Liquid Staking Tokens (LSTs) vs. Native Assets

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Overview

Understanding the differences between Liquid Staking Tokens (LSTs) and native assets is crucial for making informed decisions in your staking strategy on the Solana network. This article will help you understand the key distinctions and benefits of each.

Native Assets

Native assets refer to the original tokens on the Solana blockchain, such as SOL. When you stake native SOL, it becomes locked and unavailable for other uses until you unstake it.

Key Characteristics:

  • Locked During Staking: Staked SOL is locked and cannot be used until it's unstaked.
  • Direct Participation: Staking directly supports network security and earns rewards.
  • Unstaking Period: There is a delay when unstaking SOL before it becomes available again.

Liquid Staking Tokens (LSTs)

Liquid Staking Tokens (LSTs) allow you to earn staking rewards while maintaining liquidity. When you stake SOL with a liquid staking provider, you receive LSTs representing your staked SOL. These tokens can be used in DeFi applications or traded on exchanges.

Key Characteristics:

  • Liquidity: LSTs can be used in various DeFi applications, providing flexibility.
  • Staking Rewards: Continue earning rewards while using your tokens.
  • Tradability: LSTs can be traded on various decentralized exchanges.

Examples:

  • Marinade (mSOL): Represents staked SOL, with its value increasing as staking rewards accrue.
  • Lido (stSOL): Automatically increases your token balance to reflect staking rewards.

Pros and Cons

Native Assets:

Pros:

  • Directly supports network security.
  • Simplicity and straightforward staking process.

Cons:

  • Lack of liquidity while staked.
  • Unstaking period can delay access to your SOL.

Liquid Staking Tokens (LSTs):

Pros:

  • Provides liquidity while earning staking rewards.
  • Can be used in DeFi applications and traded on exchanges.

Cons:

  • Potentially higher complexity for new users.
  • Reliance on third-party liquid staking providers.

Conclusion

Choosing between native assets and liquid staking tokens depends on your need for liquidity and involvement in DeFi activities. Native assets offer a straightforward staking experience but lock your tokens, while LSTs provide liquidity and flexibility at the cost of added complexity.

Additional Resources

For more information on liquid staking tokens and their benefits, visit the Jito Network Blog.

If you have further questions, please contact our support team or check out other articles in our Help Center.

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