The cryptocurrency industry has evolved to the point where 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 for passive income generation. Specifically, the benefits of engaging in staking include:
1. Strengthening economic security: Essentially, staking involves locking a certain amount of cryptocurrency to support the operation of the blockchain network. This process is particularly crucial for proof-of-stake (PoS) blockchains, where validators confirm transactions based on the amount of cryptocurrency they have staked. This mechanism ensures network security and aligns participants' interests with the healthy development of the blockchain.
2. Earn passive income: In addition to enhancing network security, staking also provides attractive economic incentives. By staking assets, investors can receive rewards, typically issued in the form of additional cryptocurrency tokens. This income generation method meets the needs of both novice and seasoned investors looking to maximize returns without engaging in active trading. In certain projects, staking may also involve airdrop activities that provide additional asset appreciation opportunities for stakers.
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 method enables new projects to leverage the security and capital of existing networks, effectively guiding their development. For example, platforms like EigenLayer promote restaking by allowing users to stake their ETH or liquid staking tokens, extending the economic security of cryptocurrencies to other applications on the network, thereby providing further returns for investors.
It is important to note that while restaking offers investors the opportunity to enhance yields and strengthen network support, it also comes with complexities and risks that cannot be ignored. As 2025 approaches, the DeFi staking landscape will continue to thrive, providing investors with more choices. This article will guide you through the top DeFi staking platforms worth closely monitoring.
What is DeFi staking?
DeFi staking involves locking cryptocurrency assets in smart contracts to support the operation of blockchain networks, particularly those that adopt a proof-of-stake (PoS) consensus mechanism. In PoS networks, validators confirm transactions based on the amount of cryptocurrency they have staked and create new blocks. Staking typically requires deploying a full node and meeting the minimum staking requirements of the network, enabling participants to validate transactions and partake in network consensus to earn rewards.
Key concepts in DeFi staking
Smart contracts and staking contracts: Smart contracts are self-executing agreements coded on the blockchain, ensuring that the staking process is automated, transparent, and secure. When you stake tokens, you essentially become a validator (or delegator) of the network, helping to maintain its security and stability. In return, you will receive rewards in the form of newly minted tokens or a share of transaction fees.
Staking rewards: Staking rewards typically consist of newly minted tokens and a share of transaction fees, incentivizing participants to contribute to the security and operation of the network.
Penalty mechanisms: To maintain network integrity, PoS networks implement penalty mechanisms known as 'slashing', which reduce the staked funds of validators engaging in malicious activities or failing to perform their duties. This mechanism aims to deter misconduct.
DeFi staking vs. centralized staking
When comparing DeFi staking to centralized staking services, several key factors emerge:
Ownership: DeFi staking allows users to retain actual ownership of their assets, as they can control their private keys. In contrast, centralized staking requires users to delegate their assets to third parties, relinquishing direct control.
Transparency: DeFi platforms operate on open-source smart contracts, offering transparent staking processes and reward distributions. Centralized platforms may lack this transparency, making it difficult for users to verify how rewards are calculated and distributed.
Security and control: DeFi staking provides users with better control over their assets, reducing reliance on intermediaries and lowering counterparty risk. Centralized staking involves delegating assets to a platform, which can pose security risks if that platform is attacked.
Mechanism: In DeFi staking, users delegate their stakes to a permissionless network of validators, directly participating in the network's consensus mechanism. Centralized staking platforms pool user funds and stake them using validators selected by the platform, often without disclosing the specifics of that process.
Learning curve: DeFi staking can be complex, requiring users to navigate various platforms and manage private keys, which can be challenging for beginners. Centralized platforms offer a more user-friendly, Web2-like experience, simplifying the staking process at the cost of decentralization.
Conclusion
Choosing between DeFi and centralized staking platforms depends on personal preferences, especially regarding control, transparency, and usability. Next, this article will explore the top DeFi staking platforms expected to make an impact in 2025 and provide some insights.
DeFi staking platforms
The following 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 annualized yields (APY).
Lido Finance
Lido Finance is a DeFi protocol focused on liquid staking services. It allows users to stake their digital assets across multiple blockchain networks while maintaining liquidity, effectively addressing the limitations of traditional staking, such as asset lockup and high entry barriers. By issuing liquid staking tokens (LSTs) like stETH for Ethereum, Lido enables 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 (like 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 hires 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 have been widely accepted across various DeFi platforms, allowing users to participate in lending, yield farming, and other activities while earning staking rewards.
Supported staking tokens
Lido supports staking a variety of 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 tokens and their 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 such as protocol upgrades, fee structures, and node operator selection.
Incentives: LDO tokens can be used to incentivize liquidity providers and users contributing to the growth and stability of the Lido protocol.
Summary
Lido Finance has now solidified its leadership position in the DeFi space. As of December 2024, its total locked value (TVL) has approached a historic high of nearly $40 billion.
Lido's dominance as the leading LST platform is increasingly being reinforced | Chart from DefiLlama.
This growth reflects increasing user 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 bolstering the network's security and resilience.
