Crushing The Biggest Solana Liquid Staking Misconceptions

Liquid staking is one of the most widely used features in the Solana ecosystem, yet it is also one of the most misunderstood. Users often have questions about how Solana’s liquid staking tokens compare to Ethereum LSTs, whether LSTs are secure, and whether transferring an LST affects staked SOL, among plenty of others.

In this guide, we break down the biggest misconceptions surrounding Solana liquid staking and explain how Solana’s architecture creates a safer, more transparent, and more capital-efficient system for users and validators.

If you want to understand how LSTs actually work on Solana, why APY sometimes looks low, and why your staked SOL never stops securing the network, you are in the right place.

Liquid staking is often treated as a uniform concept across Proof-of-Stake networks, but the underlying mechanics differ significantly.

The key distinction comes down to how assets are held, who controls withdrawals, and where trust is placed. These architectural differences create materially different risk profiles.

Below is a high-level comparison.

On Ethereum and most Proof-of-Stake networks, liquid staking introduces a trust dependency. Users delegate tokens to a liquid staking provider, which runs validators on their behalf and issues a derivative token representing the staked assets and rewards.

Because the original tokens are handed to the provider, users rely on that entity to manage validator performance, avoid slashing, and process withdrawals correctly. Risk is therefore concentrated at the provider level, making the model effectively custodial in nature.

Solana takes a different approach. When staking through a Solana stake pool, SOL is deposited into an onchain program governed by transparent, immutable logic. Users receive a liquid staking token that represents their stake, but control of the underlying SOL never passes to a third-party custodian.

Withdrawals and ownership are enforced entirely by the program. Only the holder of the LST can redeem their stake, and the stake pool manager cannot access user funds. This removes the need to trust an operator with custody of assets.

Although both ecosystems use Proof-of-Stake, their liquid staking trust models diverge sharply. Ethereum-style liquid staking relies on external providers, introducing counterparty and operational risk tied to validator management and redemption processes.

Solana eliminates this intermediary. Stake pools operate fully onchain, with rules enforced by code rather than organizations. Users retain control through their LSTs, and withdrawals are executed programmatically without human discretion.

As a result, Solana’s liquid staking more closely resembles self-custody. Instead of trusting a provider, users trust transparent, auditable code, fundamentally changing the risk and trust assumptions behind liquid staking.

For more information on Solana liquid staking vs. other PoS networks, read:

→ Liquid Staking Misconceptions: Solana vs. Other PoS Networks

Liquid staking is often assumed to be less secure than native staking because it introduces additional smart contract logic. While this is technically true, the practical risk difference is minimal for most users today.

On Solana, liquid staking builds directly on the same validator and consensus model as native staking. The underlying security assumptions remain unchanged, and the additional protocol-level risk has become largely negligible due to the maturity of Solana’s stake pool infrastructure.

Native staking security is derived from Solana’s validator network, and liquid staking does not alter that foundation. LSTs simply represent ownership of staked SOL and do not introduce new consensus-level risks.

While liquid staking adds smart contract complexity, Solana’s staking model does not include slashing. Validator underperformance impacts rewards, not principal, whether staking natively or via an LST. In both cases, SOL remains secured under the same network rules.

Solana’s liquid staking ecosystem is built on the SPL Stake Pool Program, the canonical onchain standard developed and maintained by Solana Labs.

The program has undergone multiple audits and has processed billions of dollars in stake across market cycles, securing over $10 billion in assets today. As a result, most major Solana LSTs rely on one of the most battle-tested programs in the ecosystem.

Sanctum has played a direct role in this standard. Our engineers contributed to the original implementation and continue to support its ongoing development and maintenance.

→ Learn more about Solana liquid staking security

Low or suddenly dropping LST APY is one of the most common points of confusion for users. While it can look like underperformance, it is usually a normal and predictable outcome of how Solana stake pools operate.

In most cases, short-term APY dips are not a sign of a problem. They are a side effect of rapid pool growth and how newly deposited SOL becomes active.

When SOL is deposited into a liquid staking pool, it does not earn yield immediately. New deposits must wait one full epoch, roughly two days, before becoming active stake.

During this activation period, the newly deposited SOL is idle. Because APY is calculated across the pool’s total stake, inactive deposits temporarily drag down the displayed yield. The faster a pool grows, the more visible this short-term effect becomes.

This is why rapidly growing LSTs often appear to “underperform” for one or two epochs, even though the pool is functioning exactly as intended.

All Solana stake pools experience this dynamic, but scale determines how noticeable it is.

