What Is “Liquid Staking” and How Does It Affect Token Utility?

Liquid staking allows users to stake their tokens while simultaneously receiving a derivative token (a "liquid staking derivative" or LSD) that represents their staked position plus accrued rewards. This LSD remains liquid and can be used in other DeFi protocols (e.g. as collateral), enhancing the utility and capital efficiency of the original staked token.

It mitigates the opportunity cost of locking tokens.