Beginners Guide to Liquid Staking

Liquid staking lets you stake SOL and earn rewards while receiving a token you can still use, trade, or transfer. It solves an important problem: traditional staking locks your SOL for days, and liquid staking removes most of that restriction.

This guide starts with the basics of staking, walks through the vocabulary you need, explains how liquid staking works on Solana, and covers the real risks involved. Every section builds on the one before it, so readers with no crypto background can follow from start to finish. The risks section goes beyond the usual smart contract warning to cover price drops, exit friction, and the compounding dangers of layered strategies.

Sanctum, which operates as infrastructure behind a significant share of Solana's liquid staking activity, is covered in detail once the foundational concepts are in place.

Staking is a way to put your SOL (the token that powers the Solana network) to work. You contribute it to help keep the network running, and in return, the network pays you rewards. Think of it like earning interest for participating in a system that needs your support.

Before getting into the mechanics, it helps to understand why staking exists in the first place.

Solana is a blockchain, which means it is a shared digital system that records transactions. For that system to work, someone has to verify that every transaction is legitimate and that everyone agrees on the order things happened.

That job falls to validators. A validator is a person or organization running specialized computer software that checks transactions and helps the network reach agreement. Validators need financial backing to do this work credibly. That is where stakers come in.

When you stake SOL, you are backing a validator with your tokens. The network then distributes rewards to both the validator and you for keeping things running smoothly. You earn a share of the rewards. The validator earns a commission for doing the technical work.

To stake your SOL, you first pick a validator, then delegate your SOL to them through a wallet app, and start accumulating rewards over time. Solana's own learning resources estimate those rewards at roughly 5-7% per year, though the exact rate changes depending on network conditions.

One point worth clarifying early: delegating your SOL does not mean sending it to someone else's account. You keep ownership of your SOL the entire time. You are giving the validator permission to count your stake as part of their weight on the network, which helps them participate in the verification process more often.

Think of it like voting with your tokens. You are saying, “I trust this validator to do a good job” and the network rewards both of you when they do.

Native staking is the simplest version of staking on Solana. You delegate directly to a validator, rewards build up over time, and you can unstake whenever you want.

The tradeoff is time. When you unstake, your SOL does not become available right away. Native unstaking typically takes 2 to 3 days before your SOL is free to use again. During that waiting period, you cannot spend, trade, or move it.

A few terms will come up repeatedly in this guide. Getting clear on them now will make everything that follows easier to follow.

SOL is Solana's native token and currency of the Solana network. You use it to pay transaction fees, send value to other people, and participate in staking. If you are reading this guide, SOL is the asset at the center of every decision.

A validator is a computer operator that helps process transactions and keep the Solana network secure. Validators run specialized software around the clock. Think of them as the workers who keep the system honest. Their reliability and the fees they charge directly affect the rewards stakers earn.

Delegation is the act of assigning your SOL's staking power to a validator. You are not handing your SOL over to someone else, the way you might wire money to a bank. You are telling the Solana network, “Count my SOL toward this validator's stake”. You stay in control of your tokens.

APY stands for annual percentage yield. It is the estimated return you would earn over a full year if rewards kept compounding at the current rate. For example, if a savings account advertises 5% APY, that means you would earn 5% on your balance over 12 months. APY in staking works the same way, but the rate is not fixed. It can change based on network conditions, validator performance, and fees.

DeFi stands for decentralized finance. It refers to crypto applications that offer financial services like trading, lending, and borrowing, but without traditional banks or brokerages in the middle. These apps run on blockchains. DeFi is relevant here because liquid staking tokens can be used inside these applications, which creates both opportunities and risks.

Unstaking is the process of withdrawing your SOL from a staking position. On Solana, native unstaking involves a cooldown period (typically 2 to 3 days) before the SOL is freely usable again. During that time, your SOL is in limbo: you cannot use it, and it is no longer earning rewards.

Native staking is straightforward and reliable. But it comes with a real flexibility tradeoff that affects everyday decisions.

When you stake SOL natively, the tokens are committed to a validator and cannot be freely moved. If you decide to unstake, you wait through a cooldown period that can last 2 to 3 days.

During that window, your SOL is completely unavailable. You cannot sell it, send it to someone, or use it for anything. For someone who needs to react to a sudden price change or an unexpected expense, that waiting period can be a real problem.

Markets move quickly. If your SOL is locked in a native stake and the price drops sharply, you cannot sell to limit your losses until the cooldown ends. If a new opportunity appears somewhere in the Solana ecosystem, you cannot redirect your capital to take advantage of it.

The rewards you earn from staking might be offset by what you miss elsewhere. And because your SOL is locked, you have no easy way to evaluate that tradeoff in real time.

