Staking has become one of the most popular ways to earn passive income in crypto. Whether you’re holding Ethereum, Solana, or NEAR, staking lets you earn rewards simply by helping secure the network.
But today, investors now have two major staking options:
-
Regular (traditional) staking
-
Liquid staking
Both offer yield — but they work differently, carry different risks, and suit different types of investors.
So which one actually gives better yield?
This guide explains everything you need to know, from the mechanics and risks to real-world APYs and best use cases.
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What Is Regular (Traditional) Staking?
Regular staking is the original staking model used by Proof-of-Stake blockchains such as:
-
Ethereum
-
Solana
-
Polkadot
-
Cardano
-
NEAR
How Regular Staking Works
You lock your tokens in a validator node or through a staking service.
In return, you earn rewards for helping secure the network.
Example (Ethereum):
Stake ETH → validate blocks → earn ~3–4% APY
Key Characteristics
-
Tokens are locked
-
You cannot trade or transfer them
-
Unlocking (unbonding) can take days or weeks
-
Rewards are paid in the native token
-
Very secure
-
Simple and low maintenance
Pros of Regular Staking
-
Lowest risk option
-
Stable, predictable rewards
-
Direct participation in network security
-
No exposure to DeFi smart contracts
Cons of Regular Staking
-
Funds are locked
-
You miss DeFi opportunities
-
No leverage or yield layering
-
Lower APY compared to liquid staking
What Is Liquid Staking?
Liquid staking emerged as a solution to the biggest drawback of regular staking:
your tokens become illiquid.
With liquid staking, you stake tokens but still receive a tokenized derivative that remains tradable.
Example (Solana):
Stake SOL → receive mSOL or JitoSOL
You keep the staking yield AND you can trade or farm with the derivative.
Example (Ethereum):
Stake ETH → receive stETH or rETH
These derivatives act like synthetic versions of the original token.
How Liquid Staking Works (Simple Explanation)
-
You deposit your tokens into a staking protocol.
-
The protocol stakes them with validators.
-
You receive a liquid token representing your stake.
-
You earn staking yield plus any DeFi yield you generate with the derivative.
This creates a powerful combination:
✅ Staking yield
✅ DeFi yield (farming, LPs, borrowing, etc.)
✅ Liquidity
All at the same time.
Liquid Staking Advantages
1. You Keep Liquidity
You can:
-
Trade the derivative
-
Provide liquidity
-
Farm
-
Collateralize
-
Sell
-
Swap
You never lose access to your capital.
2. Yield Layering (Compound Yield)
Because the derivative remains usable, you can stack yields.
Example (Solana):
-
Stake SOL → 7%
-
Deposit mSOL into a lending pool → +4%
-
Farm liquidity → +10%
Total: ≈ 20% APY
This is far higher than regular staking.
3. Attractive for DeFi Users
Liquid staking tokens integrate into:
-
Lending markets
-
LP farms
-
Yield optimizers
-
Derivatives
-
Synthetic assets
4. Often Includes Bonus Rewards
Protocols such as:
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Jito (SOL)
-
Lido (ETH)
-
Rocket Pool (ETH)
-
MetaPool (NEAR)
add extra incentives like:
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MEV rewards
-
Protocol incentives
-
Bonus emission tokens
Liquid Staking Risks
Liquid staking is not risk-free.
1. Smart Contract Risk
You rely on the protocol’s contracts.
A bug could cause losses.
2. Depeg Risk
Derivative tokens (stETH, mSOL, etc.) may trade below peg during market stress.
3. Validator Concentration Risk
If a protocol uses many validators from one operator, decentralization weakens.
4. Systemic Risk During Crises
Example:
stETH depegged during the Terra collapse in 2022.
Yield Comparison: Regular vs Liquid Staking
Below is a realistic comparison across major chains.
| Chain | Regular Staking APY | Liquid Staking APY (Base) | With DeFi Strategies |
|---|---|---|---|
| Ethereum | 3–4% | 4–6% | 8–20% |
| Solana | 6–8% | 7–9% | 12–25% |
| NEAR | 6–7% | 7–9% | 10–18% |
| Polygon | 4–5% | 5–7% | 8–14% |
✅ Liquid staking always yields more
✅ Yield layering can multiply returns
⚠️ But risk is also higher
Which Is Better?
