Article Source: Techub News
Author: Siddhant Kejriwal
Compiled by: Glendon, Techub News
As the cryptocurrency industry has developed, staking has become an indispensable cornerstone, playing a significant role in network security and investor participation. By participating in staking, individuals not only contribute to the stable operation of blockchain networks but also unlock opportunities to earn passive income. Specifically, the benefits of participating in staking include:
1. Strengthening Crypto-Economic Security: Essentially, staking involves locking a certain amount of cryptocurrency to support the operation of a blockchain network. This process is particularly critical for proof-of-stake (PoS) blockchains, where validators confirm transactions based on the amount of cryptocurrency they stake. This mechanism ensures the security of the network and aligns the interests of participants with the healthy development of the blockchain.
2. Earning Passive Income: In addition to enhancing network security, staking also provides attractive economic incentives. By staking assets, investors can earn rewards, usually in the form of additional cryptocurrency tokens. This income generation method meets the needs of both novice and seasoned investors seeking to maximize returns without engaging in active trading. In some projects, staking may also involve airdrop activities, providing stakers with additional asset appreciation opportunities.
3. Launch New Projects Through Restaking: A recent innovation in the staking space is 'restaking,' which allows staked assets to be reused across multiple protocols. This approach enables new projects to leverage the security and capital of existing networks, effectively guiding their growth. For example, platforms like EigenLayer facilitate restaking by allowing users to stake their ETH or liquid staking tokens while extending crypto-economic security to other applications on the network, providing further yield opportunities for investors.
It is important to note that while restaking provides investors with opportunities to enhance yields and bolster network support, it also comes with complexities and risks that should not be overlooked. As 2025 approaches, the DeFi staking space will continue to thrive, offering investors more options, and this article will guide you through the top DeFi staking platforms to keep a close eye on.
What is DeFi Staking?
DeFi staking involves locking cryptocurrency assets in smart contracts to support the operation of blockchain networks, particularly those utilizing proof-of-stake (PoS) consensus mechanisms. In PoS networks, validators confirm transactions based on the amount of cryptocurrency they stake and create new blocks. Staking usually requires deploying a full node and meeting the minimum staking requirements of the network, enabling participants to validate transactions and engage in network consensus for rewards.
Key Concepts in DeFi Staking
Smart Contracts and Staking Agreements: Smart contracts are self-executing agreements coded on the blockchain that ensure the staking process is automated, transparent, and secure. When you stake tokens, you essentially become a validator (or delegator) for the network, collectively maintaining its security and stability. In return, you will receive rewards in the form of new tokens or a share of transaction fees.
Staking Rewards: Staking rewards typically include newly minted tokens and a share of transaction fees, incentivizing participants to contribute to the security and operation of the network.
Penalty Mechanism: To maintain network integrity, PoS networks implement a penalty mechanism called 'slashing,' where validators can have their staked funds reduced if they engage in malicious activities or fail to fulfill their duties. This mechanism aims to deter misconduct.
DeFi Staking vs. Centralized Staking
When comparing DeFi staking with centralized staking services, the following key factors stand out:
Ownership: DeFi staking allows users to retain actual ownership of their assets, as they control their private keys. In contrast, centralized staking requires users to entrust assets to third parties, relinquishing direct control.
Transparency: DeFi platforms operate on open-source smart contracts, providing a transparent staking process and reward distribution. Centralized platforms may lack this transparency, making it difficult for users to verify how rewards are calculated and distributed.
Security and Control: DeFi staking allows users to have better control over their assets, reducing reliance on intermediaries and lowering counterparty risk. Centralized staking involves entrusting assets to a platform, which may pose security risks if the platform is attacked.
Mechanism: In DeFi staking, users delegate their stakes to a permissionless network of validators, directly participating in the consensus mechanism of the network. Centralized staking platforms pool user funds and stake them using validators selected by the platform, typically without disclosing the specific details of the process.
Learning Curve: DeFi staking can be complex, requiring users to navigate various platforms and manage private keys, which may pose challenges for beginners. Centralized platforms offer a more user-friendly, Web2-like experience at the cost of simplifying the staking process, sacrificing some degree of decentralization.
