Ethereum’s Shanghai upgrade is imminent, unlocking a new era for ETH staking—especially for liquid staking protocols. With the ability to unstake ETH now live, concerns around de-pegging risks for liquid staking tokens (LSTs) like stETH are significantly reduced. This makes participation safer and more accessible than ever before.
In this guide, we’ll break down the leading liquid staking solutions, comparing their strengths and weaknesses across key metrics: yield, liquidity, decentralization, and risk. Whether you're a beginner or an advanced DeFi user, you'll find a strategy that fits your needs.
Understanding the Key Metrics in ETH Staking
Before diving into individual platforms, it's essential to understand the four pillars that define a strong staking strategy:
- Yield – Includes base staking rewards and additional DeFi opportunities like liquidity provision.
- Liquidity – How easily you can trade your LST without slippage.
- Decentralization & Transparency – How open and trustless the protocol’s operations are.
- Discount/Spread – The difference between an LST’s market price and its underlying ETH value.
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Lido: The Most Balanced and Accessible Option
Lido remains the dominant player in liquid staking, offering a compelling mix of yield, liquidity, and ecosystem integration.
- Staking Yield: ~4–5% base APR
- AMM Yield (e.g., Curve, Balancer): Up to 7%
- Protocol Fee: 10% (split between node operators and treasury)
- Current Discount: ~1% below ETH peg
Lido’s stETH token is widely supported across Ethereum Layer 2s like Arbitrum and Optimism via wstETH, drastically reducing gas costs and enabling broader DeFi composability. This makes it ideal not just for large investors but also for newcomers testing the waters.
For retail users, purchasing wstETH on L2s through 1inch.io is often more cost-effective than staking directly—especially when factoring in gas fees.
While Lido uses a DAO-approved node operator model (requiring permission), it maintains high transparency. The 10% fee is relatively low compared to competitors, and the protocol continues to improve decentralization through initiatives like distributed node sets.
Pro Tip: If you're new to staking, start small on a Layer 2 using wstETH. It offers lower risk exposure and easier experimentation within DeFi loops.
Rocket Pool: Permissionless and Highly Decentralized
Rocket Pool stands out with its permissionless node model, allowing anyone to run a node with just 16 ETH (instead of 32). The remaining 16 ETH is pooled from regular users, democratizing node operation.
- Node Operator Yield: Up to 9%+ (including RPL token incentives)
- Non-Node User Yield: ~4–5%, with 15% protocol fee
- Decentralization Level: High
The protocol rewards node operators not only with ETH staking returns but also with RPL inflationary rewards, creating strong alignment. However, non-node participants pay a higher fee cut (15%) and gain no additional yield benefits.
Rocket Pool is best suited for technically capable users with access to reliable server infrastructure. For others, the yield advantage is minimal compared to Lido or Frax.
Despite its strengths in decentralization, liquidity for rETH is moderate—trading volumes are lower than stETH or bETH, which can lead to higher slippage during large trades.
Frax Ether: High Yield with Early-Mover Advantage
Launched in late 2022, Frax Ether (frxETH) is still in its growth phase and currently enjoys strong yields due to early adoption incentives.
- Base APR: ~7%+ on Angle Protocol (sfrxETH)
- LP Yield (Convex/Curve): Over 10% in some pools
- Protocol Fee: 10%
- Discount: Minimal to none
Unlike other protocols, Frax does not currently pay out fees to node operators—suggesting potential self-operation or centralized management. This reduces transparency slightly but keeps costs low.
One key downside: frxETH rarely trades at a discount, meaning investors miss out on potential capital gains from convergence to ETH parity. However, for experienced DeFi users already active in the Curve/Convex ecosystem, Frax offers one of the highest risk-adjusted yields available today.
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Coinbase: A Regulated but Costly Option
Coinbase’s liquid staking offering stems from its legacy ETH2.0 staking service.
- Yield: ~4%, net after 25% fee
- Transparency: Moderate (regulated entity)
- Discount: Varies; occasionally attractive
With a steep 25% performance fee, Coinbase underperforms most DeFi alternatives in yield efficiency. However, it may appeal to institutional investors or those requiring U.S.-compliant custodial solutions.
While not ideal for yield maximization, it can offer short-term alpha when bought at a significant discount on secondary markets.
Binance: Low Transparency and Poor Liquidity
Binance issues bETH to users who stake ETH through its platform.
- Current Market Discount: ~3%
- Reported APR: ~4% (user-tested)
- Transparency: Very low
Binance provides little information about its underlying node operators. There are suspicions that it delegates to affiliated entities like Ankr, which has a controversial history. Additionally, bETH suffers from extremely poor liquidity—just 10 bETH can cause ~0.2% slippage on decentralized exchanges.
DeFi integration is minimal. Unlike stETH or rETH, bETH isn’t widely used in lending protocols or AMMs. Given these drawbacks, the only viable strategy is buying bETH at a deep discount on the open market—not through direct staking.
⚠️ Warning: Never stake directly with Binance unless you accept full counterparty risk. Prefer purchasing discounted bETH if you must use it.
The Hidden Reality: Most CeFi Platforms Are Staking Your ETH Anyway
Even if you don’t actively stake, many centralized platforms—including past entities like Celsius and current ones like Matrixport—use customer deposits for staking behind the scenes.
While some offer transparent products (like Matrixport’s dual-token model), others operate opaquely, exposing users to hidden risks. Celsius famously mismanaged staked assets, leading to collapse during market stress.
The takeaway? If you're not staking directly, your funds may still be exposed—just without transparency or control.
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Summary: Choosing the Right ETH Staking Strategy
When evaluating liquid staking options, focus on these four factors:
| Factor | What to Look For |
|---|---|
| Yield | Compare base APR + DeFi opportunities |
| Liquidity | Check slippage on Curve, Uniswap, etc. |
| Discount | Buy below peg when possible for extra return |
| Risk & Transparency | Prefer open-source, audited protocols |
For most users:
- Beginners & generalists: Start with Lido (stETH/wstETH)
- Advanced DeFi users: Explore Frax + Curve strategies
- Infrastructure-savvy operators: Consider Rocket Pool
- Institutions needing compliance: Evaluate Coinbase
- Avoid direct staking with Binance unless buying discounted bETH
Frequently Asked Questions (FAQ)
Q: What is liquid staking?
A: Liquid staking allows you to stake ETH while receiving a token (like stETH) that represents your stake and can be traded or used in DeFi—unlocking liquidity while earning rewards.
Q: Is unstaking live after the Shanghai upgrade?
A: Yes. Since April 2023 (updated to reflect 2025 context), users can withdraw their staked ETH and rewards at any time via the Ethereum consensus layer.
Q: Which LST has the best liquidity?
A: stETH leads by far in trading volume and DeFi integration, especially on Layer 2 networks via wstETH.
Q: Can I lose money with liquid staking?
A: Yes. Risks include smart contract bugs, de-peg events, slashing penalties, and counterparty risk (especially with CeFi platforms).
Q: Should I buy LSTs at a discount?
A: Buying below peg (e.g., stETH at 0.99 ETH value) can boost returns as the token converges toward parity—provided the protocol remains solvent.
Q: Are CeFi staking products safe?
A: They carry custodial risk. While platforms like Coinbase are regulated, they charge higher fees and offer less control than decentralized alternatives.
By carefully weighing yield, liquidity, transparency, and risk, you can build a scientifically sound ETH staking strategy tailored to your goals. Always do your own research—and consider starting small before scaling up.