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.

Pros

Passive income generation through rewards.
Fixed staking periods can reduce the risk of market volatility.
Generous sign-up bonus of up to $4,100, offering extra trading capital for new users.
Relatively low entry barriers for users with small investments.
Can support eco-friendly blockchain initiatives.
Rewards are predictable and can compound over time.

Cons:

Risks of slashing or penalties for misbehavior of the validator.
Rewards may decrease over time.
Some networks have high minimum staking requirements.

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.

Pros

Liquidity is maintained while earning rewards.
Staked assets can be used to maximize earnings.
Generous sign-up bonus of up to $4,100, offering extra trading capital for new users.
More flexibility compared to traditional staking.

Cons:

An additional risk of smart contract vulnerabilities.
The complexity of understanding liquidity pool mechanics.

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.

Pros

Amplifies staking rewards by participating in multiple networks.
Enables enhanced liquidity with a potentially higher return.
Facilitates more diversified staking strategies.
More flexibility compared to traditional staking.
Increases capital efficiency through restaking flexibility.

Cons:

Additional risks involved with cross-chain interactions.
It may lead to overexposure to certain assets.

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.

Conclusion

Liquid restaking is an evolution of staking that increases capital efficiency. It allows users to earn multiple layers of rewards without sacrificing liquidity.

However, it comes with added risks, such as smart contract vulnerabilities and potential discounting of RLTs.

As the industry and ecosystems expand, more protocols will likely adopt liquid restaking, making it a key part of crypto staking.

Understanding how the basics work can you make informed decisions on how to maximize your yields — at the same time managing risks.

FAQs

Which cryptocurrencies support staking?

Many Proof-of-Stake (PoS) blockchains support staking. Major ones include Ethereum (ETH), Solana (SOL), Polkadot (DOT), Cardano (ADA), Cosmos (ATOM), Tezos (XTZ), and Binance Coin (BNB).

Each has its own rules for staking rewards, lock-up periods, and penalties. Some networks require a minimum stake, while others allow delegation with any amount.

What is restaking, and how does it differ from liquid staking?

Restaking means using staked assets to secure multiple protocols for extra rewards. It builds on liquid staking by letting LSTs be restaked in specific platforms.

While liquid staking boosts liquidity, restaking compounds rewards by securing additional services—though it comes with more risks, like exposure to multiple protocols.

What are RLTs, and how do they generate extra rewards?

RLTs are the next evolution of staking rewards. When you stake ETH and get stETH, you can restake it in EigenLayer to receive RLTs like PufETH (Puffer Finance) or eETH (EtherFi).

These tokens can be used in DeFi while earning rewards from both Ethereum staking and additional security roles in restaking protocols.

What is the expected APY for staking, liquid staking, and restaking?

It depends. Regular staking: ETH yields around 3-4% APY (higher for Solana and Polkadot). Liquid staking: LSTs often offer similar APY but can earn extra in DeFi.

Restaking: Depending on the protocol, additional rewards can push APY higher—EigenLayer-based restaking can boost yields significantly. But extra rewards mean extra risks, so balance your strategy accordingly.

Can I lose money with liquid staking or liquid restaking?

Yes. While staking itself isn’t risky if the network is secure, LSTs and RLTs come with smart contract risks, price fluctuations, and slashing risks. If an LST or RLT loses value, you might get back less than you put in.

Always check the protocol’s security measures to understand the risks before staking or restaking.

How do I choose the best staking, liquid staking, or restaking strategy?

It depends on your goals:

Want simplicity? Regular staking (via Kraken or a validator) is safest. Want liquidity? Liquid staking (Lido, Rocket Pool) lets you use staked assets. Want max rewards? Restaking (EigenLayer, Puffer) compounds earnings but with higher risks.

Consider APY, lock-up periods, security, and personal risk tolerance before choosing.