Staking is one of the easiest ways for beginners to earn passive income in crypto. But today, investors face a key choice:
Should you use traditional staking, or liquid staking?
At first glance, both sound similar. You lock tokens. You earn rewards. But under the hood, these two models behave very differently — especially when it comes to liquidity, flexibility, risk, and yield opportunities.
This guide breaks everything down in plain language, so you can confidently choose the staking method that fits your goals.
Panaprium is independent and reader supported. If you buy something through our link, we may earn a commission. If you can, please support us on a monthly basis. It takes less than a minute to set up, and you will be making a big impact every single month. Thank you!
What Is Crypto Staking? (Quick Refresher)
Staking is the process of locking cryptocurrency to help secure a blockchain network and earn rewards in return.
It’s commonly used on Proof-of-Stake (PoS) blockchains like:
-
Ethereum
-
Solana
-
Cosmos
-
Avalanche
-
Polkadot
When you stake:
-
Your tokens help validate transactions
-
The network rewards you with yield (APR/APY)
Now let’s explore the two main ways to do it.
What Is Traditional Staking?
Traditional staking means locking your tokens directly with a validator or protocol for a fixed or semi-fixed period.
How Traditional Staking Works
-
You stake tokens (e.g., ETH, SOL, ATOM)
-
Tokens become locked
-
You earn staking rewards over time
-
To exit, you must unstake and wait
Key Characteristics
-
Tokens are illiquid while staked
-
Rewards are predictable
-
Often includes an unbonding period
-
Simpler and more conservative
Example
Staking ETH directly on Ethereum:
-
ETH is locked
-
Cannot be traded or used elsewhere
-
Withdrawal delay applies
What Is Liquid Staking?
Liquid staking allows you to stake tokens while receiving a liquid token that represents your staked position.
This liquid token can then be:
-
Traded
-
Used in DeFi
-
Supplied to yield vaults
-
Used as collateral
How Liquid Staking Works
-
You stake tokens through a liquid staking protocol
-
You receive a liquid staking token (LST)
-
LST earns staking rewards automatically
-
You can use or sell the LST anytime
Common Liquid Staking Tokens
-
stETH (Lido)
-
rETH (Rocket Pool)
-
cbETH (Coinbase)
-
mSOL (Marinade)
Liquid Staking vs Traditional Staking: Core Differences
| Feature | Traditional Staking | Liquid Staking |
|---|---|---|
| Liquidity | Locked | Liquid |
| Flexibility | Low | High |
| DeFi Use | No | Yes |
| Complexity | Simple | Moderate |
| Yield Potential | Base staking yield | Staking + DeFi yield |
| Exit Speed | Slow | Fast (via markets) |
Advantages of Traditional Staking
1. Lower Complexity
Traditional staking is straightforward:
-
Stake
-
Earn
-
Unstake
This simplicity appeals to beginners who want minimal moving parts.
2. Lower Smart Contract Risk
You interact directly with:
-
The blockchain
-
A validator
There are fewer smart contracts involved compared to liquid staking protocols.
3. More Predictable Returns
Rewards come only from:
-
Network inflation
-
Validator performance
There’s no exposure to:
-
DeFi volatility
-
Secondary market pricing
4. Often Preferred for Long-Term Holders
If you plan to:
-
Hold tokens long-term
-
Avoid active management
-
Ignore short-term price movements
Traditional staking can be ideal.
Disadvantages of Traditional Staking
1. Locked Capital
Your tokens cannot be:
-
Sold
-
Traded
-
Used as collateral
This can be painful during market volatility.
2. Unbonding Periods
Many chains require:
-
Days or weeks to unstake
-
No rewards during unbonding
If markets move fast, you may miss opportunities.
3. Opportunity Cost
While locked:
-
You can’t use tokens in DeFi
-
You miss higher-yield strategies
Advantages of Liquid Staking
1. Liquidity Without Giving Up Rewards
Liquid staking solves the biggest problem of staking:
illiquidity
You keep:
-
Staking rewards
-
Access to your capital
2. Higher Yield Potential
Liquid staking unlocks:
-
Staking yield
-
PLUS DeFi yield
Examples:
-
Supply stETH to lending markets
-
Deposit LSTs into yield vaults
-
Use as collateral for leveraged strategies
3. Faster Exit Options
Instead of waiting days to unstake:
-
You can sell the liquid token instantly
-
Exit via DEXs or aggregators
4. Capital Efficiency
Liquid staking makes your capital:
-
More productive
-
More flexible
-
Easier to rebalance
This is why liquid staking dominates modern DeFi strategies.