Conclusion
Choosing between DeFi and centralized staking platforms depends on personal preferences, particularly regarding control, transparency, and ease of use. Next, this article will explore the top DeFi staking platforms expected to make an impact in 2025 and provide some insights.
DeFi Staking Platforms
Here is a comprehensive overview of the DeFi staking protocols we will discuss, highlighting their key features, associated tokens, and current annual percentage rates (APR) or annual percentage yields (APY).
Lido Finance
Lido Finance is a DeFi protocol focused on liquid staking services. It enables users to stake their digital assets across multiple blockchain networks while maintaining liquidity, effectively addressing the limitations of traditional staking, such as asset locking and high barriers to entry. By issuing liquid staking tokens (LSTs) like stETH for Ethereum, Lido allows users to earn staking rewards while utilizing their assets within the broader DeFi ecosystem.
Key Features of Lido Finance
Liquid Staking: Lido's core service allows users to stake assets without locking them up. It provides staking token derivatives (such as stETH) that can be freely transferred, traded, or used in other DeFi protocols.
Decentralized Governance: Managed by Lido's Decentralized Autonomous Organization (DAO), Lido ensures that decisions regarding protocol parameters, node operator selection, and fee structures are made collectively by LDO token holders.
Security Measures: Lido employs experienced node operators and conducts regular audits to maintain the integrity and security of the staking process, minimizing risks such as slashing penalties.
DeFi Integration: Lido's liquid staking tokens are widely accepted across various DeFi platforms, allowing users to participate in activities like lending and yield farming while earning staking rewards.
Supported Staking Tokens
Lido supports staking for various cryptocurrencies across different networks, including:
Ethereum (ETH): Stake ETH and receive stETH.
Polygon (MATIC): Stake MATIC and receive stMATIC.
Solana (SOL): Stake SOL and receive stSOL.
Polkadot (DOT): Stake DOT and receive stDOT.
Kusama (KSM): Stake KSM and receive stKSM.
LDO Token and Its Utility
Lido's native token LDO plays several key roles within the ecosystem:
Governance: LDO holders participate in the Lido DAO, voting on key decisions related to protocol upgrades, fee structures, and the selection of node operators.
Incentives: LDO tokens can be used to incentivize liquidity providers and users who contribute to the growth and stability of the Lido protocol.
Summary
Lido Finance has currently solidified its leading position in the DeFi space. As of December 2024, its Total Value Locked (TVL) has approached a historic high of nearly $40 billion.
Lido's dominance as a leading LST platform is strengthening | Graph from DefiLlama
This growth reflects users' increasing confidence in Lido's liquid staking solutions and their integration within the DeFi ecosystem. Additionally, Lido's recently launched community staking module enhances decentralization by allowing permissionless node operators to participate, further strengthening the security and resilience of the network.
Pendle Finance
Pendle Finance is a DeFi protocol that allows users to tokenize and trade the future yields of income-generating assets. By separating the principal and yield components of an asset, Pendle adopts more sophisticated yield management strategies, including fixed income, speculation on future yield fluctuations, and unlocking liquidity from staked assets. This innovative approach brings traditional financial concepts (such as interest rate derivatives) into the DeFi space, providing users with greater control and flexibility over their investments.
Key Features of Pendle Finance
Yield Tokenization: Pendle allows users to wrap yield tokens into standardized yield (SY) tokens, which can then be split into principal tokens (PT) and yield tokens (YT). This separation enables the independent trading of principal and future yield components, facilitating strategies like locking in fixed income or speculating on yield fluctuations.
Pendle Automated Market Maker (AMM): Pendle's AMM is designed for time-decaying assets like YT, providing optimized pricing and minimal slippage. It supports concentrated liquidity and a dynamic fee structure, enhancing capital efficiency and reducing impermanent loss for liquidity providers.
vePENDLE Governance: Pendle adopts a voting escrow token model, allowing users to lock PENDLE tokens to receive vePENDLE. This mechanism grants governance rights, enabling holders to participate in protocol decisions, provide direct incentives to specific liquidity pools, and earn a share of the protocol's revenue.
