What is liquid staking? LSTs, stETH and jitoSOL explained

Liquid staking turns a staked position into a token that can be traded, lent or posted as collateral, and the token's design decides how it tracks the staked asset, how fast it can be redeemed and what happens when the market prices it below its backing.

Liquid staking lets a holder stake a proof-of-stake asset such as ETH or SOL through a protocol that runs the validators and hands back a liquid staking token (LST) representing the staked position plus its rewards. The holder keeps earning staking rewards while the LST moves freely: it can be sold, lent, or used as collateral for a loan. On 27 September 2026, Lido's stETH alone was backed by about 9.8 million ETH, roughly 22.6% of the 43.4 million ETH staked on Ethereum, and liquid staking protocols across all chains held about $61 billion according to DefiLlama.

Staking by itself pays a network reward and locks the asset. Liquid staking keeps the reward and swaps the lock for a set of new dependencies: a smart contract, a set of node operators chosen by the protocol, and a secondary market that prices the token. Those dependencies explain most of what separates one LST from another, and most of what has gone wrong with them in the past.

Liquid staking terms

How does liquid staking work?

A holder deposits ETH or SOL into the protocol's contract and receives newly minted LSTs in the same transaction. The protocol pools deposits and stakes them with a set of node operators, who run validators and earn rewards from the network. Rewards flow back into the pool, minus the protocol's fee, and the pool's growth is passed to LST holders either as a larger balance or as a higher exchange rate. Lido, the largest protocol, takes 10% of staking rewards, split between its node operators and its treasury, according to Lido's integration guide and its fee documentation.

The closest everyday comparison is a certificate of deposit that can be sold: the money stays locked and earning interest, while the certificate itself can be traded or pledged as security for a loan. Because the LST is an ordinary token, the holder can use it anywhere it's accepted while the underlying stake keeps working. The staking yield is the same network reward described in our breakdown of current Ethereum staking yields, less the protocol's fee, and in exchange the position stays usable. Redemption runs the other way, either by returning the LST to the protocol and waiting for validators to exit, or by selling it to someone else on an exchange at whatever price the market offers.

Rebasing vs value-accruing tokens

LSTs pass rewards to holders in one of two ways, and the difference shapes where each token can be used. A rebasing token such as stETH changes the holder's balance: Lido's oracle reports validator balances once a day and every stETH wallet grows by that day's rewards, according to Lido's explainer on stETH and wstETH. The balance can also fall if Lido's validators are penalised or slashed, because the rebase reflects losses as well as gains.

A value-accruing token keeps the holder's balance fixed and raises the amount of the underlying asset each token can be redeemed for. Lido's wstETH wraps stETH this way, and on 27 September 2026 one wstETH was redeemable for 1.2450 stETH, according to the wstETH contract on Ethereum. Rocket Pool's rETH read 1.1726 ETH and Coinbase's cbETH read 1.1404 ETH on their own contracts the same day. Most Solana LSTs, including jitoSOL and mSOL, also accrue value, with their exchange rates updated each epoch of about 2 days.

A rebasing token behaves like a savings account that pays interest as extra units in the balance, and a value-accruing token behaves like a fund share whose count stays put while its price per share rises.

Most DeFi integrations use the value-accruing form for this reason. A lending market or vault that records a deposit of 10 tokens expects to hold 10 tokens later, and a balance that changes on its own breaks that accounting. The ERC-4626 vault standard works the same way as wstETH, with a fixed share count whose redemption value grows.

Liquid staking tokens compared

Yields and TVL are from DefiLlama on 27 September 2026 and move daily. Solana LSTs pay more than Ethereum ones because SOL's network reward rate is higher, and jitoSOL also passes on MEV tips its validators collect. Protocols that stake ETH and then commit the same stake to other services, such as ether.fi's weETH, issue liquid restaking tokens, which our guide to what restaking adds to staked ETH covers separately.

Who holds the most staked ETH?

