Liquid staking tokens represent a form of staked assets on a blockchain network that have been tokenized, enabling holders to trade or use them as collateral while still earning staking rewards. Staking is the process of participating in network consensus by locking up a certain amount of cryptocurrency as collateral to support the operations of a blockchain network. In return for providing this collateral, stakers receive rewards in the form of additional tokens.
Liquid staking tokens allow users to retain the benefits of staking (earning rewards) while also having liquidity, meaning they can trade or transfer the tokens without having to wait for the staking period to end. This is achieved through tokenization, where staked assets are represented by tokens on a blockchain. These tokens can then be traded on decentralized exchanges (DEXs) or used as collateral in decentralized finance (DeFi) applications.
Overall, liquid staking tokens provide a way for users to unlock the value of their staked assets which would have been otherwise locked for participating in network staking, without offering any more benefits beyond the staking rewards.