In large LSTs, new deposits represent a small fraction of total stake, so inactive SOL has minimal impact on displayed APY. In smaller or newly launched pools, the same inflows can make up a meaningful share of TVL, causing a sharp but temporary APY drop.

Once the new stake activates, yields normalize and APY stabilizes in line with Solana’s network staking rate.

→ Get more info on low LST APYs

A common concern is that liquid staking tokens harm validators by concentrating stake and weakening network decentralization. While this sounds plausible, it does not reflect how liquid staking works on Solana in practice.

In reality, liquid staking has increased staking participation, expanded delegation across the validator set, and improved validator economics by bringing more SOL into active stake.

Concerns around LSTs typically stem from fears of stake concentration. The assumption is that large stake pools might funnel delegation toward a small number of operators, giving them outsized influence.

On Solana, however, users still choose where their stake goes by selecting which LST to use. Each liquid staking token applies its own transparent delegation strategy, meaning stake is not controlled by a single operator or decision-maker.

Solana stake pools are designed to distribute stake rather than concentrate it. Delegations are spread across many validators based on onchain rules that prioritize performance and reliability.

Because delegation is programmatic, no single validator can dominate stake allocation. This creates meaningful competition and gives smaller or newer validators access to stake they might not receive through direct delegation alone.

Liquid staking increases the total amount of SOL securing the network. More staked SOL means more consistent rewards flowing to validators that perform well.

Stake pools naturally reinforce strong operators by directing stake toward reliable validators over time, creating a positive feedback loop. Rather than reducing validator revenue, LSTs expand the staking market by making participation attractive to users who want liquidity.

The result is a healthier, more competitive validator ecosystem that is strengthened by liquid staking.

You can learn more about LSTs and their relationship with validators in our dedicated blog:

→ Liquid Staking Misconceptions: Are LSTs Bad for Validators?

No. When a Solana liquid staking token is transferred, only the LST moves. The underlying SOL remains fully staked with validators, earning rewards and securing the network at all times.

The ability to move an LST does not require the SOL behind it to be unstaked, idle, or redelegated. Staking and liquidity are cleanly separated by design.

Liquidity comes from the LST itself, not from moving the underlying SOL. When SOL is deposited into a stake pool, it is delegated to validators and becomes part of Solana’s active stake.

The LST acts as a transferable receipt that represents ownership of that staked SOL. Because it is redeemable, it can be traded or used in DeFi without affecting how the SOL is staked.

Stake pools maintain onchain accounting for all deposited SOL. Once delegated, SOL remains actively staked until a user explicitly requests a withdrawal.

Transferring or trading the LST only changes ownership of the receipt. It does not unstake, move, or interrupt the underlying delegation. The SOL continues earning rewards regardless of how often the LST changes hands.

LST transfers do not change the status of the underlying stake. SOL remains active and securing the network while liquidity is provided through the token layer.

This design allows users to access liquidity without sacrificing staking rewards, while validators benefit from a larger and more stable base of delegated stake.

→ Learn more about LST liquidity

Liquid staking on Solana allows you to stake SOL through an onchain stake pool and receive a liquid staking token (LST) that represents your staked position. The SOL backing the LST stays fully staked while the token remains liquid and transferable.

On Ethereum, liquid staking requires trusting a provider to manage and later return your ETH. On Solana, your SOL is deposited into a permissionless stake pool program that the operator cannot withdraw from. Ownership and withdrawals are enforced by code, not by a custodian.

Yes. Solana’s staking model does not include slashing, and the SPL Stake Pool Program has been audited nine times and secures more than 10 billion dollars in staked assets. Liquid staking introduces program-level risk, but not consensus-level risk.

No. When you trade, transfer, or use an LST in DeFi, the underlying SOL stays fully staked in the validator set. Only the receipt token changes hands.

APY drops temporarily when new deposits enter a stake pool because that SOL must wait one epoch before earning rewards. During this “activation period,” APY appears lower even though the pool is functioning as intended.

Large pools absorb new deposits more efficiently because inflows represent a smaller percentage of total TVL. Smaller or newly launched pools see more noticeable APY dips when growing quickly.

No. Solana stake pools distribute stake across many validators based on onchain rules, helping smaller operators attract delegation they may not receive directly. LST growth expands total network stake and strengthens validator economics.

Yes. Using an LST in DeFi does not interrupt staking rewards. Rewards continue accruing based on the underlying SOL held in the stake pool.

No. SOL deposited into a Solana stake pool cannot be withdrawn or touched by the operator. Only the holder of the LST can initiate withdrawals.