How Does “Liquid Staking” Introduce a New Layer of Risk to PoS Security?

Liquid staking introduces a new layer of risk by creating a liquid derivative token (LST) that represents the user's staked asset. This token can be traded or used in DeFi protocols, potentially centralizing control of the underlying staked assets in the hands of a few LST protocols.

If a single liquid staking protocol controls over 51% of the staked tokens, it could theoretically collude to perform a malicious attack without having to acquire the tokens directly, creating a single point of failure and centralization risk.