Supported Staking Assets
Pendle supports a variety of yield assets across multiple blockchain networks, including:
Ethereum (ETH): Pendle allows for tokenization and trading of assets such as stETH (Lido's liquid staking token).
Stablecoins: Tokens from lending protocols like Aave or Compound (such as USDC and DAI) can be used within Pendle's ecosystem.
Other Yield Tokens: Assets generated from various DeFi protocols can also be integrated into Pendle's platform.
PENDLE Token and Its Utility
The PENDLE token serves as both a native utility and governance token within the Pendle ecosystem. Its main functions include:
Governance: PENDLE holders can lock their tokens to receive vePENDLE, granting them voting rights to participate in protocol governance decisions, such as proposing and voting on upgrades, fee structures, and other key parameters.
Incentives: PENDLE tokens incentivize liquidity providers and users, facilitating the growth and stability of the platform. Additionally, vePENDLE holders can direct incentives to specific liquidity pools, enhancing their returns.
Revenue Sharing: vePENDLE holders are entitled to share in the protocol's revenue, aligning the community's interests with the platform's success.
Summary
Pendle Finance is gradually emerging as a significant force in the DeFi space by introducing yield tokenization and specialized AMMs for yield trading. As of December 2024, Pendle's total value locked (TVL) exceeded $5 billion (data from DefiLlama).
Pendle's integration with various DeFi protocols and its expansion across different blockchain networks such as Ethereum and Arbitrum further solidify its position as a multifunctional and valuable tool for yield management within the DeFi ecosystem.
EigenLayer
EigenLayer is an innovative protocol built on Ethereum that introduces the concept of 'restaking,' allowing users to reallocate their staked Ethereum (ETH) or liquid staking tokens (LSTs) to enhance the security and functionality of other services built on the Ethereum network. By facilitating the reuse of staked assets, EigenLayer promotes a shared security model and the development of application chains and rollup technologies without requiring separate validator sets.
Key Features of EigenLayer
Restaking Mechanism: EigenLayer allows ETH stakers and LST holders to restake assets and select to validate new software modules called Active Validation Services (AVSs). This process extends Ethereum's security to a wider range of applications, including data availability layers, oracle networks, and consensus protocols.
Permissionless Token Support: EigenLayer introduces permissionless token support, allowing any ERC-20 token to be added as a restakable asset. This expansion enables various tokens to contribute to the security of decentralized networks, fostering cross-ecosystem collaboration while enhancing the utility of various tokens.
EigenDA (Data Availability Layer): EigenLayer provides EigenDA, a low-cost data availability solution for Rollup and other Layer 2 solutions. By ensuring that data is easily accessible and secure, EigenDA enhances the scalability and efficiency of Ethereum-based applications.
Governance and Flexibility: The architecture of EigenLayer allows AVSs to customize their security parameters, including selecting specific tokens for restaking and defining slashing conditions. This flexibility enables services to tailor security measures to their unique needs, promoting a more resilient and adaptable ecosystem.
Supported Restaking Assets
EigenLayer supports various assets for restaking, including:
Ethereum (ETH): Users can participate in securing other services by restaking their natively staked ETH.
Liquid Staking Tokens (LSTs): Tokens like stETH, rETH, etc., can be restaked through EigenLayer to earn additional rewards.
ERC-20 Tokens: With permissionless token support, any ERC-20 token can now be added as a restakable asset.
EIGEN Token and Its Utility
EigenLayer has launched the EIGEN token, a general inter-chain working token designed to enhance the security of AVS fork protocols supported by EigenLayer. In extreme situations, such as active attacks or security vulnerabilities, the EIGEN token can protect these protocols, ensuring the integrity of the blockchain modular stack. By combining EIGEN tokens with restaked ETH, EigenLayer provides users with higher levels of crypto-economic security.
Summary
According to DefiLlama data, as of December 2024, EigenLayer's TVL has reached approximately $20.1 billion. As EigenLayer continues to evolve, it remains at the forefront of enhancing Ethereum's security and scalability through its pioneering restaking protocol, providing users and developers with new opportunities to participate in and build on the Ethereum network.