Your staking rewards are not a flat, guaranteed rate. They depend partly on the validator you choose. A validator with high uptime and low commission fees will deliver better net returns. A validator that goes offline frequently or charges a high commission will deliver less.

Choosing a validator is part of the staking decision, and it directly affects what you earn.

Liquid staking was designed to solve the lockup problem described above. It lets you earn staking rewards without giving up the ability to use your capital.

Instead of staking directly to a validator yourself, you deposit SOL into a liquid staking protocol (a type of application built for this purpose). The protocol stakes that SOL on your behalf through validators and gives you a new token in return.

That new token is called a liquid staking token, or LST. It is your transferable receipt, representing both the SOL you deposited and the staking rewards that accumulate over time.

Here is the step-by-step flow:

1. You deposit SOL into a liquid staking protocol.
2. The protocol stakes that SOL through one or more validators.
3. You receive an LST in your wallet.
4. Your staked SOL keeps earning rewards in the background.
5. The value of your LST gradually increases as rewards build up.

You do not need to do anything else to earn rewards. Just holding the LST is enough.

The word “liquid” means you can move it freely. Unlike natively staked SOL, which is locked in place, your LST can be held in your wallet, sent to another person, traded on a market, or deposited into a DeFi application.

A rough comparison: native staking is like putting money into a savings account that requires a 2 to 3 day notice before you can withdraw. Liquid staking gives you a transferable claim on that savings account, one you can sell or use without waiting.

Your staked SOL keeps earning rewards regardless of what you do with the LST.

The simplest option is to just hold your LST. You keep it in your wallet and let the underlying staking rewards build up over time. For most beginners, this is the right starting point. You get the benefit of staking rewards and the flexibility of being able to sell or transfer if you need to.

Beyond holding, LSTs can be swapped for other tokens, used as collateral to borrow funds, or deposited into liquidity pools and other DeFi strategies. Each of these advanced uses adds flexibility, but also adds risk. The risks section below explains why.

If you are new to crypto, holding is a perfectly valid strategy. You do not need to use DeFi apps to benefit from liquid staking.

Liquid staking is no longer a small experiment on Solana. Over 63 million SOL is currently held in LSTs, representing about 14% of all staked SOL on the network. That level of adoption signals a mature category with established protocols and real usage.

Liquid staking adds flexibility on top of native staking. But that flexibility comes with additional risk. Understanding each type of risk clearly is more useful than a generic warning to “be careful.”

Native staking interacts with Solana's base-level protocol. Liquid staking adds a layer of software code (called smart contracts) on top of that.

In simple terms: when you use a liquid staking protocol, you are trusting that the software handling your deposit, minting your LST, and managing withdrawals works correctly. If that code has a bug or gets exploited by an attacker, users can face losses or service disruptions.

Mature protocols reduce this risk through security audits and extended time in production without issues. But the risk is never zero.

An LST is designed to represent the value of your staked SOL plus accumulated rewards, so it should always be worth at least as much as the underlying SOL. In practice, the market price of an LST can temporarily drop below that underlying value. This is called a depeg, and it tends to happen during periods of market stress or low trading activity.

If you sell your LST during a depeg, you receive less than the token is actually worth based on the staked SOL behind it. And if you are using the LST as collateral in a DeFi app, a price drop can trigger a forced sale (called a liquidation) that locks in your losses. The key takeaway for beginners: the market price of your LST and the value of the SOL behind it are usually close, but not always identical in volatile markets.

“Liquid” does not mean “perfectly liquid at all times”. Your ability to sell or swap an LST instantly depends on how many other people are actively trading it and the current market conditions.

In normal markets, exits tend to work smoothly. Under stress, the cost to exit can increase, or there may not be enough buyers at the price you want. Native staking has a fixed time delay for unstaking. Liquid staking can replace some of that time friction with market friction, meaning you might be able to exit faster, but not always at the price you expect.

Even with liquid staking, your SOL is still staked to validators somewhere in the background. Validator quality affects the rewards your LST earns.

If the validators behind a protocol go offline frequently or perform poorly, the staking rewards will be lower. Protocols differ in how they select and manage validators, and those design choices affect long-term performance.

This is one of the most common traps for newer users, so it is worth explaining carefully.

Holding an LST in your wallet is one level of risk. You are exposed to smart contract risk and depeg risk, but the situation is relatively simple. Depositing that LST into a lending protocol adds a second layer, exposing you to that protocol's own smart contract risk and liquidation rules.

Borrowing against your LST or using it in a leveraged strategy adds a third layer. Each additional protocol in the chain introduces its own potential failure points. Think of it like stacking blocks: each one adds height but makes the whole tower less stable.

Treating “liquid staking”; and “complex DeFi strategy” as the same thing is a common mistake. Holding an LST is alone is very straightforward. Layering it into multiple DeFi apps is an advanced strategy with compounding risks.

