Liquid Staking (LST): How Yield-Bearing Tokens Work Across Multiple Blockchains

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Liquid staking has become one of the most widely adopted mechanisms in decentralized finance. It enables users to earn consensus-level staking rewards while maintaining liquidity through derivative tokens. This article provides a structured, technical overview of how liquid staking works, how it differs from traditional staking, and how various blockchains — including Ethereum, Solana, Avalanche, and the TON network — implement it in practice.

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What Liquid Staking Is and How It Works

Liquid staking is built on top of base consensus staking. Instead of locking tokens directly with validator nodes, users deposit assets into a liquid staking protocol. The protocol stakes the assets through validators and issues a Liquid Staking Token (LST) in return.

This LST represents:

• the underlying staked asset, and

• the staking rewards accumulated over time.

The model allows users to earn yield and simultaneously use the derivative token across decentralized applications. Unlike traditional staking, liquidity is preserved, making these tokens useful in DeFi lending, liquidity provision, cross-chain swaps, and portfolio strategies.

This mechanism aligns closely with foundational areas of blockchain development, Web3 engineering, smart contract audit practices, and token engineering, since LSTs rely on audited smart contracts, validator integration, and secure digital asset infrastructure.

Ethereum: The Core of the Liquid Staking Ecosystem

Approximately 95% of all liquid staking activity occurs on the Ethereum blockchain. The largest providers include:

• Lido Finance

• Rocket Pool

• Coinbase Staked ETH (cbETH)

• Binance Staked Ethereum (BETH)

All operate under the same principle: ETH is delegated to validators, and users receive LSTs such as stETH or wstETH. These tokens reflect accrued staking rewards either through:

1. Increasing token balances (e.g., stETH on Ethereum Mainnet), or

2. Increasing token price relative to ETH (e.g., wstETH on Layer 2 networks).

Staking via these providers requires smart contract security, validator decentralization, and auditable infrastructure — a core concern for enterprises exploring Web3 solutions.

Liquid Staking Beyond Ethereum

Although the majority of value is on Ethereum, other networks implement similar models.

Solana

The Solana ecosystem includes major providers such as:

• Marinade Finance (mSOL)

• Jito (JitoSOL)

• BlazeStake (bSOL)

Each token appreciates relative to SOL as validator rewards accumulate. Unstaking can be completed:

• through the provider (≈1 hour), or

• instantly on a decentralized exchange with a small discount.

Avalanche (AVAX)

On Avalanche, liquid staking is offered by:

• Benqi (sAVAX)

• Yield Yak Finance

Unlike stETH, sAVAX does not increase in quantity. Instead, its price gradually rises relative to AVAX as staking rewards accumulate. Unstaking through the provider requires a 15-day waiting period. Instant swaps via aggregators provide immediate liquidity at a slightly lower rate.

TON Network

The TON blockchain also supports liquid staking with a base yield around 17% annually. The mechanism is identical across networks: stake the base asset, receive an LST, and redeem it later at a higher value.

How Unstaking Works Across Networks

Liquid staking protocols generally support two exit methods:

1. Official Unstaking

• Requires waiting for the network’s unbonding period

• Provides the best exchange rate

• Reflects full accumulated staking rewards

2. Instant Swaps via DEX Aggregators

• No waiting

• Typically 1–2% less return

• Reflects the cost of skipping the remaining yield period

This liquidity choice is a fundamental design element in DeFi engineering, highlighting the balance between yield optimization, user experience, and smart contract-based financial automation.

Two Models of Liquid Staking Tokens (LSTs)

Across blockchains, two main models exist:

1. Increasing Token Balance

Used primarily by Ethereum’s stETH on Mainnet.

• Smart contracts increase user balances daily

• Represents continuous reward accrual

2. Increasing Token Price

Used by wstETH, sAVAX, JitoSOL, and most cross-chain LSTs.

• Token quantity stays constant

• Token price increases relative to the base asset

Both models deliver the same economic effect and rely heavily on secure smart contract execution — a crucial aspect for organizations deploying enterprise blockchain solutions.

How LSTs Integrate with DeFi

One major advantage of liquid staking is that LSTs can be used across decentralized finance ecosystems, while continuing to earn staking yield. For example, users can:

• provide liquidity in AMM pools,

• deposit LSTs into lending markets as collateral,

• borrow stablecoins or volatile assets against them,

• participate in yield-farming strategies,

• support multi-chain applications through wrapped representations of staked assets.

These use cases highlight LSTs as foundational components of the broader Web3 architecture — intersecting with decentralized applications, token development, crypto security, and cross-chain infrastructure.

Practical Examples: AVAX and SOL

AVAX (Benqi)

• Stake 100 AVAX → receive ~86.69 sAVAX

• sAVAX value increases by ~5% annually

• After one year, users redeem or swap at the higher rate

SOL (Jito Network)

• Stake SOL → receive JitoSOL

• Base yield ≈ 8–10% annually

• Unstake in 1 hour or swap instantly with discount

Across all networks, the same rule applies:

official unstaking yields the best rate, while DEX swaps trade yield for instant liquidity.

Why Liquid Staking Is Growing

Liquid staking has expanded rapidly due to its combination of:

• consistent staking yield,

• capital efficiency in DeFi,

• compatibility with multi-chain infrastructures,

• smart contract-driven automation,

• secure delegation without transferring ownership.

These characteristics align with broader trends in enterprise blockchain adoption, decentralized application development, and token engineering.

Conclusion

Liquid staking has evolved into a core component of modern Web3 ecosystems. Whether implemented on Ethereum, Solana, Avalanche, or TON, the underlying principles remain the same: users stake assets, validators generate consensus rewards, protocols issue yield-bearing tokens, and users maintain the ability to deploy these tokens across DeFi platforms.

In the next post, we will explore where liquid staking tokens are used in practice and how they can generate even higher yields beyond base consensus rewards.

These materials are created for educational purposes only and do not constitute financial advice.