Ether.fi
Ether.fi is a decentralized, non-custodial liquid staking protocol that enhances users' capabilities by allowing Ethereum holders to stake their assets while retaining control over their private keys. Ether.fi issues the liquid staking token eETH, which enables users to earn staking rewards and participate in the broader DeFi ecosystem without the limitations imposed by traditional staking. This approach enhances the security, decentralization, and user autonomy of the Ethereum network.
Key Features of Ether.fi
Non-Custodial Staking: Unlike many staking services, Ether.fi ensures that users retain control over their private keys throughout the staking process, significantly reducing custodial risks.
Using eETH for Liquid Staking: When users stake ETH, they receive eETH, a liquidity token representing their staked assets. This token can be used across various DeFi platforms for lending and yield farming while accumulating staking rewards.
Integration with EigenLayer: Ether.fi collaborates with EigenLayer to provide restaking capabilities, allowing users to earn additional rewards by securing multiple decentralized applications (DApps) simultaneously.
Operation Solo Staker: Ether.fi allows individuals to operate their own validator nodes through the Operation Solo Staker program, promoting decentralization.
ETHFI Token and Its Utility
The native token of Ether.fi, ETHFI, serves multiple functions within the platform:
Governance: ETHFI holders have the right to participate in governance of the protocol, influencing decisions related to treasury management, token utility, and ecosystem development.
Revenue Sharing: A portion of the protocol's monthly revenue is used to buy back ETHFI tokens, which may enhance their value and benefit token holders.
Staking Incentives: Users can stake their ETHFI tokens to receive additional rewards, further incentivizing participation and aligning with the platform's growth.
Summary
Ether.fi has become a significant player in the DeFi space, with its TVL exceeding $9.54 billion as of December 2024, making it one of the leading restaking protocols within the Ethereum ecosystem.
Ethena Finance
Ethena Finance is an Ethereum-based DeFi protocol that provides a crypto-native synthetic dollar known as 'USDe.' Unlike traditional stablecoins that rely on fiat reserves, USDe maintains its peg through a delta hedging strategy and cryptocurrency collateral (primarily Ethereum), offering a censorship-resistant and scalable solution.
Key Features of Ethena Finance
Synthetic Dollar (USDe): USDe is a fully backed synthetic dollar managed by crypto assets as collateral and delta hedging. This approach ensures stability without relying on traditional banking systems, providing a resilient alternative for the DeFi space.
Internet Bonds (sUSDe): By staking USDe, users can earn sUSDe, which is a yield asset that accumulates income generated over time within the protocol. This mechanism allows users to earn passive income while maintaining exposure to stable assets.
Delta Hedging Mechanism: Ethena employs delta hedging, using short positions in the derivatives market to offset price fluctuations of collateral assets. This strategy maintains the peg of USDe to the dollar, ensuring stability even during market volatility.
Non-Custodial and Decentralized: Ethena operates without relying on traditional financial infrastructure, providing users with complete control over their assets.
Supported Staking Assets
Ethena primarily supports Ethereum as collateral for minting USDe. Users can deposit ETH into the protocol to generate USDe, which can then be staked to receive sUSDe, participating in the protocol's yield generation mechanism.
ENA Token and Its Utility
The native governance token ENA of Ethena plays several critical roles within the ecosystem:
Governance: ENA holders can participate in protocol governance, influencing decisions related to system upgrades, parameter adjustments, and overall strategic direction.
Staking Rewards: By staking ENA, users can earn sENA, which may accumulate additional rewards within the protocol's incentive mechanism, providing higher reward multiples.
Summary
Data from DefiLlama shows that as of December 2024, Ethena Finance's TVL exceeds $5.9 billion.
Jito
Jito is a liquid staking protocol running on the Solana blockchain, focusing on maximizing Extractable Value (MEV) strategies. By allowing users to stake their SOL tokens in exchange for JitoSOL—a liquid staking token—Jito enables participants to earn staking rewards enhanced by MEV income.
Key Features of Jito
MEV-Driven Staking Rewards: Jito integrates MEV strategies to enhance staking rewards. By capturing and redistributing MEV profits, JitoSOL holders can achieve higher yields compared to traditional staking methods.