Liquid staking involves more moving parts than native staking, and those moving parts can carry fees. Protocol fees, validator commissions, and swap or unstaking fees can all reduce your net return.

Solana's own documentation notes that liquid staking may offer slightly lower rewards than native staking due to fees. The extra flexibility may be worth that cost, but the tradeoff should be evaluated, not assumed.

A note on slashing: Many staking guides list slashing (a penalty where the network destroys a portion of staked funds for validator misbehavior) as a primary risk. On Solana, slashing is not currently part of the protocol. It may be added in the future. But today, the more immediate risks for stakers are smart contract exposure, depeg events, liquidity conditions, and validator quality.

With staking, liquid staking, and the risk landscape covered, Sanctum's role in the ecosystem should be easier to understand. Sanctum much more than just another LST issuer. It is infrastructure that addresses a structural problem in Solana's liquid staking market.

Solana has a large and growing number of liquid staking tokens. That variety is healthy for competition, but it creates a fragmentation problem.

Here is what that means in simple terms: imagine a city with dozens of small currency exchanges, each handling a different currency, and none of them connected to each other. If you want to convert one currency to another, you might struggle to find a good rate, or you might not find a buyer at all. That is roughly what happens when liquidity gets split across many different LSTs and trading venues.

Sanctum's infrastructure connects that fragmented market so users and protocols can move between LSTs with less friction and better pricing.

Sanctum's infrastructure has three core components. Each one solves a different part of the fragmentation problem.

Infinity is a shared liquidity layer. Instead of each LST needing its own separate trading pool, Infinity lets many LSTs share a common pool. This means more available liquidity for everyone, which makes trading and swapping more efficient.

Router is the system that handles swaps between different LSTs. Instead of relying only on standard market-based trading, Router can move underlying stake positions at their actual values. This reduces the cost and price slippage that can happen when converting between tokens.

Reserve is a backstop pool that provides instant exit liquidity when Infinity and Router cannot fully handle a request. The Reserve takes over the underlying stake account and handles the unstaking cooldown itself, giving the user SOL right away. Fees for this service are dynamic, scaling based on how much of the Reserve is being used at the time.

INF is a liquid staking token built on top of Sanctum's infrastructure. Rather than staking to a single validator or validator set, INF holds a basket of other LSTs. It earns from both the underlying staking rewards and trading fees generated when users swap between LSTs through Sanctum's liquidity pool.

INF is one product that shows how the infrastructure components work together, but it is not the entirety of what Sanctum does. The infrastructure layer behind INF also powers many other LSTs across the Solana ecosystem.

The scale of Sanctum's infrastructure role is worth noting concretely. Four of the top 10 LSTs by stake on Solana are built on Sanctum infrastructure, representing about 9.8 million SOL combined, or roughly 15% of all liquid staked SOL. That share makes Sanctum a significant structural layer in Solana's liquid staking market, not a peripheral player.

Both earn staking rewards by helping secure the Solana network. The difference is that liquid staking gives you a tradable token (an LST) representing your staked position, while native staking locks your SOL directly with a validator. Protocols like Sanctum go a step further by providing infrastructure that connects multiple LSTs, making it easier to swap between them without the friction of fragmented liquidity.

No staking method is completely risk-free. Established liquid staking protocols reduce risk through audits, time in production, and careful validator selection. Smart contract exposure, depeg events, and liquidity conditions are all real risk factors that apply across the liquid staking ecosystem, including LSTs built on Sanctum infrastructure. The risk level also depends on what you do with the LST after you receive it.

Yes. A smart contract exploit could result in loss of funds, whether the LST is issued through Sanctum or any other protocol. A depeg event could cause your LST to temporarily trade below its underlying value, and if you sell at that moment, the loss becomes real. Using an LST in DeFi strategies adds further risk if those positions get liquidated.

Yes. If the LST's design passes through underlying staking rewards (most do), your token's value relative to SOL increases over time as rewards accumulate. Sanctum's INF token, for example, earns from both staking rewards and swap fees generated through Sanctum's liquidity pool. You do not need to take any additional action beyond holding the token in your wallet.

Generally yes. LSTs are standard tokens that can be sent, traded, or swapped. Sanctum's Router and Reserve infrastructure can help with exits by enabling stake-level conversions between LSTs and providing backstop liquidity when market depth is thin. In normal conditions, selling or transferring is straightforward, though the price you receive still depends on available market liquidity.

No. Solana does not currently have slashing built into the protocol. Validators can still underperform or go offline, which reduces rewards for any LST staked through them, including those on Sanctum infrastructure. The more relevant risks to focus on are smart contract exposure, depeg, liquidity, and validator quality.