What is Liquid Staking? For example, Lido Finance.

No problem, friend! The concept of liquid staking might sound a bit complex, but its underlying principle is actually quite easy to grasp. I'll explain it to you in plain language, so you're sure to understand.

What is Liquid Staking?

You can break it down into two steps to understand it: "Staking" and "Liquidity".

1. First, Let's Talk About "Staking"

In networks like Ethereum (which we call Proof-of-Stake networks), you need to "stake" your Ether (ETH) to help maintain the network's security and operation. You can think of it like putting money into a fixed deposit (time deposit) at a bank.

You deposit money (stake ETH): The bank (Ethereum network) uses your money to make investments, keeping the entire financial system running.
You earn interest (staking rewards): In return, the bank (network) gives you interest.

Here are the problems with traditional staking:

Your money is locked up: Just like a fixed deposit, once you stake 32 ETH (which is the threshold to run your own validator node), this money is inaccessible for a period. Want to use your money? No, you have to wait for it to be unlocked. This is "lack of liquidity".
The barrier to entry is too high: How many ordinary people have 32 ETH (currently worth hundreds of thousands of RMB)? Even if they do, they might not know how to run a technical node, and they could even be penalized for going offline.

So, traditional staking is like putting a large sum of money into a long-term fixed deposit; although it offers good interest, you completely lose control over that money, and the barrier to entry is extremely high.

2. "Liquid Staking" is the Solution!

Liquid staking, as the name suggests, allows you to enjoy staking rewards while also keeping your money "liquid".

How does it work? Let's take Lido Finance as an example:

Lido acts like a "staking wealth management intermediary platform".

You deposit money (stake any amount of ETH): You don't need 32 ETH; even if you only have 0.1 ETH, you can deposit it into Lido. Lido pools the funds from all individual users, accumulating many multiples of 32 ETH, which they then professionally stake.
You receive a "deposit receipt": After you deposit ETH with Lido, Lido immediately gives you an "electronic receipt" called stETH (Staked ETH). This stETH represents your ETH deposit with Lido and all the future interest it will generate.