Using JitoSOL for Liquid Staking: After staking SOL, users will receive JitoSOL tokens, which represent their staked assets. These tokens maintain liquidity, allowing users to participate in various DeFi activities while still earning staking rewards.
Non-Custodial Platform: Jito operates as a non-custodial platform, ensuring that users retain control over their assets.
Enhancing Network Performance: Jito helps improve network performance and reduce spam on the Solana blockchain by staking with validators running optimized software.
Supported Staking Assets
Jito primarily supports the staking of Solana token SOL. Users can stake any amount of SOL and receive JitoSOL as a reward.
JTO Token and Its Uses
Jito has launched its native token JTO, which serves multiple functions within the ecosystem:
Governance: JTO holders can participate in protocol governance.
Staking Rewards: By staking JTO, users can earn additional rewards.
Summary
Jito has achieved significant growth in the Solana ecosystem. According to its website data, as of December 2024, over 14.5 million SOL tokens have been staked through Jito, with around 204 Solana validators participating. The staking annual percentage yield (APY) offered by the platform exceeds 8%, reflecting its competitive advantage in the liquid staking market.
A hallmark of Jito is its integration of MEV strategies to boost staking rewards. Additionally, Jito's commitment to open-source development is exemplified by the release of Jito-Solana, the first third-party, MEV-enhanced validator client for Solana.
Babylon
Babylon is a groundbreaking protocol that introduces Bitcoin staking into the DeFi ecosystem. By allowing Bitcoin holders to directly stake their assets, Babylon enables users to earn yields while also contributing to the security of proof-of-stake blockchains. This innovative approach eliminates the need to bridge, wrap, or transfer BTC to third-party custodians, thus preserving Bitcoin's inherent security and decentralization.
Key Features of Babylon
Self-Custody Staking: Babylon's protocol allows BTC holders to stake assets without transferring control to external entities. Users lock their Bitcoin in a self-custodial manner, ensuring full ownership and security throughout the staking process.
Integration with PoS Chains: By staking BTC, users can participate in securing various PoS blockchains, including application chains and decentralized applications (DApps). This integration enhances the security of these networks and rewards stakers in return.
Fast Unbonding: Babylon employs a Bitcoin timestamp protocol that allows staked BTC to be quickly unbonded. This feature ensures that users can quickly withdraw their assets without relying on social consensus, thus maintaining liquidity and flexibility.
Scalable Restaking: The modular design of the protocol supports scalable restaking, allowing a single BTC stake to simultaneously secure multiple PoS chains. This function maximizes yield potential.
Supported Staking Assets
Babylon focuses on using Bitcoin for staking purposes.
Summary
Babylon has achieved significant milestones, including successfully launching its mainnet and initiating multiple staking caps. Notably, the protocol's TVL exceeded $5.7 billion as of December 2024.
Pros and Cons of DeFi Staking
Benefits of DeFi Staking
1. Potential for High Returns Through Yield Farming: DeFi staking often offers substantial rewards, especially when combined with yield farming strategies.
2. Enhanced Control Over Funds: Users retain full ownership of their funds through decentralized wallets, without relying on third-party custodians.
3. Participation in Governance: Staking governance tokens allows users to vote on protocol decisions and influence the platform's future development.
4. Contribution to Network Security and Operations: By staking, users help protect blockchain networks and maintain decentralized operations.
5. Liquid Staking Tokens: Liquid staking tokens enable users to access staked capital while continuing to earn rewards.
6. Flexibility in Yield Strategies: DeFi staking offers opportunities for various innovative strategies, such as achieving compounding returns through restaking or using staking tokens to participate in other DeFi activities.
7. Access to Emerging Ecosystems: Staking supports innovation by helping to guide new protocols and ecosystems.
Risks of DeFi Staking
1. Smart Contract Vulnerabilities: Malicious attacks or vulnerabilities in smart contracts can lead to the loss of staked assets.
2. Impermanent Loss in Liquidity Pools: Changes in token prices can decrease the value of assets in liquidity pools, affecting overall returns.
3. Volatility of Token Prices: The volatility of cryptocurrencies may impact the value of staking rewards.
4. Slashing Penalties: In some networks, improper validator behavior may lead to penalties that reduce the amount of staked funds.
