Tag: crypto staking

  • Liquid Staking Explained: How It Works, Benefits, Risks, and Key Differences from Traditional Crypto Staking

    Liquid Staking Explained: How It Works, Benefits, Risks, and Key Differences from Traditional Crypto Staking

    Traditional staking allows cryptocurrency holders to earn protocol rewards by helping secure a Proof-of-Stake blockchain. Liquid staking adds another layer: users receive a transferable token representing their staked assets, allowing them to keep using that capital while staking rewards accumulate. Ethereum has become the largest example of this model.

    How Traditional Staking Works

    On Ethereum, a solo validator requires 32 ETH. The validator is involved in consensus and earns ETH based on verification and approval of the blocks. Solo staking offers the operator direct control of both the infrastructure and keys, but requires tech knowledge, hardware, and adequate funds.

    Delegated staking allows a third-party operator to conduct the validation on behalf of the owner, providing the required ETH. Smaller holders delegate their staking assets through staking pools.

    How Liquid Staking Changes the Model

    A liquid staking protocol pools ETH from many users and delegates it to validators. In return, users receive a liquid staking token, or an LST, representing their share of the underlying staked ETH and accumulated rewards.

    Ethereum.org says liquid staking protocols currently account for roughly one-third of all staked ETH. Lido’s stETH and Rocket Pool’s rETH illustrate two different approaches.

    With a rebasing token such as stETH, the holder’s token balance increases as rewards accrue. With exchange-rate tokens such as rETH, the balance remains constant while each token gradually becomes redeemable for more ETH.

    Why Liquidity is Important

    Traditional staking can make capital less flexible as assets may need to wait for protocol withdrawal queues. An LST can generally be transferred, traded, or deployed in decentralized finance while the underlying ETH remains staked.

    This means one asset can simultaneously earn staking rewards and serve as collateral in lending markets or liquidity pools.

    Ethereum’s staking market has grown significantly. Lido reported total staked ETH rising 19% during H1 2026, from 36.3 million ETH to 43.1 million ETH.

    Liquid Staking Adds New Risks

    Liquidity does not come free. An LST depends on smart contracts, protocol governance, and validator operators in addition to Ethereum itself.

    The token can also trade below the value of the ETH backing it during stressed markets. Ethereum.org notes that secondary-market prices may deviate from redemption value.

    Validator slashing can also reduce underlying assets, while DeFi integrations introduce additional smart-contract and liquidation risk.

    Traditional vs Liquid Staking

    Traditional solo staking offers greater control and removes protocol intermediaries but requires 32 ETH and technical infrastructure.

    Liquid staking lowers the entry barrier and keeps assets usable, but adds another layer of counterparty and smart-contract risk.

    Why this Matters

    Liquid staking makes staked crypto more flexible by allowing users to earn rewards while still using tokenized representations across DeFi. The trade-off is added exposure to smart contracts, validator performance, liquidity conditions, and protocol-level risks.

    Final Thoughts

    Liquid staking improves capital efficiency and lowers barriers to staking participation, especially for smaller holders. However, the added flexibility also introduces more complexity. Investors should weigh yield opportunities against smart-contract, liquidity, and validator risks before choosing an LST.

    FAQs

    1. What is liquid staking?

    Liquid staking lets users stake cryptocurrency while receiving a transferable token representing the staked assets. That token can often be traded, transferred, or used across DeFi while rewards continue to accrue.

    2. How is liquid staking different from traditional staking?

    Traditional staking can make assets less liquid because they may remain locked or subject to withdrawal queues. Liquid staking provides an LST that keeps the economic value usable while the underlying crypto stays staked.

    3. What are liquid staking tokens?

    Liquid staking tokens, or LSTs, represent a user’s share of staked assets and accumulated rewards. Examples include Lido’s stETH and Rocket Pool’s rETH.

    4. What are the main risks of liquid staking?

    Risks include smart-contract vulnerabilities, validator slashing, protocol governance problems, and liquidity issues. LSTs can also trade below the value of the underlying assets during stressed market conditions.

    5. Do you need 32 ETH for liquid staking?

    No. Solo Ethereum staking requires 32 ETH, but liquid staking protocols pool assets from multiple users. This allows smaller holders to participate without operating their own validator.

  • BNY Mellon to Offer In-Custody Crypto Staking for Institutions via Galaxy Partnership

    BNY Mellon to Offer In-Custody Crypto Staking for Institutions via Galaxy Partnership

    BNY Mellon has announced plans to integrate crypto staking into its digital asset custody platform through a collaboration with Galaxy, the bank confirmed on August 4, 2026. The proposed service would allow eligible institutional clients to earn staking rewards while keeping their assets within BNY’s custody system, pending regulatory approval.

    Under the arrangement, Galaxy will provide the staking infrastructure and technical support, enabling clients to participate in proof-of-stake blockchain networks without transferring their tokens to a third party. BNY said the service would maintain the same controls, governance standards, and asset protections expected by institutional investors.

    “As digital assets continue to evolve, clients want more than safekeeping alone — they want a broader set of capabilities delivered through an institutional-grade model,” said Carolyn Weinberg, BNY’s chief product and innovation officer.

    Galaxy will also serve as a design partner for BNY’s broader digital asset platform, contributing to infrastructure development beyond staking. The Nasdaq-listed firm, which already uses BNY’s custody platform as an early client, brings expertise in proof-of-stake networks and digital asset operations.

    Steve Kurz, Galaxy’s global co-head of digital assets, said: “The future of financial markets will be built on open, programmable rails, and the institutions that move first will define the era that follows.”

    BNY launched its digital asset custody service in 2022 and continues to expand blockchain-related services. The bank manages tens of trillions of dollars in assets under custody and administration. It also plans to move core transfer agency record-keeping onto blockchain, enable around-the-clock settlement for U.S. Treasuries by 2027, and test tokenized Treasuries on a private blockchain before the end of 2026.

    Ethereum, the largest proof-of-stake network by market value, remains a key reference point for staking services. At press time, Ethereum traded near $1,868, with a market value of about $225 billion. However, BNY did not specify which networks or tokens the staking service would support, nor did it provide a launch date, fee structure, or client eligibility details.