid staking has many benefits, which make it a preferred option for investors looking to get the most out of their crypto.
- Liquidity: As the name implies, liquid staking gives you a liquid token in return for your staked crypto. This allows you to earn an even higher yield on your staked crypto by lending out your liquid token or leveraging it across DeFi.
- Better Blockchain Security:The staking mechanism lies at the core of proof-of-stake blockchains. These blockchains need stakers in order to remain secure, so whenever you liquid stake your crypto, you are helping to run the blockchain.
- Risk Management: Your liquid staking tokens can be used as collateral to take out DeFi loans or to provide you additional yield in interest-bearing accounts. You can put these loans to work for personal use, or you can re-invest the funds.
Liquid Staking Risks
As with anything in crypto, there’s no such thing as a free lunch. Liquid staking comes with its own risks:
- Platform Risk: Your liquid staking tokens will be platform-specific. stETH, for example, is a liquid staking token for ETH that’s specific to the Lido platform. This means that any time you are holding stETH, you are exposed to how Lido performs as a company. If it were to get hacked or go bankrupt, the value of your stETH tokens might be affected.
- Limited Support:Liquid staking tokens are generally not as well supported by exchanges as other major cryptocurrencies. For example, you can trade ETH pretty much anywhere and use it for any DeFi application. stETH, meanwhile, is less well-supported, so your options may be more limited.
- Taxes: In the US, trading your staked crypto for a liquid staking derivative represents a taxable event. This is because the trade is a “swap,” which is considered a sale that has to have capital gains or losses calculated.
Who Should Liquid Stake?
- People Who Are Intermediate Users:Liquid staking is an advanced concept in crypto that can prove difficult to navigate. While savvy beginners may be able to participate in liquid staking, they should do so at their own risk and be aware of some of the risks they are taking.
- People Who Need Liquidity: The largest benefit of liquid staking is that it provides liquidity. If you want to earn a yield on your crypto but you also need to use it as collateral, or you want to lend it to earn even more, getting another token through liquid staking may be a good option.
- People Who Are Long-Term Holders: Liquid staking, like normal staking, is most profitable over a long timeframe. If you pair liquid staking with lending or liquidity providing, you can earn even more on your crypto over the long term.
Who Shouldn't?
- People Who Are Just Starting Out:As we’ve mentioned before, liquid staking is an advanced concept that can take a while to understand and use effectively. If you’re a beginner looking to earn some extra yield on your crypto, a simpler option, such as lending or providing liquidity, may be a better bet.
- People Who Want Simple Taxes:When you swap your crypto for liquid staked assets, you are incurring a taxable event. At the end of the year, you will have to go back and pay taxes on all of the capital gains you incurred every time you swapped a crypto for its liquid-staked version.
- People Who Can’t Afford To Lose Any Crypto: Liquid staking is risky — you may make a mistake during the many steps required to stake and unstake your crypto, or your liquid staking platform may experience a hack or become insolvent. It’s best done with crypto you can afford to lose and that you plan on holding for a long time.
To Sum It Up
In summary, liquid staking is an intermediate strategy used by savvy traders to earn yield on their crypto while also retaining a liquid asset. While it can be very profitable, it’s important to note that liquid staking is risky and should be undertaken only after you do proper research.
Remember to never stake money that you can’t afford to lose.
Frequently Asked Questions
Liquid staking is different from traditional staking because it provides you with a “liquid” token while your crypto is staked.
You can use this liquid token to lend, provide liquidity, and much more across DeFi to boost your yield even more.
It’s difficult to determine which staking protocol is the best. Lido is the largest staking protocol, while Rocket Pool is known for its vibrant community.
Additionally, Coinbase Prime and ANKR are good choices for institutional stakers.
Liquid staking derivatives are simply the liquid tokens that represent your staked crypto. For example, when staking ETH through Lido, your “liquid staking derivative” token will be “stETH.”
While similar in name, liquid staking, and liquidity pools are two very different concepts. Liquid staking is when you receive a liquid token in return for staking your crypto. Liquidity pools, on the other hand, are when you provide “liquidity” to a pair of tokens that other traders can use to trade. For example, you can supply ETH liquidity into a USDC/ETH pool which will provide the ETH that traders need to buy when they are selling USDC.
Liquid staking tokens allow you to have access to your staked crypto without any lockups.
Normally, you can’t use your staked tokens for anything until you un-stake them. With liquid staking, you can use your liquid tokens to lend, provide liquidity, or as collateral when taking out loans.
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