LST Derivatives

Definition ∞ LST derivatives are financial instruments whose value is derived from liquid staking tokens, or LSTs. These derivatives allow participants to gain exposure to the underlying staked assets and their associated rewards without directly holding the LSTs. They offer avenues for hedging, speculation, and yield optimization within decentralized finance protocols. Such instruments introduce additional layers of financial complexity.
Context ∞ The growth of LST derivatives is a significant topic within decentralized finance, particularly as staking protocols continue to gain prominence. Discussions often focus on the associated risks, including smart contract vulnerabilities and potential market manipulation. Regulators are also beginning to examine these novel financial products to determine appropriate oversight and consumer protection measures.