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Liquid staking is an exciting way to earn rewards with your crypto. It helps make staking easier and more flexible for investors. But what are the best DeFi protocols for liquid staking? And more importantly, are they right for you?
Below, we’ll explore the top five liquid staking protocols on Ethereum in 2024. But before we get started, let’s get clear on exactly what liquid staking protocols are, how they work, and what makes them unique.
Liquid staking protocols let you stake your crypto tokens and still use them in the DeFi ecosystem. When you stake tokens, you usually lock them up to help secure the network and earn rewards.
With liquid staking, you get special tokens in return that you can trade or use while still earning staking rewards. This makes staking much more flexible.
You might be wondering how liquid staking compares to other methods. We can see a comparison by looking at the pros and cons of liquid staking compared to solo staking. Solo staking or traditional staking is when you stake your tokens directly by running a validator node yourself. While this can earn good rewards, it has some drawbacks. Running a node requires a lot of technical knowledge, and node operators need to lock up a large amount of tokens, which can’t be used while they’re staked.
For example, to run a validator node on Ethereum, you need to lock up 32 ETH. At current prices, this could be over $90,000, and during this time, those 32 ETH are locked and can’t be used for anything else.
Liquid staking, on the other hand, is much easier. You don’t need to run a node or lock up a lot of tokens. You can stake a small amount, and you get liquid tokens back that you can trade or use in other DeFi activities.
For instance, with a liquid staking protocol like Origin Protocol, you can swap any amount of ETH for OETH, Origin’s LST. You can then use OETH in other DeFi activities while still earning rewards. This flexibility is the main benefit of liquid staking for token holders.
On Ethereum, liquid staking protocols work by letting users stake their ETH and receive liquid staking tokens in return. The entire process works in just a few simple steps, and enables users to have much more flexibility:
Stake ETH: You stake your ETH in a liquid staking protocol, or swap for an LST on a DEX. Receive Liquid Tokens: You get liquid tokens, like stETH or OETH, which represent your staked ETH. Earn Rewards: Your LST holdings continue to earn staking rewards. Use Liquid Tokens: You can trade these liquid tokens or use them in other DeFi applications and activities.
Again, the big advantage of this system is that it allows you to earn rewards from staking while still having access to your tokens.
Now that we understand how liquid staking works, let’s look at the top five liquid staking platforms on Ethereum in 2024.
Origin Ether (OETH) is a liquid staking protocol that offers high yields and flexibility. When you stake with Origin Ether, you receive OETH tokens. These tokens can be used in various DeFi activities, allowing you to earn more rewards. Origin Ether also has strong security measures, making it a safe choice for staking.
Lido Finance is one of the most popular liquid staking protocols. When you stake ETH with Lido, you get stETH in return. This stETH can be traded or used in other DeFi projects. Lido makes staking easy and accessible, even for beginners.
Rocket Pool is another great option for liquid staking. It allows users to stake ETH and receive rETH tokens. Rocket Pool is known for its decentralized approach, which means it’s managed by a community of users. This makes it a secure and reliable option for staking.
Binance Staked ETH is offered by the Binance exchange. When you stake ETH on Binance, you get bETH tokens. These tokens can be traded on the Binance platform. This option is good for those who already use Binance and want a simple way to stake their ETH.
Frax Ether is a newer liquid staking protocol that is gaining popularity. It allows users to stake ETH and receive sfrxETH tokens. Frax Ether focuses on providing high yields and has a user-friendly interface, making it a great choice for both new and experienced users.
Liquid staking is important because it makes staking more accessible and flexible. By allowing users to stake their tokens and still use them, it opens up new opportunities in the DeFi world.
Here are the biggest benefits to keep in mind:
As the DeFi sector grows, liquid staking will continue to play a crucial role in making staking accessible and rewarding for everyone.
Using a liquid staking protocol can be very rewarding, but like all investments, it carries a degree of risk. To really understand whether liquid staking is worth it for you, you need to to understand the specific risks involved.
Here are some things to consider:
If you can tolerate these risks, liquid staking can be a great way to earn rewards as long as it’s done carefully. Make sure to do your research and stick to the more reliable protocols with real track records like Lido Finance, Rocket Pool, Origin Ether, Binance Staked ETH, and Frax Ether.
Solo staking, also known as traditional staking, requires running a validator node on a proof of stake blockchain and locking up a large amount of tokens, such as 32 ETH. Liquid staking allows users to stake smaller amounts and receive liquid tokens, which can be used for maximizing returns through additional DeFi activities.
Liquid staking helps in maximizing returns by allowing users to earn staking rewards while still using their liquid tokens in other DeFi projects. This means you can stake your ETH and earn extra income through activities like lending and liquidity mining simultaneously.
Ethereum staking is popular in liquid staking protocols because it offers flexibility and accessibility, letting users stake smaller amounts and still participate in the network. These protocols also provide liquid tokens, enhancing the ability to maximize returns and engage in various DeFi opportunities.
