Liquid Staking
A mechanism that lets users stake tokens and receive a liquid, transferable receipt token in return.
Liquid staking protocols allow users to stake assets and receive a liquid derivative token representing the staked position. For example, depositing ETH into Lido returns stETH — a token that appreciates in ETH value as staking rewards accrue, and can be freely used in DeFi.
This solves the 'opportunity cost' problem of native staking: instead of having ETH locked and earning only staking rewards, holders can use stETH as collateral, in liquidity pools, or as yield-bearing collateral — earning multiple layers of yield simultaneously.
The dominance of Lido (holding ~30% of all staked ETH) has raised centralisation concerns. If a single entity controls too large a share of validators, it could theoretically censor transactions or gain outsized influence over the network.