5. Protocol-Specific Risks: Emerging platforms may lack sufficient audits or experience, increasing the risk of operational failures.
6. Lack of Liquidity: Staked assets may be locked for a period, limiting the immediate availability of funds.
Strategies for Reducing DeFi Staking Risks
1. Diversify Staking Across Multiple Platforms: Spread your staking assets across different protocols to reduce the impact of a single platform's failure.
2. Research Platform Audits and Security History: Choose platforms with a good security record and regular third-party audits to ensure the safety of your funds.
3. Monitor Tokenomics and Protocol Changes: Keep a close eye on changes in token supply, reward mechanisms, and governance decisions that may affect your staking strategy.
4. Utilize liquid staking options: Use protocols that provide liquid staking tokens to maintain liquidity and flexibility while earning rewards.
5. Set Risk Limits: To manage risk exposure, determine the maximum percentage allocated to staking in your portfolio and adhere strictly to it.
6. Use reputable wallets and hardware security devices: Store your staked assets in a secure wallet to prevent potential hacking or phishing attacks.
How to Start DeFi Staking: A Step-by-Step Guide
DeFi staking allows you to earn rewards by supporting blockchain networks. While the specific steps may vary by protocol, the following provides a general guide:
Step 1: Choose a Staking Protocol
Research different staking platforms and choose one that aligns with your goals, such as liquid staking (like Lido Finance or Jito) or yield tokenization (like Pendle Finance).
Consider factors such as supported assets, security measures, and potential returns.
Step 2: Set Up a Wallet
Choose a non-custodial wallet compatible with the protocol you plan to use, such as MetaMask for Ethereum-based platforms or Phantom for Solana.
Ensure wallet security by backing up your seed phrase and enabling two-factor authentication.
Step 3: Acquire Tokens
Purchase the tokens required for staking through cryptocurrency exchanges (e.g., Lido's ETH, Jito's SOL).
Transfer the tokens to your wallet.
Step 4: Connect to the Staking Protocol
Access the official website of the protocol (e.g., lido.fi, jito.network).
Follow the prompts to authorize the connection and link your wallet to the platform.
Step 5: Stake Assets
Choose the tokens you wish to stake and determine the amounts.
Confirm the staking transaction and ensure you have sufficient funds to cover transaction fees.
In a liquid staking protocol, you will receive a derivative token (such as stETH or JitoSOL) that you can use within the DeFi ecosystem.
Step 6: Monitor and Manage Your Stake
Regularly track your staking rewards and portfolio performance through the dashboard or interface of the protocol.
Consider leveraging yield tokenization features from protocols like Pendle to formulate additional strategies.
How to Maximize DeFi Staking Returns
1. Diversify Your Staking Portfolio: Spread investments across multiple protocols to minimize risks and optimize returns.
2. Reinvest Rewards: Use the rewards earned to increase returns through restaking or participating in yield farming opportunities.
3. Stay Informed: Keep up with updates that may impact staking rewards or security, such as protocol governance, tokenomics, and network upgrades.
4. Optimize Gas Fees: Schedule transactions during periods of low network activity to reduce transaction costs.
5. Explore Advanced Strategies: Consider using protocols like Pendle Finance to lock in fixed income or speculate on future yields with tokenized assets.
7. Use Liquid Staking Tokens in DeFi: To accumulate additional returns on top of staking rewards, deploy derivative tokens (such as stETH, JitoSOL, etc.) in lending or yield farming.
The steps and tips mentioned above will help you embark on your DeFi staking journey and fully unlock the potential for generating passive income within the DeFi ecosystem.
Summary
This article explores some top platforms that may gain significant attention in 2025, including Lido Finance, Pendle Finance, EigenLayer, Ether.fi, Ethena, Jito, and Babylon. Each protocol offers unique features while providing basic staking services, such as yield tokenization, restaking, or Bitcoin staking. Mastering and effectively utilizing these features will be key to unlocking real yields. As the cryptocurrency market enters a new bull run, the DeFi space in 2025 shows limitless potential, with DeFi staking expected to become a vital avenue for achieving substantial returns driven by continuous innovation and widespread adoption.