Choose Regular Staking If You Want:
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Maximum security
-
Minimal risk
-
Long-term holding
-
No DeFi involvement
-
Simplicity
-
Predictable returns
Ideal for:
✅ Long-term holders
✅ Risk-averse investors
✅ Institutional participants
Choose Liquid Staking If You Want:
-
Higher APY
-
DeFi integration
-
Liquidity
-
The ability to earn multiple layers of yield
-
Flexibility
-
Farming opportunities
Ideal for:
✅ DeFi users
✅ Active yield farmers
✅ Traders
✅ Those comfortable with smart contract risk
Case Study 1: Ethereum (ETH)
Regular staking
Stake ETH → earn ~3.8%
Liquid staking
Stake ETH → receive stETH
Base yield ≈ 4–5%
Then:
-
Deposit stETH into lending → +3%
-
Use stETH in LP → +8–12%
Total: ≈ 12–18% APY
Case Study 2: Solana (SOL)
Regular staking
≈ 6–8%
Liquid staking
mSOL or JitoSOL → 7–9%
Then:
-
Lending → +4%
-
LP farming → +10–15%
Total: ≈ 20–25% APY
Case Study 3: NEAR
Regular staking
6–7%
Liquid staking (stNEAR)
7–9%
Then:
-
Ref Finance LP → +6–10%
-
Burrow leveraged staking → +10–20%
Total: ≈ 15–25% APY
Risk Comparison Table
| Risk | Regular Staking | Liquid Staking |
|---|---|---|
| Smart contract risk | Low | Medium–High |
| Depeg risk | None | Possible |
| Liquidity | Locked | Fully liquid |
| APY | Low | High |
| Complexity | Simple | Medium |
| DeFi access | No | Yes |
| Safety | Very high | Moderate |
Best Use Cases
Best for Safety → Regular Staking
If you want:
-
Long-term holding
-
Low risk
-
“Set and forget”
-
No DeFi interaction
Regular staking is best.
Best for Yield → Liquid Staking
If you are:
-
Comfortable with DeFi
-
Wanting high APY
-
Using yield optimizers
-
OK with smart contract risk
Liquid staking gives superior returns.
What Most Investors Choose
Most DeFi-oriented investors prefer liquid staking because:
-
APYs are higher
-
Tokens remain usable
-
DeFi ecosystems reward derivatives
-
Yield layering compounds returns
However, conservative investors still prefer traditional staking due to its simplicity and security.
Final Verdict: Which Gives Better Yield?
✅ Liquid staking gives better yield — by a large margin.
Especially when combined with DeFi strategies.
✅ Regular staking remains the safest option.
Both models have value depending on your risk tolerance.
Summary
| Feature | Regular Staking | Liquid Staking |
|---|---|---|
| Yield | Low | High |
| Risk | Low | Medium–High |
| Liquidity | None | Full |
| DeFi integration | No | Yes |
| Best for | Long-term HODLers | Yield farmers |
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Disclaimer: The above content is for informational and educational purposes only and does not constitute financial or investment advice. Always do your own research and consider consulting with a licensed financial advisor or accountant before making any financial decisions. Panaprium does not guarantee, vouch for or necessarily endorse any of the above content, nor is responsible for it in any manner whatsoever. Any opinions expressed here are based on personal experiences and should not be viewed as an endorsement or guarantee of specific outcomes. Investing and financial decisions carry risks, and you should be aware of these before proceeding.
About the Author: Alex Assoune
Alex Assoune (MS) is a global health and environmental advocate. He founded Panaprium to inspire others with conscious living, ethical, and sustainable fashion. Alex has worked in many countries to address social and environmental issues. He speaks three languages and holds two Master of Science degrees in Engineering from SIGMA and IFPEN schools.
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