This analysis will concentrate on the market performance, successes, and challenges of the significant liquid staking protocols in 2025.
Liquid staking reached $56.75 billion TVL in 2025, driven by Ethereum’s dominance and Solana’s MEV-boosted yields.
Liquid staking is evolving through lower fees, cross-chain interoperability, and enhanced security to ensure sustainable adoption in DeFi.

Introduction

Liquid staking is a significant part of DeFi in 2025, allowing for greater capital efficiency without compromising the security of Proof-of-Stake (PoS). The sector reached a total value locked (TVL) of $56.75 billion (DefiLlama, Q1 2025), fueled by Ethereum’s leading role, Solana’s yield opportunities, and seamless cross-chain interoperability. This article offers a brief overview of the top market players in terms of fees, examines how real yields are generated, and explores emerging risks, providing users with clear insights to confidently navigate the liquid staking landscape.

What Is Liquid Staking?

Liquid staking solves a significant limitation of traditional Proof-of-Stake (PoS) networks by unlocking staked capital. In conventional staking, users delegate tokens to validators and lose liquidity for weeks or months. Liquid staking changes this by issuing tokenized derivatives—such as stETH or jitoSOL representing staked assets while maintaining liquidity. This allows users to trade, lend, or borrow against their staked tokens while still earning rewards.

How It Works

Deposit: Users deposit their native tokens (ETH or SOL) into a liquid staking protocol.
Mint: The protocol mints a liquid staking token (LST), like Lido’s stETH or Jito’s jitoSOL.
Utilize: These LSTs can be used within DeFi ecosystems for yield farming, securing loans, or instant liquidity.

This approach makes staking rewards more accessible without sacrificing flexibility, benefiting retail and institutional investors.

Importance of Liquid Staking

Yield Farming Optimization:
LSTs enable users to layer yield strategies. For example, staking ETH for stETH can be followed by depositing stETH on platforms like Aave to earn interest and borrow stablecoins, amplifying returns.

Liquidity for Loans & Leverage:
By using LSTs as collateral on platforms such as MakerDAO or Frax Finance, investors can access liquidity while retaining exposure to asset appreciation, allowing for leveraged positions without asset liquidation.

Instant Liquidity:
Liquid staking removes unbonding periods, enabling quick trades on DEXs. This flexibility proved crucial during the 2024 market downturn.

Comparative Market Performance Analysis

Source: Total value locked of liquid staking from Defillama

Liquid staking protocols comprise a big chunk of this figure, collectively representing over $56.75 billion in TVL in 2025. The surge in validators reflects the growing adoption of Proof-of-Stake networks and the increasing interest in staking rewards without the liquidity risk associated with their staking. Ethereum-based LSTs, including stETH and rETH, dominate the market, representing approximately 60% of total TVL. This supremacy is a testament to the robustness of the Ethereum ecosystem, which is attractive to investors seeking security and liquidity. The Solana liquid staking sector is also doing well. Jito was a game-changer, as it led to ever-increasing TVL, which continued to increase during November 2024 as it rebounded and hit an all-time high of $3 billion and as much as 14 million SOL being staked — all are results of improved staking incentives through MEV. Moreover, Avalanche (e.g., BENQI) and BNB Chain (e.g., Stader) platforms extend liquid staking adoption to varied blockchain ecosystems.

In conclusion, this increasing trend, corroborated by DefiLlama, emphasizes the importance of liquid staking in developing DeFi, where liquid staking returns quickly become a key pillar. This allows stakers to earn rewards without locking up their assets, resulting in a more dynamic and efficient financial ecosystem.

Source: Comparative Overview of Quarterly Fees Charged by the Top 10 Liquid Staking Protocols from Token Terminal

According to Token Terminal, Q1 2025 saw the top liquid staking protocols generate a combined $3.305 billion in fees, a clear indicator of robust adoption and sustainable market activity among the leading players. Lido Finance emerged as a market leader, generating $2.216 billion in fees and solidifying its dominant role in Ethereum staking. In comparison, Jito followed with $970.55 million, bolstered by its competitive 4% fee structure and MEV-boosted yields in the Solana ecosystem. Polynomial Protocol’s impressive fee generation of $2.1 billion highlights growing investor interest in leveraged staking strategies, suggesting market participants increasingly seek advanced approaches to maximize yield while effectively managing risk. Other significant contributions come from Frax Ether ($35.27 million), BENQI ($34.97 million), StakeStone ($18.40 million), and StakeWise ($18.35 million), underscoring the importance of diversification and cross-chain expansion within the liquid staking market. The high fee generation among these top protocols is a critical benchmark for long-term viability, indicating that users are discovering genuine value through higher yields, improved network security, and enhanced liquidity. As the sector matures, these established players continue to refine their strategies. With a focus on innovative staking techniques and cross-chain capabilities, they are well-positioned to drive further market expansion and reinforce their leadership in the DeFi ecosystem.