Pendle Finance
Pendle Finance is a DeFi protocol that allows users to tokenize and trade future yields of their yield-bearing assets. By separating the principal and yield portions of an asset, Pendle employs more advanced yield management strategies, including fixed income, speculation on future yield fluctuations, and unlocking liquidity from staked assets. This innovative approach brings traditional financial concepts (like 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 principal and future yield portions to be traded independently, facilitating strategies such as 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 dynamic fee structures to improve capital efficiency and reduce 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, allowing holders to participate in protocol decision-making, direct incentives to specific liquidity pools, and earn a share of protocol revenue.
Supported staking assets
Pendle supports various yield assets across multiple blockchain networks, including:
Ethereum (ETH): Pendle allows tokenization and trading of assets like stETH (Lido's liquid staking token).
Stablecoins: Tokens from lending protocols like Aave or Compound (e.g., USDC and DAI) can be used within the Pendle ecosystem.
Other yield tokens: Various assets generated by DeFi protocols can also be integrated into Pendle's platform.
PENDLE tokens and their utility
PENDLE tokens are the native utility and governance tokens within the Pendle ecosystem. Their 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, promoting 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 community interests with the platform's success.
Summary
Pendle Finance is gradually becoming a significant force in the DeFi space by introducing yield tokenization and an AMM specifically designed for yield trading. As of December 2024, Pendle's total locked value (TVL) has exceeded $5 billion (data from DefiLlama).
Pendle shows variable yields for the USDe token | Image from Pendle DApp
Pendle's integration with various DeFi protocols and its expansion across various blockchain networks like Ethereum and Arbitrum further solidify its position as a multifunctional and valuable tool for yield management in 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 enabling the reuse of staked assets, EigenLayer promotes a shared security model and the development of application chains and Rollup technologies without requiring independent sets of validators.
Key features of EigenLayer
Restaking mechanism: EigenLayer allows ETH stakers and LST holders to select new software modules for validation through restaking assets, known as Active Validation Services (AVSs). This process extends Ethereum's security to a broader range of applications, including data availability layers, oracle networks, and consensus protocols.
Permissionless token support: EigenLayer introduces permissionless token support, enabling any ERC-20 token to be added as a restakable asset. This extension allows a variety of tokens to contribute to the security of decentralized networks, promoting 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 data is accessible and secure, EigenDA improves the scalability and efficiency of Ethereum-based applications.
Governance and flexibility: EigenLayer's architecture 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 according to their unique needs, fostering a more resilient and adaptable ecosystem.
Supported restaking assets
EigenLayer supports a variety of assets for restaking, including:
Ethereum (ETH): Users can restake their natively staked ETH to participate in securing other services.
Liquid staking tokens (LSTs): Tokens like stETH and rETH can be restaked through EigenLayer, allowing holders to earn additional rewards.
ERC-20 tokens: With permissionless token support, any ERC-20 token can now be added as a restakable asset.
EIGEN tokens and their utility
EigenLayer has launched the EIGEN token, a general-purpose inter-protocol working token designed to enhance the security of AVS fork protocols supported by EigenLayer. In extreme scenarios, such as active attacks or security vulnerabilities, the EIGEN token can protect these protocols, ensuring the integrity of the blockchain's modular stack is not compromised. By combining the EIGEN token with restaked ETH, EigenLayer provides users with a higher level of 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 engage and build on the Ethereum network.
Ether.fi
Ether.fi is a decentralized, non-custodial liquid staking protocol that enhances the capabilities of Ethereum holders by allowing them to stake their assets while retaining control of their private keys. Ether.fi issues liquid staking tokens eETH, which enable 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 autonomy of the Ethereum network.
Key features of Ether.fi
Non-custodial staking: Unlike many staking services, Ether.fi ensures users maintain control over their private keys throughout the staking process, significantly reducing custodial risk.
Using eETH for liquid staking: When users stake ETH, they receive eETH, a liquidity token representing their staked assets. This token can be used for lending and yield farming on various DeFi platforms while accumulating staking rewards.
Integration with EigenLayer: Ether.fi collaborates with EigenLayer to provide restaking functionality, allowing users to earn additional rewards by simultaneously securing multiple decentralized applications (DApps).
Operation Solo Staker: Ether.fi allows individuals to operate their own validator nodes through the Operation Solo Staker program, promoting decentralization.
ETHFI tokens and their utility
The native token of Ether.fi, ETHFI, has multiple functions within the platform:
Governance: ETHFI holders have the right to participate in the protocol's governance, 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 earn additional rewards, further incentivizing participation and aligning with the platform's development.
Summary
Ether.fi has become a significant player in the DeFi space, with its TVL surpassing $9.54 billion in December 2024, making it one of the leading restaking protocols in the Ethereum ecosystem.
Ethena Finance
Ethena Finance is a DeFi protocol that offers 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), providing a censorship-resistant and scalable solution.
Key features of Ethena Finance
Synthetic Dollar (USDe): USDe is a fully-backed synthetic dollar secured by crypto assets and managed through 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, a yield-bearing asset that accumulates income generated by the protocol over time. This mechanism allows users to earn passive income while maintaining exposure to stable assets.