Lido is the largest Ethereum liquid staking protocol, and its share of staked ETH is the number most often cited in debates about how concentrated Ethereum's validator set has become. On 27 September 2026, Lido's API showed 9.80 million ETH staked through the protocol, about 22.6% of the 43.4 million ETH staked network-wide on validatorqueue.com. The figures below divide each protocol's DefiLlama TVL by the ETH price on the same day, so they are estimates.

Coinbase stakes far more ETH for its customers than the cbETH figure shows, since only the ETH wrapped into the tradable token counts here. Under Ethereum's consensus rules, validators holding more than a third of all stake could stop the chain from finalising blocks, which is why Lido's share, and its spread across many independent node operators, gets close attention. On Solana the market is more fragmented: jitoSOL held about $1.28 billion, Binance's BNSOL $1.26 billion, and hundreds of smaller Sanctum-issued LSTs $2.0 billion combined on 27 September 2026, according to DefiLlama.

How long does it take to unstake?

An LST holder has two exits. Selling on an exchange is instant and costs whatever discount and slippage the market charges that day. Redeeming directly with the protocol pays the full exchange rate and waits on the network, which throttles how quickly validators can leave. Ethereum only opened staking withdrawals with the Shapella upgrade on 12 April 2023, and Lido switched on direct withdrawals with its V2 upgrade on 15 May 2023, as The Block reported. Before those dates the only way out of stETH was to sell it.

1. Request. The holder sends stETH or wstETH to Lido's withdrawal queue contract and receives an NFT representing the claim.
2. Finalise. Lido pays requests from ETH it already holds, or exits validators and waits for Ethereum's exit queue and the sweep that returns their balances.
3. Claim. Once the request is finalised, the holder claims ETH at the rate locked in when the request was made.

Lido's withdrawal API estimated that a request made on 27 September 2026 would finalise on 29 September, about 40 hours later. The network's own exit queue held 153,040 ETH with a wait of about 2 days 16 hours, plus a sweep delay of about 7.7 days before a fully exited validator's ETH is paid out, according to validatorqueue.com. Ethereum's rules for exits and the sweep are set out on ethereum.org's withdrawals page.

Solana's exit is quicker because stake deactivates at the end of an epoch. Jito's documentation says a delayed unstake of jitoSOL takes up to 1 epoch, about 2 days, and costs a 10 basis point fee, while selling on Jupiter settles instantly, as described in Jito's FAQ.

What makes unstaking take longer?

A direct redemption passes through several layers, and each one can add time. The combined wait can stretch to weeks when many holders leave at once.

• Ethereum's exit queue: the network lets only a set amount of stake leave each epoch of about 6.4 minutes. Since the Pectra upgrade on 7 May 2025, the cap is 256 ETH per epoch, or about 57,600 ETH a day, according to the Electra consensus specs. Validators keep earning rewards while they wait.
• The withdrawal sweep: an exited validator waits 256 epochs, about 27 hours, before its balance becomes withdrawable, and block proposers then pay out at most 16 withdrawals per block as they cycle through every validator, which is the 7.7-day sweep delay above.
• The protocol's own queue: Lido pays requests first from its buffer of new deposits, rewards and ETH from earlier exits, and it holds back new deposits while any request can be filled, per Lido's withdrawal queue docs. Validators only need to exit when the buffer runs short. If mass slashing or a fall in validator balances hits the pool, Lido's bunker mode slows finalisation so that holders leaving early and those staying share the loss.
• The market route: selling on a DEX settles at once, at a price that carries the expected wait, so the discount tends to widen as the queue lengthens.

Queues grow whenever exit requests arrive faster than the churn limit clears them. Three triggers account for the spikes so far: looped positions unwinding when ETH borrow rates rise above the staking yield, a single large operator exiting all its validators at once, and arbitrage, since buyers of a discounted LST who redeem it at the full rate join the same line. Slashed validators are exited by the protocol automatically, so a mass slashing would add to the queue as well.

