What is liquid staking? Earning staking rewards without locking coins away
By SendPay Business · · 2 min read
Normal staking locks up your coins to help secure a proof-of-stake network in return for rewards. Liquid staking gives you a separate token that stands for your staked coins, so you keep earning rewards while still being able to move or use that token.
How it works
- You deposit coins such as ETH with a liquid staking service.
- The service stakes them with network validators.
- You receive a liquid staking token that represents your share of the staked coins and their rewards.
- You can hold, send or trade that token, and later swap it back for the underlying coins.
Why people use it
Staking can tie coins up for days or weeks when you want to leave. A liquid staking token can often be sold straight away, and it can be used in other crypto apps while it keeps earning.
The extra risks
- The token can trade below the value of the coins it stands for, especially in a market panic.
- You rely on the service's smart contracts, which can have bugs.
- If a validator breaks the network's rules, part of the stake can be cut, which is called slashing.
- Using the token in other apps stacks those apps' risks on top.
Where SendPay fits
SendPay platforms let customers buy, sell and hold crypto, held with regulated partners, alongside GBP, EUR and USD accounts, powered by licensed partners. SendPay doesn't offer trading tools, DeFi or lending.
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Build my platform →Questions people ask
How much could staking earn?
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Staking rewards calculator →What is crypto staking?
Locking coins to help run a proof-of-stake network in return for rewards.
Crypto staking →What is a wrapped token?
A token that stands for another asset, often on a different blockchain.
Wrapped tokens →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.