• Liquid staking is a method of staking. You stake your tokens and receive representative tokens equal to your staked token in return.

• You can use a representative token as you wish: sell, exchange, trade, and move while your tokens are staked

• You delegate your tokens to a pool but not to a specific validator. In this pool, your tokens are distributed to many validators.

• The most popular platform for liquid staking is Lido Finance

• Liquid staking has certain risks

This is how normal staking works: you delegate tokens to the validator and forget about them for a certain time. As long as your tokens are locked, you cannot sell, move, exchange, or do anything with them. In the world of cryptocurrencies, it's very inconvenient. During the blocking time, a market may collapse or a local bullish trend may occur and you won't have a chance to do something with your assets immediately because they're at stake. You have to withdraw them and wait unbounding time which could be too long. Traders and investors remain with their hands tied. Therefore the solution has been created, and it is liquid staking. Liquid staking means that you get passive income and maintain the liquidity of your assets.

Liquid staking accepts your tokens and stakes them in a liquid pool. They are distributed among a variety of validators. Instead of your tokens, you get a representative (sometimes called tokenized) token, which has a similar name to the main token. For example, for ETH it's stETH, for SOL it's mSOL (or another, depending on the platform, but you get the idea). Usually, the nominal value of a representative token is equal to the nominal value of the token itself. The representative token is a kind of derivative instrument and it can be used as you need: you can sell them, move to other platforms, exchange them, use them on DeFi, and so on. While you freely use the liquidity of a representative token, your main tokens are staked and earn you passive income. Win-win!

To get your staked tokens and income from them, you need to return your deposit, which is a representative token. You need to return them in the same amount in which you received them. Please note that some protocols charge a fee for using their platform.

Liquid staking became widespread in 2022 after the boom of DeFi. Knowing the level of activity in DeFi, it's not a surprise that liquid staking has become a necessary and successful feature. According to DefiLlama, Lido Finance accounts for the majority of the market with a TVL of $8.84 billion. It is mostly because of stacking from the Ethereum pool. Liquid staking is also common in Solana, Polygon, Polkadot, Acala, and other networks. Source: https://defillama.com/protocols/Liquid Staking

Flexibility and liquidity. Cryptocurrencies are extremely volatile and blocking funds can play a cruel joke. As long as your tokens are frozen, you can lose by not selling on time. If the bear market is in full swing, normal staking can lead to losses for the investor. In addition, as long as your tokens are staked, you cannot use them for other investment and trading opportunities. With liquid staking, you can use representative tokens in protocols, and on other platforms and implement your ideas to generate income. For example, you can use representative tokens as collateral to obtain loans secured by cryptocurrency. These loans can then be deposited into accounts with higher returns, ensuring a greater turnover per investment. Also,  you don't need to wait for the unstaking period. You can get your tokens back at any time.

Passive income. You still receive passive income and at the same time generate more funds with the help of representative tokens.

You don't need to choose a validator yourself. Normally we're looking for the validator with the highest APY, the lowest commission, and the largest total amount of SOL stake. However, if we all stake on the largest validators, this will doubt decentralization.

Liquid staking is quite a risky method. One of the risks is that the price of a representative token may no longer be equal to the price of the token itself. This has already happened, for example, with Ethereum. Its representative token stETH was trading lower than ETH. It happened because of the widespread use of stETH, which led to an elastic supply.

You may lose your representative tokens in the deal, which means you will lose access to your frozen tokens. In this case, you will have to make an additional equivalent deposit or purchase additional tokens for exchange.

Liquid staking is based on smart contracts, which means there is a risk of a hacker attack or an error in the system. If this happens, you may lose all your assets without the possibility of their return.

Link: https://marinade.finance/

Marinade is the main platform for liquid for Solana. When you stake your SOL, you get mSOL. You can use mSOL in different DeFi deals. mSOL automatically increases in value with the reward for staking. When Marinade was just starting, 1 mSOL was equal to 1 SOL, but now the price of mSOL is higher than SOL. This is because the staking reward for each SOL on Marinade gets added to the mSOL. This ensures you can get your SOL and staking rewards when you swap your mSOL back to SOL in the future. Marinade has been audited 3 times, so the risks are minimal.

Let’s have a look how it works (very simple) 👇🏼

Go to the app, click “Start staking SOL” and connect your wallet (there are a lot of options)

Stake SOL

Now you have mSOL in your wallet

What we can do with it 👇🏼

If you have never used DeFi, then go to the DeFi Cookbook page. It explains how it works quite clearly. Read about every strategy and deal there. Link: https://marinade.finance/learn/cookbook/

1️⃣ You can stake mSOL. After that you will be able to get MNDE tokens. If you stake them, you will get a Chief NFT that you can use to vote within the Marinade DAO or use your voting power in the Validators Gauges to direct a part of Marinade stake to a specific validator. Marinade DAO decides how resources like money or time should be allocates, what Marinade strategy should be and etc.

2️⃣ You can add mSOL to the liquidity pools and get SOL and mSOL from the pool according to the actual composition of the pool.

3️⃣ Contribute to a Liquidity Pool protocols like Saber, Radium, Orca

4️⃣ Lend to lend/borrow protocols like Synthetify, Larix, Jet and Francium

5️⃣On validators page you can see the dashboard of distribution of validators, the amount of staked tokens, commissions and other info

6️⃣ Or you can do nothing and just wait for your staking rewards and feel good because you can withdraw your tokens at any moment

That’s it for this article. Remember always DYOR!