The first test came days after Shapella. On 18 April 2023, 28,436 validators were waiting to exit and the queue stood at 11.7 days, about 17 days once the sweep was added, with Kraken making up about 43% of the withdrawal queue after its SEC settlement closed its US staking service, CoinDesk reported from Nansen data. The exit queue was empty by 21 May 2023, according to validatorqueue.com's history.

In July 2025 the trigger was the ETH lending market. A wallet tagged to the HTX exchange withdrew more than 167,000 ETH from Aave from 18 June, and Aave's ETH borrow rate jumped from a usual range of 2% to 3% up to 18% on 16, 18 and 21 July, which pushed looping trades into a loss, according to Galaxy Research. The exit queue went from 1,920 ETH on 16 July to 743,989 ETH and 12.9 days on 26 July, and stETH slipped about 0.3% to 0.6% below par, per The Block.

The record followed in September 2025. On 9 September the staking provider Kiln chose to exit all of its ETH validators as a security precaution after an infrastructure incident, putting about 1.6 million ETH into the queue, as Figment reported. The queue peaked at 2.67 million ETH and 46.4 days on 13 September, stayed above 40 days until 5 November and was empty by 6 January 2026. A smaller rise took it to 9.2 days on 2 May 2026, and on 28 September 2026 it read 2.8 days.

LST prices have held far closer to their backing since withdrawals opened. The July 2025 discount was a fraction of a percent against about 6% in June 2022, because a holder can now redeem at the exchange rate and arbitrageurs have a route to close the gap. That same arbitrage lengthens the queue, so in a stress event the cost of exiting tends to show up as a longer wait more than a lower price.

The stETH depeg of June 2022

The largest test of an LST came in mid-2022, while stETH still had no direct redemption route. After Terra collapsed in May, Three Arrows Capital pulled about $400 million of liquidity from the stETH/ETH pool on Curve in a single transaction on 12 May, and Celsius took out $380 million the same day, according to a Nansen report covered by CoinDesk. With less liquidity in its main market, every sale moved the price further. By mid-June, as both firms unwound positions, one stETH traded for about 0.94 ETH on Curve, per Decrypt.

The stake behind stETH was intact the whole time; every token remained a claim on staked ETH. The loss fell on holders who had to sell before withdrawals opened, including borrowers who had posted stETH as collateral and looped it to borrow more ETH. Once Lido's V2 withdrawals went live in May 2023, anyone could redeem at the exchange rate, which gave arbitrageurs a way to close a discount and has kept large depegs of major ETH LSTs rare since. The same pattern of a solvent asset trading below its backing because its exit is slow runs through stablecoin depegs too.

How LSTs are used as collateral in lending and vaults

An LST earns staking rewards while it sits as collateral, so borrowers use it to cut the net cost of a loan. On 27 September 2026, lenders had supplied $2.63 billion of wstETH to Aave's main Ethereum market, with a maximum LTV of 78.5%, according to DefiLlama. Aave has described wstETH as the third-largest collateral asset on the protocol as of October 2025, in its case study with Lido. Morpho's isolated markets list wstETH against WETH with liquidation LTVs as high as 96.5%, which only makes sense because the two assets move almost together.

That close pairing makes looping possible. A holder deposits wstETH, borrows WETH against it, stakes the WETH into more wstETH and repeats, stacking staking exposure several times over. The trade earns the gap between the staking yield and the ETH borrow rate on every turn, and it flips to a loss when borrowing ETH costs more than staking pays. It also magnifies a depeg, since a falling LST price can push a looped position toward liquidation. Lending markets that price an LST from its redemption rate and those that use its market price behave differently here, and a lender's exposure depends on which method the market uses. Our explainer on how DeFi lending works covers liquidation mechanics in more detail.

