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What Is “Liquid Staking” and What Financial Risks Does It Introduce?

Staking via a protocol for a tokenized derivative (LSD), introducing counterparty and smart contract risk.
Greeks.Live19.11.25

What Is “Liquid Staking” and What Financial Risks Does It Introduce?

Liquid staking is a mechanism where a user stakes their cryptocurrency through a protocol and receives a tokenized derivative (a "liquid staking derivative" or LSD) representing their staked asset plus rewards. The financial risk introduced is counterparty risk (the risk of the staking pool operator failing), smart contract risk (bugs in the protocol), and the potential for the LSD to de-peg from the underlying asset.

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