Disadvantages of Liquid Staking
1. Smart Contract Risk
Liquid staking relies on:
-
Complex smart contracts
-
Third-party protocols
This introduces:
-
Exploit risk
-
Protocol risk
2. Peg Risk
Liquid staking tokens can:
-
Trade at a discount
-
De-peg during stress events
This happened historically during:
-
Market crashes
-
Liquidity shortages
3. Higher Complexity
Beginners must understand:
-
Token mechanics
-
DeFi integrations
-
Yield sources
Mistakes can be costly.
Yield Comparison: Which Pays More?
| Strategy | Typical Yield |
|---|---|
| Traditional ETH staking | ~3–5% |
| Liquid ETH staking (stETH) | ~3–5% |
| Liquid staking + DeFi vaults | 6–15%+ |
Liquid staking doesn’t automatically pay more — it gives you more ways to earn.
Risk Comparison: Which Is Safer?
| Risk Type | Traditional | Liquid |
|---|---|---|
| Validator risk | Yes | Yes |
| Smart contract risk | Low | Higher |
| Liquidity risk | High | Low |
| Market volatility exposure | Medium | Medium–High |
Safety depends on how actively you manage your position.
Which Is Better for Beginners?
Traditional Staking Is Better If You:
-
Want simplicity
-
Plan to hold long-term
-
Avoid DeFi complexity
-
Prioritize safety over yield
Liquid Staking Is Better If You:
-
Want flexibility
-
Use DeFi vaults or aggregators
-
Actively manage risk
-
Seek higher capital efficiency
A Beginner Hybrid Strategy (Best of Both Worlds)
Many investors use both.
Example allocation:
-
60% traditional staking (core, low risk)
-
40% liquid staking (flexible, higher yield)
This balances:
-
Stability
-
Liquidity
-
Yield optimization
Common Beginner Mistakes to Avoid
-
Chasing APY without understanding risks
-
Putting 100% into liquid staking vaults
-
Ignoring peg risk
-
Forgetting smart contract exposure
-
Over-leveraging liquid staking tokens
Final Takeaways
-
Traditional staking is simple and conservative
-
Liquid staking is flexible and capital-efficient
-
Liquid staking enables advanced yield strategies
-
Higher yield comes with higher complexity and risk
-
Beginners should prioritize understanding before optimizing
Final Thoughts
Liquid staking represents the next evolution of staking, but traditional staking remains a strong foundation for beginners.
The smartest approach is not choosing one — it’s using each where it makes sense.
In crypto, flexibility and risk management matter more than raw yield.
Was this article helpful to you? Please tell us what you liked or didn't like in the comments below.
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.
What We're Up Against
Multinational corporations overproducing cheap products in the poorest countries.
Huge factories with sweatshop-like conditions underpaying workers.
Media conglomerates promoting unethical, unsustainable products.
Bad actors encouraging overconsumption through oblivious behavior.
- - - -
Thankfully, we've got our supporters, including you.
Panaprium is funded by readers like you who want to join us in our mission to make the world entirely sustainable.
If you can, please support us on a monthly basis. It takes less than a minute to set up, and you will be making a big impact every single month. Thank you.
RELATED ARTICLES
Tags
Liquid Staking vs Traditional Staking: What’s the Difference and Which Is Better for You?
Staking is one of the easiest ways for beginners to earn passive income in crypto. But today, investors face a key choice: Should you use traditional staking, or liquid staking?... Read More
How Multi-Chain Yield Aggregators Automatically Maximize APY
In DeFi, yield isn’t just about putting money into a protocol and waiting. Multi-chain yield aggregators are designed to maximize returns automatically, using strategies that would take an individual investor hours—or... Read More
How to Evaluate Yield Vault Safety Before Depositing Capital
Before you deposit into a crypto yield vault, you are making a decision that goes far beyond chasing APY. You are trusting code, incentives, governance, and external protocols to protect your... Read More
How to Backtest Swing Trading Strategies with Automation
Swing trading crypto can be profitable, but the key to consistent results isn’t guessing—it’s testing. Backtesting strategies allows traders to evaluate setups on historical data before risking real money. When combined... Read More
The Mystical Meaning Behind Wands, Athames, and Staffs
Why tools of direction, division, and authority appear across magical traditions Across civilizations, certain objects appear again and again in spiritual and magical practice. Among the most enduring are wands,... Read More
The Best Warding Charms for Home, Work, and Travel
Ancient protection methods adapted for modern life Across cultures and centuries, people have created warding charms for one reason: to establish boundaries. Not walls of fear, but energetic thresholds—markers that... Read More
How Ritual Tools Enhance Intention and Focus
Why objects help the mind settle, clarify, and act with purpose Ritual tools have been used across cultures for thousands of years. From simple bowls and candles to staffs, stones,... Read More
Altcoin Season Risk Management: How to Lock In Gains Before the Cycle Turns
Altcoin seasons are some of the most lucrative periods in cryptocurrency markets, but they also carry the highest risk. Traders who fail to manage risk properly often see gains evaporate in... Read More
