What Is Liquid Staking?

Liquid staking is a way to earn rewards on your cryptocurrency without giving up access to it.

Think about the difference between a certificate of deposit and a high-yield savings account. A CD might pay solid interest, but your money is locked for a fixed term. Withdraw early and you pay a penalty. A high-yield savings account pays comparable interest, but you can pull your money out whenever you want. Same earnings, different flexibility.

Liquid staking is the high-yield savings account version of crypto staking. When you stake crypto through a liquid staking protocol, you receive a tradable token called a liquid staking token (LST) that represents your deposit. The LST is basically a receipt that can be traded, sold, or used in other crypto apps, and the whole time, your original deposit keeps earning rewards. The word "liquid" just means your money isn't frozen while it works for you.

Blockchains like Solana and Ethereum need people to put up crypto as a security deposit to keep the network honest. Participants called validators run the computers that process transactions, and they stake crypto as collateral to prove they're trustworthy. Regular users can participate by "delegating" tokens to a validator they trust, adding to that collateral and earning a cut of the rewards in return. On Solana, staking rewards currently run about 6-7% per year, paid out every 2-3 days.

The catch: your tokens are locked while staked. On Solana, getting them back takes about 2-3 days, and on Ethereum, it can take much longer. Liquid staking removes that tradeoff by giving you a usable token while your deposit earns rewards. For a deeper look at how Solana staking works, see our complete guide to liquid staking on Solana.

You deposit crypto (like SOL) into a liquid staking protocol, which stakes it with validators on your behalf. An LST shows up in your wallet representing your staked position. As your deposit earns rewards every few days, those rewards get baked into the value of your LST, so it gradually becomes worth more over time.

Say you deposit 100 SOL and receive an LST. A year later, that LST might be worth 107 SOL. The extra 7 SOL is yield you earned, and you never had to lock up your SOL tokens to get it. Whenever you want your SOL back, you trade in your LST and receive your original deposit plus whatever rewards it accumulated.

The simplest approach is just holding it. The LST sits in your wallet and grows in value as staking rewards accumulate. No buttons to click, nothing to manage.

But because LSTs are regular tradable and composable tokens, they also work across the broader crypto ecosystem, most notably in DeFi. Some holders lend their LSTs to earn extra interest on top of staking rewards, use them as collateral to borrow other tokens, or provide liquidity on exchanges to earn trading fees. These strategies can stack yields on top of each other, though they also add complexity and risk. Most beginners start by just holding.

Liquid staking is one of the lower-risk activities in crypto, but it isn't risk-free.

Your crypto lives inside a smart contract, a piece of code on the blockchain. A flaw in that code could theoretically put funds at risk. The most widely used staking programs on Solana have been audited multiple times and secure billions of dollars, which reduces this risk without eliminating it entirely.

LST are similar to wrapped tokens in that they have an underlying pool of SOL that should dictate the price. However, selling pressure with low liquidity can have LSTs temporarily trade at a discount to the SOL backing them during market panic.

We cover the risks of liquid staking in detail in our Solana Staking Risks post.

At Sanctum, we've built three things that serve different parts of Solana's liquid staking ecosystem.

One of the biggest risks with any LST is whether you can actually exit when you need to. Sanctum connects all supported LSTs into a single shared liquidity pool, so any LST built on Sanctum has deep liquidity from day one. When Binance launched bnSOL, for example, holders could swap it instantly through Sanctum without waiting for standalone exchange listings. That shared liquidity keeps LST prices closely pegged to the underlying SOL and gives holders a reliable path to exit.

Sanctum makes it possible for companies to create and launch their own liquid staking tokens without building staking infrastructure from scratch. JupSOL (Jupiter), dfdvSOL (DeFi Development Corp), fwdSOL (Forward Industries), and many others all run on Sanctum's systems.

Sanctum's own LST, INF, holds a basket of high-performing LSTs rather than staking directly with validators. This earns two revenue streams: the weighted staking yields from all the LSTs in the basket, plus trading fees generated when users swap between LSTs through Sanctum's liquidity layer. That dual yield structure is why INF has averaged roughly 9% APY over 2025, compared to 6-7% for most individual LSTs.

If you hold SOL and plan to keep it for a while, liquid staking is worth considering. Rewards accumulate automatically, and your tokens stay accessible for other uses. As a bonus, keeping your liquidity via an LST supports a healthier Solana; more liquidity circulating in the ecosystem is a positive for everyone involved!

Regular staking works fine if you don't need flexibility and prefer the simplest possible setup. Liquid staking adds a small amount of smart contract risk in exchange for keeping your tokens usable. Most people who are comfortable holding crypto long-term find it a straightforward way to earn yield without giving up control.

If you want to try liquid staking on Solana, you can explore your options and stake at sanctum.so.

What is liquid staking in simple terms? Liquid staking lets you earn staking rewards on your crypto while keeping your tokens usable. You deposit crypto into a protocol and receive a tradable token (called an LST) that represents your staked position. Your deposit earns rewards in the background, and you can trade or use the LST whenever you want.

How is liquid staking different from regular staking? With regular staking, your tokens are locked for a set period. On Solana, unstaking takes about 2-3 days. With liquid staking, you get an LST back immediately that you can trade, sell, or use in other crypto apps while your deposit keeps earning rewards.

What can I do with a liquid staking token? The simplest option is just holding it in your wallet and letting it grow in value over time. Beyond that, LSTs work like any other token. Some users lend them for extra interest, use them as collateral to borrow, or provide liquidity on exchanges. These strategies can increase returns but also add risk.

Is liquid staking safe? Liquid staking is one of the lower-risk activities in crypto, but it carries some risk. Your funds sit inside a smart contract, and a bug in that code could theoretically cause losses. The most popular staking programs on Solana have been audited multiple times. LSTs can also briefly trade below their backing value during market sell-offs.

How much can I earn from liquid staking on Solana? Most individual LSTs on Solana earn roughly 6-7% APY from staking rewards. Sanctum's INF token averaged around 9% APY across 2025 by combining staking yields from a basket of LSTs with trading fees from Sanctum's liquidity layer.

What is Sanctum? Sanctum is the staking, liquidity, and yield infrastructure layer for all of Solana, generated more than $185M in yields and secured more than 16M staked SOL. We are the #1 LST platform on Solana by far, the #3 protocol by TVL on Solana, and a top-35 DeFi protocol across all of crypto.