Vaults treat LSTs as building blocks in the same way. An ETH vault can hold wstETH or rETH as a base position, supply it to lending markets, pair it in liquidity pools, or loop it within limits set by its curator. On Upshift, the curator can only move funds into the protocols, tokens and functions each vault's policy engine allows, and the risk management framework sets how new collateral types are assessed. The Sentora ETH vault, curated by Sentora, takes WETH and supplies liquidity to established DeFi protocols, and depositors hold a single share token whose value tracks the underlying positions.

Is liquid staking safe?

Liquid staking keeps every risk of ordinary staking and adds a few of its own. The main ones are:

• Smart contract risk: a bug in the staking, wrapping or withdrawal contracts could lose deposits, which audits reduce without ruling out.
• Slashing and operator risk: if the protocol's node operators are penalised, the loss is shared across every LST holder.
• Depeg and liquidity risk: the market price can fall below the exchange rate when sellers outnumber buyers, as stETH did in 2022.
• Exit delay: direct redemption waits on network queues that lengthen when many holders leave together.
• Governance and custody risk: protocol governance can change fees or operators, and exchange-issued tokens such as wBETH and cbETH depend on the issuer.
• Collateral risk: used in loops or lending, an LST can be liquidated during a price drop even when its backing is intact.

On regulation, the US SEC's Division of Corporation Finance said on 5 August 2025 that, in its staff's view, liquid staking activities and staking receipt tokens as described in its statement don't involve the offer and sale of securities, unless the deposited assets are themselves part of an investment contract. The statement notes it has no legal force or effect (SEC staff statement, 5 August 2025).

Always make sure to do your own research and be aware of the above and any other risks before depositing.

Frequently asked questions

What is liquid staking in simple terms?

Liquid staking lets a holder stake ETH, SOL or another proof-of-stake asset and receive a token that represents the staked position. The token keeps earning staking rewards and can be traded, lent or used as collateral while the original asset stays staked.

What is Lido?

Lido is the largest liquid staking protocol on Ethereum, with about 9.8 million ETH staked on 27 September 2026. Depositors receive stETH, which can be wrapped into wstETH, and Lido takes a 10% fee on staking rewards.

What is the difference between staking and liquid staking?

Ordinary staking locks the asset with a validator until it's withdrawn. Liquid staking issues a transferable token for the staked position, so the holder earns the same network rewards, minus a protocol fee, while keeping the ability to sell or use the token.

What is the difference between stETH and wstETH?

stETH rebases, so the wallet balance grows each day as rewards arrive. wstETH is the wrapped form with a fixed balance whose redemption value in stETH rises instead, which makes it easier for lending markets and vaults to handle.

Can you lose money with liquid staking?

Yes. Slashing, contract bugs and liquidations can reduce a position, and an LST sold during a depeg returns less than its backing. The stETH discount of about 6% in June 2022 is the best-known example.

How long does it take to unstake an LST?

Selling on an exchange is instant. Redeeming with the protocol took about 40 hours for Lido on 27 September 2026 and up to about 2 days for jitoSOL on Solana, and Ethereum's exit queue reached a record of about 46 days in September 2025.

Why is the ETH unstaking queue so long?

Ethereum caps how much stake can exit per epoch at 256 ETH, about 57,600 ETH a day, so the wait grows whenever exit requests arrive faster than that. The longest queues followed the unwinding of looped positions in July 2025 and Kiln's exit of about 1.6 million ETH in September 2025, when the wait peaked at 46.4 days.

Is liquid staking a security in the US?

SEC staff said in August 2025 that liquid staking activities and receipt tokens as described in their statement aren't securities offerings, with conditions. Staff statements carry no legal force, so the view could change.

Keep reading

• Ethereum staking yield. What ETH staking pays today and where the reward comes from.
• What is restaking. How liquid restaking tokens reuse staked ETH, and the risks that adds.
• Solana vaults. How vaults on Solana put SOL and stablecoins to work.
• How onchain yield vaults are secured. Roles, permissions and the 10 smart contract audits by 6 independent firms behind Upshift's contracts.