To run your own Ethereum validator you need 32 ETH, which is serious money, and a machine that stays online around the clock. Most holders have neither. Liquid staking is the workaround. You hand your ETH to a protocol, it stakes on your behalf, and it gives you back a token that stands for your staked ETH plus the rewards it earns. You can hold that token, sell it or use it somewhere else while the ETH underneath keeps working.

How it works

Staking is how Ethereum stays secure. Validators lock up ETH, check transactions and get paid for doing it honestly. Right now that pays a little over 2% a year. Lido's stETH averaged 2.24% over the week to October 3, 2026.

Before liquid staking, staked ETH just sat there. You couldn't move it or sell it, and until the Shapella upgrade in April 2023 you couldn't withdraw it at all. A liquid staking token solves the first part. ethereum.org calls it "an ERC-20 token that represents a claim on staked ETH and the rewards it earns." You can trade it like any other token.

stETH, wstETH and rETH

The big tokens pay you in two different ways.

  • stETH (Lido) grows your balance. Every day at noon UTC the amount of stETH in your wallet goes up a little.
  • wstETH is stETH wrapped so your balance stays put and each token becomes worth more instead. Many DeFi apps take wstETH rather than stETH, because a balance that changes on its own causes problems in their code.
  • rETH (Rocket Pool) works like wstETH. Your number of tokens stays fixed and the rate between rETH and ETH climbs about once a day.

Solana has the same idea in tokens like jitoSOL and mSOL, which also rise in value rather than balance. jitoSOL adds MEV rewards on top of staking. Marinade's mSOL updates its price every epoch, roughly every two days.

What it costs

There's no entry fee. The protocols take a cut of the rewards instead. Lido keeps 10%, split between the node operators who run the validators and the Lido DAO. Rocket Pool takes 14%: 5% to its node operators and a 9% "voter share", which leaves rETH holders 86% of the rewards. A proposal on Rocket Pool's forum in June 2026 would cut that voter share from 9% to 5%.

How big it is

About 34% of all ETH is now staked, up from about 29% in January, according to The Block. Lido held around 23% of staked ETH in March, by DefiLlama's count, and $26.7 billion in total on October 4. Rocket Pool held $1.4 billion. On Solana, Jito held $1.3 billion and Marinade $277 million.

Lido's size worries people. If a single provider ever controlled more than a third of staked ETH, it could in theory stall the network. In 2022 Lido's own token holders voted against limiting its share.

What can go wrong

  • The token trades below its value. In June 2022, before withdrawals were possible, stETH fell to a record 8% discount to ETH. The lender Celsius held 409,260 stETH, and the hedge fund Three Arrows Capital pulled nearly $400 million out of the main trading pool as both scrambled for cash. Anyone forced to sell that week took the loss.
  • Getting out can take weeks. Lido normally pays out withdrawals in one to five days. In September 2025, though, Ethereum's own exit queue held 2.5 million ETH, about $11 billion, and the wait stretched past 46 days. You can always sell the token on a market instead, but in a rush the price can drop below the ETH it stands for.
  • Smart contract risk. Your ETH sits in the protocol's contracts. A bug there is a risk however well the validators behave.
  • Slashing. Validators that break the rules lose part of their stake. It's rare: fewer than 500 of more than 1.2 million Ethereum validators had been slashed by September 2025. With liquid staking the loss is shared by every holder, and Lido's own risk page says slashing can cost "up to 100%" in the worst case.
  • Borrowing against it. Liquid staking tokens are popular collateral, which adds lending risk on top. On March 10, 2026, a pricing error on Aave valued wstETH at 1.1939 ETH instead of 1.228, and about $26 million of positions across 34 accounts were liquidated. Aave is repaying the users.
  • Restaking stacks more on top. ethereum.org warns that restaking adds "additional slashing conditions". Our restaking explainer covers that layer.

How to get in and out

There are two ways in: stake through the protocol's own site and receive the token, or buy the token on a decentralized exchange. And two ways out: ask the protocol for a withdrawal and wait your turn, or sell the token on a market right away and take whatever the price is that day. In calm markets the two prices sit close together. In a panic they don't. Tax rules vary by country, and the tokens that grow your balance can be treated differently from the ones that grow in value.

Questions people ask

Is liquid staking safe?

It carries less risk than most of DeFi, but some. You take on smart contract risk, the chance the token trades below its value, slashing and delays getting out. Our guide to whether DeFi is safe covers the wider picture.

What's the difference between staking and liquid staking?

With regular staking your ETH is locked up and earns rewards. With liquid staking it's still staked and earning, and you also hold a token you can sell or use elsewhere.

Is stETH the same as ETH?

No. It's a claim on staked ETH. It usually trades close to one ETH, but it fell to an 8% discount in June 2022 and can drift again when markets panic.

How much does liquid staking pay?

Ethereum staking pays a little over 2% a year right now. Lido's stETH averaged about 2.2% in early October 2026. The protocol's fee comes out of the rewards.