Liquid staking explained: stETH, rETH and how it works
Liquid staking lets you earn staking rewards and keep a tradable token. How it works, options like stETH and rETH, the risks of depegs and contracts, and tax.
- Checked against the rules: Nov 2026
- Sources cited · No buy or sell calls
Staking, briefly
On proof-of-stake networks like Ethereum and Solana, staked coins help secure the network and earn rewards. Running your own validator needs technical skill, and on Ethereum a large minimum amount. Staked coins can also take time to unlock.
What liquid staking adds
A liquid staking protocol pools deposits, runs or delegates to validators, and gives you a receipt token:
- stETH (Lido): its balance grows as rewards arrive.
- rETH (Rocket Pool): its value against ETH rises over time.
- Solana has its own liquid staking tokens from several providers.
You can hold the token, sell it, or use it as collateral in DeFi. Uniswap, Aave and Lido explained.
The risks
- Depeg: in stressed markets, stETH and similar tokens have traded below ETH for a while.
- Smart contracts: bugs or exploits in the protocol.
- Operators: you rely on the protocol's validators behaving well; misbehaviour can be penalised.
- Stacking risk: using the token in other DeFi apps multiplies risk. DeFi risks checklist.
Exchange staking vs liquid staking
Some exchanges offer staking with a simple button. It's easier, but the exchange holds your coins. Liquid staking keeps you onchain but needs a wallet and more care.
Tax in India
Staking rewards are generally treated as income when received, and selling is taxed at 30% plus cess. Whether swapping ETH for stETH is itself a taxable transfer isn't settled. Keep records. Wrapping, bridging and liquid staking tax.
Sources
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