How to Integrate Bots Into Your Daily Swing Trading Routine
Swing trading crypto is time-intensive, requiring constant market monitoring, strategy adjustments, and emotional discipline. Automated trading bots can handle execution, but success depends on integrating them effectively into your daily routine.... Read More
Smart Contract Risk in Crypto Yield Vaults: What Every Investor Must Understand
Crypto yield vaults promise passive income, auto-compounding, and optimized APY—but they all rely on one critical component that many investors overlook: smart contracts. Smart contract risk is the single largest hidden... Read More
How Yield Aggregators Actually Generate APY (And What Can Go Wrong)
Yield aggregators have become a cornerstone of DeFi investing, promising hands-off returns and automatic compounding. But many users don’t fully understand how these platforms actually generate APY or the risks involved.... Read More
How to Track Emotional Patterns While Using Bots for Swing Trading
Automated trading bots are powerful tools for swing traders. They execute trades precisely, enforce discipline, and reduce emotional mistakes. But even with bots, your psychology still matters. Emotions influence how you... Read More
The Spiritual Power of Family Heirlooms as Magical Tools
How inherited objects carry memory, protection, and ancestral strength Across cultures and centuries, people have believed that certain objects remember. Not in a literal sense, but through accumulated use, emotional... Read More
Ancient Symbols and Their Magical Meaning in Talismans
How humanity encoded protection, power, and intention into sacred signs. Long before written language became widespread, humans communicated meaning through symbols. These marks were not decorative. They were compressed wisdom... Read More
The History and Power of Protective Amulets Across Cultures
Why humans have carried sacred objects for protection for thousands of years. From carved stones buried with the dead to charms worn close to the heart, protective amulets appear in... Read More
Herbs Your Ancestors Used for Protection and Healing
Ancient plant allies that supported the body, calmed the spirit, and safeguarded the home. Long before modern medicine, herbs were not alternative — they were essential. Across cultures, plants were... Read More
Yield Aggregator vs Yield Farming: Which Strategy Is Right for You?
If you’re diving into DeFi, two terms you’ll see everywhere are yield farming and yield aggregators. While they are related, they represent different approaches to earning crypto yield, and choosing the... Read More
Advanced Automation Strategies for Experienced Swing Traders
Once you’ve mastered the basics of swing trading bots, the next step is advanced automation strategies. Experienced traders use automation not just to execute trades, but to optimize performance, reduce risk,... Read More
Top Multi-Chain Yield Aggregators: Where to Farm for Max APY Safely
Yield farming has evolved. What began as manual liquidity mining on a single chain has become a multi-chain, automated, strategy-driven ecosystem powered by yield aggregators. For most investors, the question is... Read More
Yield Aggregator vs Yield Farming: What’s the Difference and Which Is Better for You?
If you’re earning yield in DeFi, you’ve probably seen the terms yield farming and yield aggregators used interchangeably. They are related—but they are not the same thing, and confusing them can... Read More
Altcoin Season Indicators Explained: How to Spot the Start Before the Crowd
Altcoin season is where life-changing gains can happen—but only for traders who recognize it early. By the time social media is euphoric and headlines scream “ALTSEASON,” most of the upside is... Read More
How Gratitude Can Become a Daily Magical Practice
Using appreciation as a tool for alignment, protection, clarity, and emotional resilience. Gratitude is often presented as something simple — a feel-good habit or a polite response to good fortune.... Read More
Plant Magic: How to Work With Herbs, Flowers, and Trees Spiritually
Ancient relationships with the green world, adapted for modern spiritual practice. Plant magic is not about controlling nature or performing elaborate rituals. It is about relationship. For most of human... Read More
Best Crystals That Enhance Intuition and Psychic Abilities
Grounded tools for strengthening inner awareness, perception, and subtle insight. Intuition and psychic sensitivity are often misunderstood. They are not about predicting the future or accessing hidden powers. At their... Read More
How to Create Your Own Personalized Talisman
A meaningful object of focus, protection, and intention — crafted for you, by you. Talismans have been part of human culture for thousands of years. Across civilizations, people carried small... Read More
The Mystical Properties of Common Household Herbs
Ancient plant wisdom hiding in plain sight. You do not need rare plants, expensive tools, or esoteric knowledge to work with herbal magic. For most of human history, spiritual practice... Read More
How to Charge and Program Crystals for Personal Magic
Simple, intentional methods to align crystals with your energy, goals, and daily practice. Charging and programming crystals is often presented as complex or ceremonial. In reality, it is a personal... Read More
0 comments