Why Real Yield Matters

Real yield captures the true returns stakers earn from actual fee income—excluding inflated rewards from token emissions—using the formula:

Real Yield=APY×(1−Fee)

This metric highlights economic sustainability, as genuine fee income ensures rewards are backed by real protocol usage. A transparent fee model is essential; users may switch platforms if fees overeat into returns, impacting TVL and network security.

Our analysis compares top liquid staking protocols based on real yield to pinpoint the most efficient and sustainable options. As competition intensifies, protocols that maximize real yield, support cross-chain interoperability, and boost capital efficiency will gain stronger market trust.

Protocol Name	Fee on Staking Rewards	Approx. APY (%)	Real Yield (%) (APY × (1 − Fee))	Notes / Comments
Lido Finance	10% of rewards	3.3%	2.97%	Largest ETH liquid staking protocol (stETH). Fee split: DAO & node operators.
Jito	4% of rewards (staking + MEV)	~7.3%	~7.0%	Leading Solana liquid staking (jitoSOL). APY benefits from MEV distribution.
Frax Ether	10% of rewards (sfrxETH)	~3.39%	~3.05%	Frax’s ETH liquid staking derivative.
BENQI Liquid Staking	10% of rewards (sAVAX)	~4.35%	~3.92%	Largest LSD on Avalanche.
StakeStone	0% of rewards	~5%	~5%	Omnichain liquidity infrastructure, featuring LiquidPad, STONE (yield-bearing ETH),and BTC LSDs (SBTC, LBTC) via LayerZero. Combines Ethereum security with Bitcoin DeFi utility.
StakeWise	5% of rewards	~3.11%	~2.95%	ETH liquid staking (sETH2)
Stader	10% of rewards	~11.13%	~10.02%	Multi-chain staking. ETH yields are lower (~4–5%); the BNB chain can be higher.
Polynomial Protocol	10% of strategy yield	~18.64%	~16.78%	Options vaults on Optimism. Yields vary with market conditions.

Source: Protocol Websites

Polynomial Protocol leads with a real yield of 16.78%, derived from an 18.64% APY after a 10% fee. This impressive return comes from high-risk options vaulted on Optimism. In comparison, Stader’s multi-chain strategy on BNB Chain delivers a real yield of 10.02% (11.13% APY minus a 10% fee).

Jito benefits from Solana’s MEV ecosystem, offering a 7% real yield (7.3% APY after a 4% fee), which outperforms Ethereum’s lower-risk platforms like Lido and Frax Ether. Lido provides a 2.97% real yield (3.3% APY less a 10% fee), while Frax Ether offers a slightly higher 3.05% real yield (3.39% APY after a 10% fee).

StakeStone stands out with a 0% fee model, achieving a 5% real yield that matches its APY. This positions it as one of Ethereum’s most cost-efficient omnichain liquid staking solutions. Meanwhile, BENQI, which dominates on Avalanche, offers a real yield of 3.92% (4.35% APY less a 10% fee).

Market Trends and Influencing Factors

Blockchain	Avg. Real Yield	Dominant Risk Profile	Protocols
Ethereum	3.49%	Low	Lido, StakeStone, Frax Ether and StakeWise
Solana	7%	Medium	Jito
BNB Chain	10.02%	Medium	Stader
Avalanche	3.92%	Low-Medium	BENQI
Optimism	16.78%	High	Polynomial

A diverse risk-reward landscape marks liquid staking in 2025. On Ethereum, protocols such as Lido, StakeStone, Frax Ether, and StakeWise offer a low-risk environment with an average real yield of around 3.49%, appealing to users who prioritize stability and security. StakeStone’s integration of Bitcoin LSDs (SBTC, LBTC) exemplifies the growing trend of cross-chain interoperability, enabling BTC holders to access Ethereum’s DeFi ecosystem while maintaining exposure to Bitcoin’s value. In contrast, Solana’s Jito delivers a medium-risk profile with a 7% real yield, effectively balancing risk and return.

