Definition
A liquid staking token is a derivative token issued to a user who locks assets into a staking protocol, representing their staked position and accrued rewards. Instead of holding the underlying staked asset directly, the holder owns this tokenized claim, which can typically be transferred, traded, or integrated into other DeFi protocols. Liquid staking tokens are designed to preserve the economic exposure to staking, including yield and potential slashing, while relaxing the lock-up and illiquidity constraints of traditional staking.
These tokens are central to liquid staking designs often referred to as LSDs, where the staking process is abstracted into a tokenized representation. In some architectures, liquid staking tokens may also be used as inputs to restaking systems, such as those built around EigenLayer, where the same economic stake is rehypothecated to secure additional services. As a concept, liquid staking tokens sit at the intersection of staking, capital efficiency, and composability across decentralized finance.
Context and Usage
Within DeFi, a liquid staking token functions as a standardized representation of staked value that can plug into lending markets, liquidity pools, and other protocols. It typically encodes the right to redeem, directly or indirectly, for the underlying staked asset subject to protocol-specific rules, queues, and risk parameters. Because the token tracks staking rewards, its value relative to the underlying asset may change over time, either through rebasing mechanisms or via a floating exchange rate.
The broader ecosystem distinguishes between different flavors of liquid staking designs, sometimes labeled as LSDs or, in newer architectures, LRTs when tied to restaking-focused models. In restaking contexts, liquid staking tokens or their restaked variants can be used to extend security guarantees from a base staking system to additional networks or services, including those integrated with EigenLayer. Across these variations, the defining property remains that the token is a liquid, composable representation of a staked position rather than the staked asset itself.