Liquid Staking Protocol
DeFi Strategies • Yield Models • Token Income
yield-earning staking without lockup
Liquid staking protocol allows users to stake their native tokens and receive a transferable “receipt token” in return—one that continues to earn staking rewards while remaining usable across DeFi. Unlike traditional staking where assets are locked, liquid staking gives users flexibility, liquidity, and composability without sacrificing yield.
Example Workflow: User stakes 1,000 $FLR via a liquid staking platform like Sceptre → receives 1,000 $sFLR (initially 1:1, later floats as rewards accrue) → $sFLR can be traded, used in lending, or paired in liquidity pools → user eventually burns $sFLR to reclaim original $FLR plus accumulated rewards (minus protocol fees).
Use Case: A holder wants to earn FlareDrops and FTSO delegation rewards on their $FLR but also needs liquidity. They stake via Sceptre, receive $sFLR, then deploy that $sFLR into a BlazeSwap liquidity pool—earning staking rewards and LP fees simultaneously.
Key Concepts:
- Staking — Locking tokens to secure network and earn rewards
- Receipt Token — Liquid representation of staked assets (e.g., $sFLR, stETH)
- Liquidity Pool — DeFi pools where receipt tokens can be deployed
- Proof of Stake — Consensus mechanism enabling staking rewards
- Yield Farming — Stacking liquid staking with additional DeFi yields
- Unbonding Period — Wait time to unstake (liquid staking bypasses this)
- Validator Node — Infrastructure that processes staked assets
- Self-Custody — Maintaining control while staking via non-custodial protocols
Summary: Liquid staking protocols unlock capital efficiency by letting users earn staking rewards while maintaining DeFi composability. Receipt tokens like $sFLR or stETH represent staked positions that can be traded, lent, or LP’d—turning idle staked assets into productive DeFi building blocks.
How Liquid Staking Works
the mechanics of staking with liquidity
Deposit $FLR, $ETH, or $SOL into protocol • Assets delegated to validators • Begin earning staking rewards • No lockup on your end
Get $sFLR, stETH, or mSOL • Initially 1:1 ratio • Token appreciates over time • Represents your staked position + rewards
Use receipt token across DeFi • LP in pools ($sFLR/FLR) • Collateral for loans • Trade or transfer anytime
Base staking rewards accrue • LP fees compound • Protocol emissions stack • Multiple income streams
Liquid Staking Platforms
ecosystem-specific liquid staking solutions
Liquid Staking Yield Stacking
layering rewards for maximum capital efficiency
• Native staking rewards
• FlareDrops (FLR)
• FTSO delegation rewards
• Network inflation share
• Receipt token appreciates
• Represents staked + rewards
• Tradeable anytime
• No unbonding wait
• LP with receipt token
• Earn swap fees
• Farm additional tokens
• Use as collateral
• Borrow against receipt token
• Loop staking position
• Amplify exposure
• Higher risk/reward
Receipt Token Mechanics
how liquid staking tokens accrue value
• Token balance increases daily
• 1 stETH stays “1 stETH”
• Wallet shows more tokens
• Simpler mental model
• Can cause DeFi issues
• Example: Lido stETH
• Token count stays same
• Each token worth more
• Better for DeFi/LPs
• No balance changes
• Cleaner accounting
• Examples: $sFLR, rETH
Flare Liquid Staking Flow
step-by-step $FLR → $sFLR deployment
Liquid Staking Strategy Guide
how to approach liquid staking based on your goals
• Stake and hold receipt token
• No DeFi deployment
• Single layer yield only
• Minimal smart contract exposure
• Best for: Long-term holders
• Stake via liquid protocol
• LP in stable pairs ($sFLR/FLR)
• Minimal impermanent loss
• Double yield layer
• Best for: Passive yield seekers
• Stake and LP in volatile pairs
• Farm all available emissions
• Accept IL risk for higher APY
• Active rebalancing required
• Best for: Yield farmers
• Borrow against receipt token
• Loop staking position
• Amplified exposure + yield
• Liquidation risk present
• Best for: Advanced DeFi users
Liquid Staking Risk Framework
understanding the trade-offs
• Protocol bugs or exploits
• Slashing events passed to users
• Oracle manipulation
• Upgrade risks
Mitigation: Use audited protocols
• Receipt token trades below peg
• Panic selling during volatility
• Low liquidity in pools
• Arbitrage delays
Mitigation: Hold through depeg if patient
• Protocol controls validators
• Single point of failure
• Governance capture
• Regulatory exposure
Mitigation: Diversify across protocols
• Direct staking may yield more
• Protocol takes fee cut
• Complex tax implications
• Gas costs for deployment
Mitigation: Calculate net APY carefully
When to Use Liquid Staking
decision framework for choosing liquid vs traditional
• You want staking rewards + DeFi access
• You plan to LP with staked assets
• You need liquidity optionality
• Capital efficiency matters to you
• You’re comfortable with extra protocol risk
• You want to avoid unbonding delays
• You want simplest setup possible
• You don’t need liquidity access
• You want to minimize smart contract risk
• You prefer direct validator relationships
• Tax simplicity is a priority
• You distrust third-party protocols
Liquid Staking APY Comparison
typical yield ranges by strategy (estimates only)
Liquid Staking Checklist
what to verify before staking
✓ Multiple security audits
✓ High TVL ($10M+)
✓ Transparent fee structure
✓ Active development team
✓ Deep receipt token liquidity
✓ Clear unstaking process
✓ Insurance or slashing protection
✗ No audits or single audit only
✗ Very low TVL (rug risk)
✗ Hidden or changing fees
✗ Anonymous team
✗ Thin liquidity for receipt token
✗ No clear unstaking timeline
✗ Admin keys without timelock
• What’s the protocol fee?
• How long to unstake?
• Is there a depeg risk?
• Who controls the validators?
• What happens if slashing occurs?
• Can I exit instantly via swap?
• DefiLlama (TVL tracking)
• Token Sniffer (contract check)
• DEX Screener (liquidity depth)
• Protocol docs (fee structure)
• Audit reports (security review)
• Discord/Telegram (community)