LSDs Explained: Liquid Staking Derivatives and What They Mean for Your Crypto Strategy
When you stake Ethereum or other Proof-of-Stake coins, you lock up your tokens to help secure the network—and earn rewards. But what if you could stake LSDs, liquid staking derivatives that represent your staked assets while letting you use them in other DeFi apps without losing access? That’s exactly what LSDs do. They turn locked-up staked tokens into tradeable tokens, so you can earn staking rewards and still swap, lend, or provide liquidity. It’s like having your cake and eating it too—and it’s one of the biggest shifts in DeFi since yield farming took off.
LSDs are built on top of Ethereum staking, the process of locking ETH to validate transactions and earn rewards, but they solve a real problem: liquidity. Before LSDs, if you staked ETH, you couldn’t touch it until the Shanghai upgrade in 2023—and even then, withdrawals were slow and limited. Now, platforms like Lido, Rocket Pool, and Frax Finance let you mint liquid tokens like stETH or rETH in exchange for your staked ETH. These tokens trade on exchanges, work in lending protocols, and even earn extra yield in pools. That’s why over $50 billion in ETH is now staked through LSDs. They’re not just a workaround—they’re becoming the default way to stake.
But LSDs aren’t risk-free. They rely on smart contracts, validator reliability, and market trust. If a staking provider gets slashed or loses funds, your LSDs could drop in value. Some LSDs also trade at a discount to their underlying asset, meaning you might not get full value when you cash out. And while they’re popular in DeFi, they’re not always accepted everywhere—some protocols still treat them as second-class assets. Still, for users who want to maximize returns without locking up capital, LSDs offer unmatched flexibility. They’re the reason you can now earn staking rewards while also trading on a DEX or borrowing against your ETH position. The trend is clear: more users are moving away from passive staking and toward active, multi-layered yield strategies.
What you’ll find below are real-world examples of how LSDs connect to crypto regulation, exchange restrictions, and DeFi innovation—from how users in Bangladesh bypass bans using staked assets, to how new platforms like SpartaDEX turn staking into a game. These aren’t theoretical concepts. They’re tools people are using right now to navigate a changing crypto landscape. Whether you’re staking ETH, exploring DeFi, or just trying to make sense of the latest trends, this collection gives you the facts—not the hype.
- By Eva van den Bergh
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- 14 Nov 2025
Understanding Liquid Staking Derivatives: How They Unlock Yield Without Locking Up Your ETH
Liquid staking derivatives let you earn Ethereum staking rewards while keeping your ETH liquid. Learn how stETH and rETH work, their risks, top providers, and how to multiply your yields using DeFi.