What Are Liquid Staking Tokens (LSTs) and How to Track Them

Staking is one of the foundational activities in crypto: you lock up a proof-of-stake asset to help secure a network and earn rewards in return. The catch has always been the lockup. Traditional staking freezes your capital — it's working for you, but you can't move it, sell it, or put it to use elsewhere. Liquid staking was invented to solve exactly that tension, and the token it produces is the LST.

This article explains what is an LST, how these tokens accrue value, why people use them across DeFi, the specific risks they introduce, and — since they tend to scatter across chains — how to track them in one place. It's an educational overview, not financial advice, and it deliberately avoids quoting any APY figures because staking yields change constantly.

What is a liquid staking token?

A liquid staking token is what you receive when you stake an asset through a liquid staking protocol instead of staking it directly. You deposit the base asset — ETH, SOL, ATOM and so on — the protocol stakes it on your behalf, and it hands you back a token that represents your staked position plus the rewards it earns over time.

The key word is liquid. Unlike a direct stake, which sits locked with an unbonding period before you can touch it, the LST is a normal transferable token. You can hold it, trade it, move it between wallets, or plug it into other DeFi protocols — all while the underlying asset stays staked and keeps earning. In effect, liquid staking crypto turns a locked position into a liquid one without giving up the yield.

Some well-known examples across ecosystems:

• stETH — represents staked ETH on Ethereum, one of the earliest and largest LSTs.
• mSOL and jitoSOL — represent staked SOL on Solana, issued by different liquid staking protocols.
• stATOM — represents staked ATOM in the Cosmos ecosystem.

There are many others across chains, but they all share the same core idea: a liquid receipt for a staked asset. The specific mechanics — how the peg is maintained, which validators the underlying stake uses, and how you redeem back to the base asset — vary from protocol to protocol, which is why it pays to read the documentation of whichever LST you're considering rather than assuming they all behave identically.

How LSTs accrue value

An LST is only useful if it captures the staking rewards the underlying asset earns. Protocols handle this in one of two common ways, and knowing which model an LST uses matters for how you read your balance.

• Rebasing tokens. With a rebasing LST, the number of tokens in your wallet grows over time. As staking rewards accrue, your balance quantity increases to reflect them, so one token stays roughly pegged to one unit of the underlying asset while the count goes up.
• Reward-bearing (value-accruing) tokens. Here the token quantity stays fixed, but each token becomes redeemable for progressively more of the underlying asset. Rewards show up as the LST's exchange rate rising against the base asset rather than as more tokens appearing.

The practical difference matters when you value a portfolio. With a rebasing token you watch the balance grow; with a reward-bearing token you watch the redemption rate climb while the balance holds steady. Either way, the LST is designed so that holding it means holding a claim on the underlying stake plus its accumulated rewards — you don't have to unstake to benefit.

Using LSTs in DeFi

The reason LSTs became so popular isn't just convenience — it's what they unlock. Because an LST is liquid, a staked position can do more than one job at a time. Capital that used to sit frozen can now participate in the broader DeFi economy while still earning staking rewards underneath.

Common uses include:

• Collateral for lending and borrowing. Many lending protocols accept LSTs as collateral, letting you borrow against a staked position instead of unstaking it.
• Liquidity provision. LSTs are frequently paired in DEX pools, so you can earn trading fees on top of the underlying staking rewards.
• Trading and swapping. Since they're ordinary tokens, LSTs can be swapped like anything else if you want to exit or rebalance quickly, rather than waiting out an unbonding period.
• Composability across protocols. Because they're standard tokens, LSTs slot into many DeFi building blocks, which is why they became a base layer for a lot of on-chain strategies.

This "yield on top of yield" composability is powerful, but it also stacks risks — each extra protocol you route an LST through adds its own exposure. That leads directly to the part too many guides skip.

Liquid staking vs traditional staking

It helps to line up the two approaches directly, because the difference is what makes LSTs worth understanding. With traditional (native) staking, you delegate your asset to a validator and it sits locked. You earn rewards, but the position is illiquid — if you want out, you enter an unbonding period, often measured in days or weeks, during which the tokens can't be moved or sold. Your capital is committed and can do exactly one thing.

Liquid staking keeps the reward-earning part but removes the lockup at the point of use. Instead of a frozen delegation, you hold a token that stands in for the staked position and stays liquid. If you want to exit, you can often sell or swap the LST on the open market immediately rather than waiting out an unbonding queue — subject to available liquidity and the token's market price at that moment.

The trade-off is honest: native staking is simpler and has fewer moving parts, while liquid staking adds flexibility and composability at the cost of extra layers — a protocol, a token peg, and market dependence. Which one suits a given holder depends on whether they value simplicity or flexibility more, and how comfortable they are with the additional risks covered below.

The risks of liquid staking tokens

LSTs are genuinely useful, but they are not risk-free, and they carry hazards that plain staking does not. Understanding these before using an LST is the responsible move.

• Depeg risk. An LST is supposed to track the value of its underlying asset, but that link is maintained by market conditions and redemption mechanics, not a law of nature. Under stress, an LST can trade below the value of the asset it represents — a "depeg" — which can hurt if you need to sell during that window.
• Smart contract risk. The liquid staking protocol is code, and code can have bugs or be exploited. A vulnerability in the protocol that issues the LST could put the underlying assets at risk.
• Validator and slashing risk. The base asset is still staked with validators. If those validators misbehave and get slashed, that loss can flow through to the LST.
• Stacked DeFi risk. The moment you use an LST as collateral or in a pool, you inherit that protocol's risks too. Layering strategies multiplies the number of things that must all keep working.
• Liquidity risk. In a sharp sell-off, exiting a large LST position at a fair price depends on there being enough liquidity to absorb it.

None of this means LSTs are bad — it means they're an instrument to understand, not a free lunch. Read the specific protocol's documentation, understand which risks apply, and size positions accordingly. Again, this is education, not advice.

Tracking LSTs across chains

Here's a practical problem that shows up fast once you hold more than one LST: they don't live together. stETH is on Ethereum, mSOL and jitoSOL are on Solana, stATOM is in Cosmos. Each sits behind a different wallet and explorer, and — because of the rebasing versus reward-bearing distinction above — they don't even report their value the same way. Getting an honest picture of what your staked capital is worth becomes a chore of tab-switching and mental math.

On top of that, an LST's value isn't simply its face balance; it reflects an underlying asset plus accrued rewards, priced against a market that moves. A good multichain tracker has to value both the LST and the assets around it in real time to give you a number you can trust.

That's the gap AveraChain is built to close. Currently in development and launching soon, it's designed to aggregate holdings across Cosmos, EVM and Solana into one interchain account and value them in real time — including LSTs and their underlying assets — so your staked, liquid and idle capital all roll up into a single live net worth instead of three separate views. Even long-tail tokens get priced by deriving value from the DEX pools they trade in, so an LST doesn't show up as a blank line. You can see how the pieces fit on the AveraChain protocol overview.

Liquid staking tokens are one of the more elegant ideas in DeFi: keep your rewards, keep your liquidity. Used with a clear understanding of the risks — and tracked in one place across every chain — they let staked capital stay productive without being stuck.