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

TL;DR

This paper provides a comprehensive overview of liquid staking tokens and restaking, analyzing their technical, economic, and security aspects, and comparing protocols to understand their market impact and emerging trends.

Contribution

It systematically categorizes and compares liquid staking and restaking protocols, highlighting recent developments, risks, and security considerations in DeFi.

Findings

Protocol design influences token market value.

Market dynamics affect token performance.

Restaking introduces new security and risk factors.

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.