SoK: Liquid Staking Tokens (LSTs) and Emerging Trends in Restaking

TL;DR

This SoK systematically analyzes liquid staking and restaking ecosystems, introducing a formal taxonomy for liquid staking protocols (LSPs), token models (rebase, reward-bearing, dual-token), and node-operator structures (whitelisted vs collateral-based with DVT). It empirically examines peg dynamics, showing that LST market prices generally track staking rewards but incur de-pegging during extreme events, with decentralization and protocol design shaping these dynamics. The study also surveys restaking innovations (EigenLayer, Babylon, and cross-chain mesh security) and their implications for security, governance, and decentralization, highlighting substantial TVL and growing institutional participation. Overall, the work provides a comprehensive framework for evaluating the technical and economic dimensions of liquid staking and restaking, while underscoring the need for further research into security risks, unstaking frictions, and systemic effects in DeFi ecosystems.

Abstract

Liquid staking and restaking represent recent innovations in Decentralized Finance (DeFi) that garnered user interest and capital. Liquid Staking Tokens (LSTs), tokenized representations of staked tokens on Proof-of-Stake (PoS) blockchains, are the leading staking method. LSTs offer users the ability to earn staking rewards while maintaining liquidity, enabling seamless integration into DeFi protocols and free tradeability. Restaking builds upon this concept by allowing staked tokens, LSTs or native Bitcoin tokens to secure additional protocols and PoS chains for supplementary rewards. Liquid Restaking Tokens (LRTs) unlock liquidity of restaked assets. This Systematization of Knowledge (SoK) establishes a comprehensive framework for the technical and economic models of liquid staking protocols. Using this framework, we systematically compare protocols mechanics, including node operator selection, staking reward distribution, and slashing. Our empirical analysis of token performance reveals that protocol design and market dynamics impact token market value. We further present the recent developments in restaking and discuss associated risks and security implications. Lastly, we review the emerging literature on liquid staking and restaking.

Figures (9)

• Figure 1: Annualized historical staking rewards for Ethereum during its transition from PoW to PoS, concluded in the Shanghai Upgrade (Data source: ETH.STORE).
• Figure 2: Overview of the Liquid Staking Protocol (LSP) architecture, including its key components: validators, node operators, staking pools, and oracle operators.
• Figure 3: Taxonomy of Liquid Staking Protocols (LSPs) bases on the collaboration models with validators, showcasing differences in node operator approval mechanisms, validators visibility or applications of Distributed Validator Technology (DVT).
• Figure 4: Comparison of Validator Key Management with and without Distributed Validator Technology, highlighting enhanced security and resilience.
• Figure 5: Taxonomy of Liquid Staking Tokens categorized by staking reward redistribution models and blockchain network deployment. The dual-token model is becoming obsolete.