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Liquid Staking Meaning

A process that allows users to "stake" their digital assets (locking them up to secure a network and earn rewards) while still maintaining the "liquidity" of their capital. When you stake through a liquid staking protocol, you receive a "Liquid Staking Token" (LST) in return.

For example, if you stake ETH through Lido, you get "stETH" back. This stETH is a "receipt" that represents your staked ETH plus any rewards earned.

Crucially, you can sell, trade, or use this stETH as collateral in DeFi while your "real" ETH remains locked and earning rewards on the beacon chain. This solves the "capital inefficiency" problem of traditional staking.

In the past, if you staked your money, it was "dead" and couldn't be used for anything else. Liquid staking allows you to "double-dip"-earning staking rewards and participating in other yield-generating activities at the same time.

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