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.

It is easy to assume that all liquid staking works the same way across Proof-of-Stake networks.

But, in reality, liquid staking on Solana carries a significantly different risk profile to alternatives. The gap is due to a structural difference in how assets are held, who can move them, and how withdrawals are enforced.

In this blog, we break down those differences. Let’s dive in.

On Ethereum and most other Proof-of-Stake networks, staking involves an element of trust.

When users stake through a liquid staking provider, their tokens are sent to the provider’s validators. In return, the provider issues a derivative token, such as stETH, which represents the user’s claim on the staked assets and accrued rewards.

This model requires users to give up direct control of their original tokens. Instead, they rely on the provider to operate validators correctly and process withdrawals when requested.

Because of this structure, risk is concentrated at the provider level. If validators are mismanaged or the provider experiences downtime, slashing events, or operational failures, users may face losses or delayed redemptions.

In practice, this makes the model custodial by nature. It depends on the provider’s infrastructure, performance, and integrity to ensure users can ultimately recover both their principal and rewards.

Solana’s liquid staking model is built differently. When you stake through a Solana stake pool, your SOL is deposited directly into an onchain program governed by transparent protocol logic instead of a third-party custodian. In return, you receive an LST that acts as a receipt for your staked SOL.

Rather than handing assets to a provider, your SOL remains controlled by a permissionless stake pool program. The stake pool manager cannot access or withdraw your principal. Only the holder of the LST can initiate a withdrawal, and the process is executed automatically by the program itself.

This architecture removes the need to trust a custodian with your funds. By enforcing ownership and withdrawals through immutable, onchain rules, Solana eliminates most counterparty and custodial risks that exist in other proof-of-stake systems while allowing users to maintain control throughout the staking process.

While both Ethereum and Solana use Proof-of-Stake, the trust model behind liquid staking is fundamentally different.

On Ethereum and similar networks, liquid staking typically requires users to place trust in an external provider. Tokens are handed over to a third party, who manages validator operations, uptime, and withdrawals. This introduces counterparty risk, operational risk, and the possibility of delayed or impaired redemptions.

Solana removes that intermediary layer. Stake pool programs are enforced entirely onchain, with transparent, verifiable logic that governs how funds are staked, delegated, and withdrawn. There is no entity that can access or mismanage user principal, and no operator that must be trusted to process redemptions correctly.

This changes the nature of risk. Instead of trusting an organization, users trust open, auditable code. Ownership is enforced programmatically, and withdrawals can only be initiated by the holder of the liquid staking token.

In practice, this makes Solana’s liquid staking model closer to self-custody. Users maintain control of their assets throughout the staking lifecycle, protected by deterministic onchain rules rather than human discretion.

The result is a simpler and safer trust framework. Rather than trusting a counterparty, users trust the code. And in liquid staking, that distinction changes everything.

One of the most common misconceptions about liquid staking is that it is inherently less secure than native staking. On paper, that is technically true because liquid staking introduces additional smart contract logic that wraps staked SOL into a tokenized form. In practice, however, the difference is negligible.

For most users, the extra risk that once existed has become functionally insignificant thanks to the proven reliability of Solana’s stake pool architecture.

When natively staking SOL, security comes from Solana’s validator network. Liquid staking does not replace this system, it builds on top of it.

LSTs represent ownership of staked SOL and do not change how Solana’s consensus works. However, liquid staking introduces additional smart contract and operational complexity that does not exist with native staking. This does not create new consensus-level risks, but it does introduce protocol-level risk.

It is also important to note that Solana’s staking model does not include slashing, so validator underperformance affects rewards rather than the principal itself. Whether a user stakes natively or through an LST, the underlying SOL remains staked with validators under the same network security model.

The foundation of Solana’s liquid staking ecosystem is the SPL Stake Pool Program. Developed and maintained by Solana Labs, it is the canonical standard that powers nearly every major liquid staking token on the network.

This program has been audited nine times and has processed billions of dollars in staked assets across market cycles, today securing more than $10 billion in AUM. For users, this means that when they interact with an LST built on the SPL standard, they are relying on one of the most secure and widely tested programs in the Solana ecosystem.

At Sanctum, we’ve played a direct role in building the SPL Stake Pool Program. Our engineers contributed to its original implementation and have continued to help improve and maintain it over time.

If you have ever wondered why an LST’s APY looks unusually low, you are not alone. It is one of the most common questions we receive from users and our liquid staking partners.

At first glance, a sudden drop in APY might seem like a sign that something has gone wrong. In reality, it is a normal and predictable outcome of how stake pools function on Solana. When deposits flow into a liquid staking pool, they temporarily create what looks like underperformance, even though everything is working exactly as intended.

Understanding this mechanism is key to interpreting performance correctly. In most cases, low short-term APY is not a problem with the pool itself, and is instead actually a reflection of how quickly the pool is growing.

When you deposit SOL into a liquid staking pool, that SOL does not begin earning yield right away. The SOL must wait through one full epoch, roughly two days, before it becomes active stake. During this activation period, those newly deposited tokens are idle and do not generate rewards.

