Definition ∞ Ethereum Liquid Staking refers to the process where users stake their Ether (ETH) on the Ethereum 2.0 network through a liquid staking protocol, receiving a liquid staking token in return. This token represents their staked ETH and accumulated rewards, while remaining tradable or usable in other decentralized finance applications. It addresses the illiquidity associated with traditional staking, which locks up assets.
Context ∞ Ethereum Liquid Staking has emerged as a significant component of the broader DeFi ecosystem, offering stakers flexibility and additional yield opportunities beyond basic staking rewards. The primary discussion points involve the security risks associated with smart contract vulnerabilities and the centralization concerns surrounding dominant liquid staking providers. A critical future development involves the ongoing decentralization efforts within these protocols and the regulatory treatment of liquid staking tokens.
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