Liquid Staking: How users can flexibly utilize their staked assets

The Problem of Traditional Staking

Anyone staking their cryptocurrencies on proof-of-stake blockchains like Ethereum makes an important contribution to network security. In return, users lock up their ETH or other assets to validate transactions and ensure the integrity of the blockchain. However, the cost of this participation is high: the staked assets remain locked for the entire staking period and cannot be traded or used in other financial applications. This illiquidity discourages many potential stakers.

Liquid Staking as an Innovative Solution

This is where liquid staking comes into play. The concept revolves around the tokenization of staked assets—a mechanism that elegantly solves the staking dilemma. When users deposit their assets into a liquid staking protocol, they receive Liquid Staking Tokens (LSTs) in return. These tokens not only represent the original staked amount but also include the ongoing staking rewards.

The special feature: the LSTs are immediately tradable. Users no longer have to wait until the end of the staking period. Instead, they can freely sell their liquid staking tokens on the market, use them as collateral on decentralized finance platforms (DeFi), or invest in other projects—while their original assets continue to generate staking rewards in the background.

EigenLayer: The Next Evolution

A particularly interesting development is the EigenLayer protocol, a decentralized restaking system based on Ethereum. EigenLayer acts as infrastructure that enables users to not only stake their assets once but to stake them multiple times—i.e., “restake”—across various networks and applications.

Liquid Restaking: Combining Multiple Yields

Liquid restaking builds on this idea and takes it a step further. Users who deposit their LSTs into EigenLayer’s smart contracts receive Liquid Restaking Tokens (LRTs). These LRTs embody a multi-layered structure: they represent the original staked assets, the associated Ethereum staking rewards, AND additionally the rewards earned through participation in the EigenLayer ecosystem.

The result is a doubling of earning opportunities. Users benefit simultaneously from Ethereum validator rewards and from restaking incentives, without fragmenting their assets.

The Practical Difference: Staking vs. Restaking

The difference between liquid staking and liquid restaking can be summarized as follows:

Liquid Staking primarily addresses the liquidity problem. It allows stakers to move their assets on the market in real-time while continuing to earn rewards.

Liquid Restaking significantly expands this approach. It enables users to deploy the same asset multiple times and thus access different streams of rewards simultaneously. This is not only practical but can also be economically much more attractive—especially for active investors looking to maximize their yields.

Conclusion: More Dynamism in the Staking Ecosystem

Liquid staking is revolutionizing how blockchain users manage their staked assets. Through tokenization, a new level of flexibility is created: users are no longer bound by rigid lock-up periods. With the introduction of liquid restaking via protocols like EigenLayer, an additional dimension opens up—the ability to utilize multiple sources of income simultaneously. The result is a more dynamic, participatory staking ecosystem where users can optimize the use of their assets.