Definition ∞ Liquid staked Ethereum refers to an asset that represents staked Ether while maintaining its tradability and utility in decentralized finance. When users stake their ETH to secure the Ethereum network, their assets typically become locked and illiquid. Liquid staking protocols issue a derivative token, often called a liquid staking token, to represent the staked ETH. This LST can then be freely traded, used as collateral in decentralized finance protocols, or otherwise deployed, allowing stakers to retain capital efficiency while earning staking rewards. It addresses the opportunity cost associated with traditional ETH staking.
Context ∞ Liquid staked Ethereum is a rapidly growing sector within decentralized finance, a frequent subject in crypto news and market analysis. It has introduced new dynamics to ETH staking, offering flexibility but also introducing additional smart contract and protocol risks. The ongoing discussion centers on the stability of LST pegging mechanisms, potential centralization concerns among liquid staking providers, and its broader impact on Ethereum’s economic security.
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