ETH Liquid Staking Tokens: How to Earn Up to 9.74% Effective APY
Before we get started, this is not a recommendation or endorsement to buy any token mentioned.
Last week, Ethereum completed a monumental engineering feat, successfully upgrading the network from Proof-of-Work to a Proof-of-Stake consensus. Prior to this milestone, anyone running an Ethereum validator has been locking up ETH in 32 ETH increments, in order to contribute to this PoS consensus in exchange for staking yield denominated in ETH.
The most popular liquid staking solutions such as Lido and Rocketpool provide a simple and secure way to earn interest on ETH by allowing individuals to stake ETH with value that’s still liquid and can be used across a range of DeFi applications, such as lending, overcollateralized borrowing, and liquidity provisions.
Since the launch of the Beacon Chain in December 2020, those running validators have been unable to withdraw ETH and so there’s been an reasonable liquidity discount when market-buying liquid staking tokens, which will be redeemable for 1 ETH eventually in the future. Staked ETH is expected to stay locked up within the network for 6-12 months after The Merge (September 15, 2022). At that point, those who have staked ETH will be able to withdraw their stake, along with whatever rewards it has accrued.
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