How to Earn from Liquid Staking and Restaking Cryptocurrencies

Staking has long been a way for crypto holders to earn rewards while securing blockchain networks.  Liquid staking took this further by allowing users to stake their assets while keeping them liquid through tradeable tokens. 

Now, liquid restaking is pushing the boundaries even further. It lets users restake their liquid staking tokens (LSTs) for additional yield, increasing capital efficiency.  This innovation is growing rapidly, with the total TVL for liquid staking tokens (LSTs) and liquid restaking tokens (LRTs) estimated at close to $45 billion.

Staking, liquid staking, and restaking

Staking secures blockchain networks by locking up tokens in exchange for rewards, but traditional staking limits liquidity. Liquid staking and restaking solve this by issuing tradeable tokens, allowing users to maximize rewards while keeping their assets flexible. 

Let’s define the process further.

What is staking, and how does it work?

Staking is the process of locking up cryptocurrency in a blockchain network to support its security and operations. It is commonly used in Proof-of-Stake (PoS) and related consensus mechanisms. 

Participants (validators or delegators) earn rewards through additional tokens in return for staking. Validators validate transactions and produce new blocks, while delegators indirectly support them by staking tokens. 

Staking helps secure the network, reduces energy consumption compared to Proof-of-Work, and incentivizes long-term holding. 

However, risks include slashing (penalties for misconduct), token lock-up periods, and fluctuating rewards based on network participation and inflationary mechanics.

Crypto staking tokens

Staking is possible on various layer-1 (L1) blockchains. It can be done directly through wallets or delegated to validators.

Ethereum 

Ethereum transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS) with the Ethereum 2.0 upgrade, also known as the Merge. Now, staking on Ethereum involves locking up 32 ETH to become a validator, which helps to validate transactions and secure the network. 

Validators earn rewards for their participation but also risk penalties (slashing) for misconduct.  

For users who don’t have 32 ETH or don’t want to run their own validator, liquid staking solutions like Lido, Rocket Pool, and Frax ETH allow them to stake smaller amounts while maintaining access to a liquid version of their staked ETH (stETH, rETH, etc.).  

Ethereum staking can be done directly through the Ethereum Launchpad using wallets like MetaMask, Ledger, and Trezor.

Solana 

Solana uses a Delegated Proof-of-Stake (DPoS) mechanism, where users can delegate their SOL tokens to validators who process transactions and maintain network security. Unlike Ethereum, Solana does not require a minimum stake to delegate.  

Users can stake SOL through the Solana CLI, Solana Beach, or wallets like Phantom and Solflare. Delegating SOL does not lock tokens permanently, but there is a short unstaking period before tokens become available for use.  

Liquid staking options for Solana include Marinade Finance and Jito, which issue liquid tokens (mSOL, jSOL) that can be used across DeFi platforms while still earning staking rewards. 

BNB

Binance Smart Chain (BSC), also known as BNB Chain, uses a Proof-of-Staked-Authority (PoSA) consensus model, which combines elements of PoS and Delegated Byzantine Fault Tolerance (dBFT). This model allows users to stake BNB with validators (called “delegates”) who validate transactions in exchange for staking rewards. 

Users can stake BNB using the Binance Web Wallet, Trust Wallet, or MetaMask. There’s no minimum staking requirement, and rewards are distributed based on validator performance who are rotated based on their staked amount.

Unlike Ethereum and Solana, BNB staking does not impose long lock-up periods, making it a flexible option for users who want to earn passive income.  

Crypto staking pools via exchanges

For beginners, setting up a staking wallet, choosing a validator, and managing rewards can feel overwhelming. That’s where crypto exchanges come in. Platforms like Kraken simplify the process by offering staking pools. 

Instead of handling everything yourself, you deposit your crypto, and Kraken stakes it on your behalf, distributing rewards automatically. Kraken supports staking for multiple cryptocurrencies and some of the best staking coins, including Ethereum (ETH), Solana (SOL), Polkadot (DOT), Cardano (ADA), Cosmos (ATOM), and Tezos (XTZ). 

The platform provides estimated annual rewards, which vary based on the token and network conditions. For example, Ethereum staking on Kraken offers an APY of around 3-4%, while Solana and Polkadot provide higher yields, typically ranging from 6-12%. 

Staked assets remain accessible, with some tokens allowing instant unstaking and others requiring a lock-up period. One advantage of staking through Kraken is its user-friendly interface and the ability to stake even small amounts. 

This makes it a good option for those new to staking who want to make money from cryptocurrency without dealing with the technical aspects of running a validator node. However, rewards may be lower than self-staking since the exchange takes a commission.

What is liquid staking, and how does it work?

Liquid staking solves the liquidity issue of traditional staking. Instead of locking tokens, users receive a liquid staking token (LST), which represents their staked assets. These LSTs can be used in decentralized finance (DeFi) applications for lending, trading, or yield farming. 

