Liquid Staking: The Ultimate Guide

Investors who want to try their hands out at liquid staking should first stake with popular and large protocols. While these protocols aren’t infallible, they still carry relatively smaller risks. 

Some blockchains, like Cardano, enable liquid staking by default. However, others like Polkadot and Solana rely on third-party projects to facilitate their liquidity staking. 

Ethereum has the highest value in both staked and liquid staking tokens. Ethereum also has several liquid staking providers. These providers include Lido finance, Rocketpool, Frax Finance, Cream, Stakehound, Ankr staking, and Stakewise. 

Lido Finance

Lido Finance is the biggest of the lot, and the firm issues the biggest liquid staking derivative, staked ETH or stETH for short. 

Lido was the first liquid staking provider, and its first-mover status in the ecosystem has ballooned its market share. They charge about 10% of the staking rewards on the staked assets and share them with the DAO treasury and the mode operators. 

Currently, Lido is the largest protocol on Ethereum in terms of Total Value Locked (TVL), with over $7 billion in Ethereum locked. Its next competitor, Rocketpool, barely has up to a billion dollars in Ethereum locked. 

Rockpool

Rocketpool is the world’s second-largest staked liquidity provider, and the protocol has about 5.5% of all ETH staking deposits. Stakers receive rETH, which is the Rocketpool derivative for ETH. 

Rocketpool gets around 5-20% of the rewards of the staked tokens and gives them to node operators directly. People who want to become node operators with Rocketpool need to purchase RPL, the protocol’s governance token. The payment of this RPL keeps the administration system of Rocketpool running smoothly. 

Frax Finance

Frax finance is a rising star in the liquidity-staking provider market. That’s because staking with Frax returns around 6-7% in ETH, while others only offer around 5% in ETH. The Frax derivative is frxETH, and users have to stake that frxETH to receive sfrxETH, which grows in value by about 6.63% per year.