On the BNB Chain, Stader provides a medium-risk approach with an average real yield of 10.02%, attracting those looking for higher returns without taking on excessive risk. Meanwhile, Avalanche’s BENQI presents a low-to-medium risk profile, offering a modest 3.92% real yield that suits conservative investors.

Optimism stands out with Polynomial, which pursues high-risk strategies to achieve a remarkable 16.78% real yield. This strategy appeals to investors willing to accept higher risks for potentially greater rewards.

These trends illustrate the growing importance of cross-chain interoperability and varied fee models. As protocols adapt—such as by lowering fees or incorporating innovative rewards like MEV—users are offered various options tailored to different risk appetites and investment goals.

Performance Analysis of StakeStone

StakeStone distinguishes itself in the liquid staking market with a 0% fee model, offering a 5% real yield that exceeds Ethereum-based platforms like Lido (2.97%) and Frax Ether (3.05%). By retaining 100% of staking rewards, StakeStone provides a cost-effective solution for Ethereum stakers. Its omnichain design, powered by LayerZero, enables seamless cross-chain utility—supporting networks like Arbitrum and zkSync—and has contributed to strong TVL growth.

Notably, StakeStone has expanded its offerings to include Bitcoin liquid staking derivatives (LSDs), such as SBTC (from the Stacks ecosystem) and LBTC (a cross-chain Bitcoin derivative). This positions StakeStone as a bridge between Ethereum’s DeFi ecosystem and Bitcoin’s growing BTCfi landscape, allowing users to stake Bitcoin while maintaining liquidity for use in yield farming, lending, or collateralization.

While high-risk strategies such as Polynomial’s 16.78% yield attract investors with a higher risk appetite, StakeStone appeals to risk-averse users by combining Ethereum’s robust security with practical cross-chain DeFi integrations, including partnerships with platforms like Aave and Curve. Its support for Bitcoin LSDs further diversifies its appeal, enabling BTC holders to participate in staking without sacrificing liquidity.

Challenges of Liquid Staking

Centralization Risks: Dominant protocols like Lido 33% of staked ETH (Source: 99bitcoins.com) and BENQI 87.99% of Avalanche’s market risk centralization(Source: defillama.com), creating potential single points of failure.

Smart Contract Vulnerabilities: DeFi exploits, such as the $200M Euler Finance hack in March 2023 (Source: chainalysis.com), highlight security risks. Protocols like Polynomial further expose users to code vulnerabilities.

Slashing & Validator Risks: Poor validator performance can lead to slashing, with incidents like a 2024 protocol mismanagement causing a $3.6M loss(Source: everstake.one). Smaller chains face higher risks due to immature node networks.

MEV Dependency: MEV-driven rewards, such as Figment’s 11.78% SOL staking yield of 3.5% from MEV (Source: figment.io), are volatile. Regulatory scrutiny, including MiCA’s oversight, raises sustainability concerns (Source: cryptoslate.com).

Regulatory Gray Areas: The SEC’s crackdown on staking services, including Kraken’s settlement, signals increased oversight (Source: winston.com). Even decentralized DAOs like Lido face legal risks under securities laws(Source: reuters.com).

Conclusion

In 2025, liquid staking has become a DeFi cornerstone, with $56.75B TVL driven by Ethereum’s dominance (Lido, StakeStone), Solana’s MEV-boosted yields (Jito), and multi-chain flexibility (Stader, BENQI). While Ethereum offers stable yields (~3–5%) for risk-averse users, platforms like Polynomial Protocol on Optimism attract high-risk investors with 16.78% real yield via leveraged strategies, and StakeStone’s 0% fee model enhances Ethereum’s appeal through omnichain utility. Despite the growth, challenges persist: centralization risks (Lido’s 33% ETH stake), smart contract vulnerabilities, MEV volatility, and regulatory uncertainty (e.g., MiCA, SEC scrutiny). Future success hinges on protocols balancing innovation with security, lowering fees, expanding cross-chain interoperability, and navigating regulatory clarity, ensuring liquid staking remains a sustainable, user-centric pillar of DeFi’s evolution.