Because stake pools calculate APY based on the total SOL under management, the presence of inactive stake temporarily lowers the displayed APY for everyone in the pool. The more deposits that arrive in a short period, the greater the short-term effect on APY.

This is what we refer to when we say that an LST is “suffering from success.” When an LST grows quickly, the inflow of new deposits drags the displayed APY down for one or two epochs, even though the pool is functioning normally.

This short-term APY dip can happen to every liquid staking pool on Solana, but the impact’s visibility is what matters to users. For larger LSTs with billions of dollars in total stake, the visibility is much smaller than a new LSTs, as fresh deposits make up only a small fraction of the overall pool. As a result, the temporary drag from inactive stake barely affects the displayed yield.

Smaller or newly launched pools experience the same process, but the effect is magnified. A few million SOL in new deposits can represent a large percentage of the total TVL, so the APY appears to fall sharply for one or two epochs. Holders often misinterpret this as a performance issue when it is simply a matter of scale, which is why we tend to get the most APY questions when an LST has recently launched.

In practice, once the new stake activates, yields normalize, and the APY stabilizes at levels consistent with the broader Solana staking rate.

A common concern around liquid staking is that liquid staking tokens are bad for validators. The fear is that stake pools centralize power, funneling delegations toward a small number of large operators and weakening Solana’s decentralization.

This concern sounds reasonable on the surface, but it does not reflect how liquid staking actually works on Solana. In reality, liquid staking has increased staking participation, expanded delegation, and strengthened the economics for validators across the network.

To dive deeper, let’s explore how stake pools are designed and how stake actually flows through Solana’s validator ecosystem.

The concern that LSTs harm validators usually comes from a fear of stake concentration, not a real loss of user choice. On Solana, users are still choosing where their stake goes. They choose which liquid staking token to use, and each LST represents a different approach to validator selection and delegation.

Some worry that large stake pools could concentrate stake and give too much influence to a small number of operators. The fear is not that users lose control, but that network power could become uneven if too much stake flows through a single source.

This concern is understandable in theory. However, it misunderstands how Solana’s stake pool design works in practice and how delegation actually behaves at scale.

Solana stake pools are built to distribute stake, not concentrate it. Instead of routing delegations to a single validator, stake pools spread SOL across many validators according to transparent onchain rules. This creates a more balanced network where performance and reliability are rewarded with greater stake.

Because stake pools must follow programmatic delegation logic, no single operator can arbitrarily dominate how stake is assigned. Validators compete based on uptime, performance, and consistency, which gives smaller or newer validators a real path to attracting stake that they might not reach through direct delegation alone.

Rather than weakening the validator ecosystem, liquid staking increases the surface area of opportunity. It gives validators access to stake from users who want liquidity without removing competitive pressure from the network.

Liquid staking grows the total amount of SOL that participates in securing the network. More participation means more stake flowing toward validators and more consistent rewards for those who perform well. Validators benefit directly from this growth because their role becomes more valuable as more capital relies on their performance.

Stake pools tend to direct stake toward validators that demonstrate reliability over time. This creates a feedback loop where strong operators attract more delegation, improve their infrastructure, and deliver better performance. The result is a healthier and more competitive validator set.

LSTs do not reduce validator revenue. They expand the addressable market for staking by making it more attractive to users who would otherwise leave their SOL idle. In doing so, they strengthen validator economics rather than undermine them.

Some people get confused about how liquid staking tokens can move freely in DeFi, since it can seem like the SOL behind them must be unstaked or sitting idle in order to stay liquid. If the token is mobile, the assumption is that the stake must be mobile too.

On Solana, this is not how liquid staking works. The SOL that backs a liquid staking token (LST) remains fully staked in the validator set, earning rewards and securing the network at all times. Only the LST moves.

In this article, we will clear up any confusion you may have in this area of LSTs. Let’s get started!

The liquidity in liquid staking comes from the LST itself, not from the underlying staked SOL. When you deposit SOL into a stake pool, that SOL is delegated to validators and becomes part of the active stake that secures the Solana network. It does not move, and it does not become unstaked simply because you transfer or trade the LST that represents it.

The LST functions as a freely transferable receipt of deposit. Because the LST is redeemable for your staked SOL, it has allows you to use the value of your staked SOL in DeFi for yield-earning activities while the actual SOL remains locked staked.

Stake pools on Solana maintain precise, onchain accounting for every token deposited into the pool. When SOL enters a stake pool, it is delegated to a validator or across a set of validators. It then earns rewards, contributes to security, and remains part of the network’s active stake until a user explicitly requests a withdrawal.

The LST simply tracks ownership of that underlying stake. It can be transferred, traded, or used in DeFi without affecting how the SOL itself is delegated. The stake does not need to move, and it does not cycle through periods of unstaking and restaking. It remains continuously active, regardless of how often the LST tokens change hands.

The movement of an LST does not change the status of the SOL behind it. The underlying stake remains active, secure, and continuously contributing to the validator set, even as the token moves through DeFi.

This design increases staking participation and strengthens network security. Users gain liquidity without giving up the benefits of staking, and validators receive a broader base of delegated stake.

Your LST may move, but your SOL never stops working for the network.

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.