Platforms like Lido and Rocket Pool issue tokens like stETH and provide liquid staking solutions for Ethereum. Liquid staking removes the need for lock-up periods and expands DeFi strategies that may be executed across the ecosystem. 

Risks here include smart contract vulnerabilities, liquidity fluctuations, and reliance on centralized entities if not fully decentralized. Market fluctuations may also impact the value of LSTs.

Crypto liquid staking tokens and protocols

Several protocols provide LSTs, enabling users to stake while keeping liquidity.

stETH (Lido Staked Ethereum)

According to DeFiLlama, Lido is Ethereum’s largest liquid staking protocol, with a close to 70% market share. It allows users to stake ETH and receive stETH in return. stETH accrues staking rewards over time and can be used across DeFi, especially with Ethereum staking ETFs on the horizon.

rETH (Rocket Pool Ethereum)

Rocket Pool is a decentralized alternative to Lido. It lets users stake with as little as 0.01 ETH and receive rETH. Rocket Pool only requires 16 ETH instead of 32 ETH for those who want to run a node.

mSOL (Marinade Staked Solana)

Marinade Finance provides mSOL, a liquid staking token for Solana. Users can stake SOL through Marinade and receive mSOL, which can be used in Solana’s DeFi ecosystem.

Understanding liquid restaking

Liquid staking has gained popularity because it allows users to stake crypto while maintaining liquidity. But liquid restaking takes this concept further. It lets users take their LSTs and restake them for additional rewards.

This process is mainly driven by Ethereum’s EigenLayer, which enables validators to restake ETH and LSTs to secure additional protocols. Liquid restaking tokens (RLTs) represent these restaked assets, providing even more flexibility and earning potential.

How Liquid Restaking Works?

Restaking builds on liquid staking by allowing LSTs to be staked again for extra rewards. Users stake their ETH through liquid staking protocols. These tokens remain tradable and usable in DeFi.

Instead of leaving the LSTs idle, users can deposit them into a restaking protocol, which repurposes the staked assets to secure additional services.

Some platforms issue Restaking Liquid Tokens (RLTs), allowing users to trade or use their restaked assets while earning continuous rewards. By participating in both Ethereum staking and restaking, users earn dual-layer rewards: standard staking rewards plus restaking incentives from the respective protocol.

EigenLayer is the key player enabling liquid restaking on Ethereum. It allows validators to reuse staked ETH to secure other networks and services.  It powers several protocols that enable liquid restaking on Ethereum. Some notable ones include EtherFi, Renzo, Kelp DAO, and Puffer. 

Users who deposit LSTs into EigenLayer-based protocols receive RLTs, which they can use across DeFi while continuing to earn staking rewards.

Liquid restaking tokens and protocols

Several protocols now offer liquid restaking services, each with different approaches to maximizing yield.

PufETH (Puffer Finance)

Puffer Finance enables ETH restaking through EigenLayer. Users deposit ETH or LSTs and receive PufETH, representing their staked and restaked assets. Puffer is designed to improve staking efficiency while keeping assets liquid.

eTH and wrapped weETH (EtherFi)

EtherFi allows ETH holders to stake while retaining self-custody. eTH is the liquid staking token, while wrapped weETH is used for restaking. Both provide extra rewards through EigenLayer.

Kernel DAO: Dual-purpose model

Kernel DAO offers a hybrid model combining liquid staking and restaking. Users can stake ETH to receive LSTs and restake them for added rewards. This approach improves capital efficiency by maximizing staking yield.

The US SEC position on liquid staking

In August 2025, the US SEC clarified that certain liquid staking tokens such as stETH do not fall under security laws, which means they are not considered as securities transactions:

‘As part of Liquid Staking, a Staking Receipt Token issued to a Depositor does not constitute any of the financial instruments specifically enumerated in the definition of security.

‘While Depositors are entitled to rewards accruing with respect to their deposited Covered Crypto Assets, the Staking Receipt Token itself does not generate rewards. Rather, rewards are generated from the underlying Protocol Staking Activities, which (as discussed above) do not involve securities transactions.

‘As such, the Staking Receipt Token merely evidences the deposited Covered Crypto Assets held with the Liquid Staking Providers to which the Depositor is entitled as the owner.’

Source: SEC statement on liquid staking activities

It is an important regulatory step in DeFi protocols. As liquid staking do not violate security laws, it paves the way for large institutions that were concerned by the possible regulatory hurdles to step in the decentralized finance space.

Summary

Staking allows crypto holders to earn rewards while securing networks. Traditional staking locks tokens, while liquid staking provides tradeable LSTs.

Liquid restaking takes this further by letting users restake LSTs for extra yield. Ethereum’s EigenLayer has driven the growth of liquid restaking by enabling stakers to secure multiple protocols simultaneously. 

Several platforms, including Puffer Finance, EtherFi, and Kernel DAO, now offer liquid restaking tokens (RLTs), allowing users to maximize rewards while maintaining liquidity.

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