Staking through a protocol that issues a tradable receipt token, so the staked capital keeps earning while the receipt can be sold or used as collateral.
Ordinary staking locks coins, with an unbonding-period before they can move. Liquid staking pools deposits, runs validators, and hands back a token representing the staked balance plus accrued rewards, which trades freely.
That receipt is the source of both the usefulness and the risk. It can be posted as collateral in a lending-protocol or looped for leverage, but it is a claim, not the underlying, and it can depeg when exit queues lengthen or confidence wobbles. Discounts of several percent have occurred and have triggered on-chain liquidation cascades.
There is also a concentration concern: a single dominant liquid staking provider controlling a large share of a network's validators is a governance and censorship risk that the ecosystem argues about openly. Add smart contract risk and slashing exposure on top.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Margin and leverage. A $5,000 deposit can control a $100,000 position, which is 20:1 leverage. Because the loss is measured on the full $100,000, a 2.5% move against you halves the deposit and brings a margin call, and a 5% move uses all of it.
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