Delta Hedging Mechanism: Ethena utilizes delta hedging, leveraging short positions in the derivatives market to offset price fluctuations of the collateral assets. This strategy maintains USDe's peg to the dollar, ensuring stability even amidst market volatility.
Non-custodial and decentralized: Ethena's operation does not rely 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 and then stake it to receive sUSDe, thereby participating in the protocol's yield generation mechanism.
ENA tokens and their utility
The native governance token of Ethena, ENA, plays several key roles within the ecosystem:
Governance: ENA holders can participate in protocol governance, voting on 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 in the protocol's incentive mechanisms and provide higher reward multiples.
Summary
DefiLlama data shows that as of December 2024, Ethena Finance's TVL has exceeded $5.9 billion.
Jito
Jito is a liquid staking protocol running on the Solana blockchain, focused 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 boosted 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 than traditional staking methods.
Using JitoSOL for liquid staking: After staking SOL, users will receive JitoSOL tokens representing 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 users retain control over their assets.
Enhancing network performance: Jito helps improve network performance and reduce spam on the Solana blockchain by specifically staking with validators running optimized software.
Supported staking assets
Jito primarily supports staking of the Solana token SOL. Users can stake any amount of SOL and receive JitoSOL in return.
JTO tokens and their 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 seen significant growth within the Solana ecosystem. According to data from its website, as of December 2024, over 14.5 million SOL tokens have been staked through Jito, with approximately 204 Solana validators participating. The platform offers an annualized staking yield (APY) exceeding 8%, reflecting its competitive advantage in the liquid staking market.
One of Jito's hallmark features is its integration of MEV strategies to enhance staking rewards. Additionally, Jito's commitment to open-source development is reflected in the release of Jito-Solana, the first third-party, MEV-enhanced validator client for Solana.
Babylon
Babylon is an innovative protocol that introduces Bitcoin staking into the DeFi ecosystem. By allowing Bitcoin holders to stake their assets directly, Babylon enables users to earn yields while 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, maintaining the inherent security and decentralization of Bitcoin.
Key features of Babylon
Self-custodial staking: Babylon's protocol allows BTC holders to stake their assets without relinquishing control to external entities. Users lock their Bitcoin in a self-custodial manner, ensuring complete 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 unbinding: Babylon utilizes a Bitcoin timestamp protocol, allowing staked BTC to unbind quickly. This feature ensures users can rapidly withdraw assets without relying on social consensus, 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 functionality maximizes yield potential.
Supported staking assets
Babylon focuses on using Bitcoin for staking purposes.
Summary
Babylon has achieved significant milestones, including the successful launch of its mainnet and the initiation of multiple staking caps. Notably, the protocol's TVL exceeded $5.7 billion in 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. Participating in governance: Staking governance tokens allows users to vote on protocol decisions and influence the future development of the platform.
4. Contributing to network security and operations: By staking, users can help protect blockchain networks and maintain decentralized operations.
5. Liquid staking tokens: Liquid staking tokens allow users to access staked capital while continuing to earn rewards.
6. Flexibility of yield strategies: DeFi staking offers opportunities for a variety of innovative strategies, such as compounding returns through restaking or using staking tokens to engage in other DeFi activities.
7. Entering emerging ecosystems: Staking supports innovation by helping guide new protocols and ecosystems.
Risks of DeFi staking
1. Smart contract vulnerabilities: Malicious attacks or vulnerabilities in smart contracts could lead to losses of staked assets.
2. Impermanent loss in liquidity pools: Changes in token prices may reduce the value of assets in liquidity pools, affecting overall returns.
3. Price volatility of tokens: The volatility of cryptocurrencies may affect the value of staking rewards.
4. Slashing penalties: In certain networks, improper validator actions 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 failure.
6. Lack of liquidity: Staked assets may be locked for a period, limiting immediate availability of funds.
Strategies to reduce DeFi staking risks
1. Diversify staking across multiple platforms: Spread your staked assets across different protocols to mitigate the impact of a single platform failure.
2. Research the audit and security history of platforms: Choose those with a good security record and regular third-party audits to ensure the safety of your funds.
3. Pay attention to tokenomics and protocol changes: Closely monitor changes in token supply, reward mechanisms, and governance decisions that may impact your staking strategy.
4. Utilize liquid staking options: Use protocols that provide liquid staking tokens to retain liquidity and flexibility while earning rewards.
5. Set risk limits: To manage risk exposure, determine the maximum percentage of your portfolio allocated to staking 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 specific steps may vary by protocol, the following provides a general guideline:
Step One: 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 Two: Set up a wallet
Choose a compatible non-custodial wallet for the protocol you plan to use, such as MetaMask for Ethereum-based platforms or Phantom for Solana.
Secure your wallet by backing up your mnemonic and enabling two-factor authentication.
Step Three: Acquire tokens
Purchase the tokens needed for staking through cryptocurrency exchanges (e.g., Lido's ETH, Jito's SOL).
Transfer the tokens to your wallet.
Step Four: 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 Five: Staking assets
Select the tokens you wish to stake and determine the amount.
Confirm the staking transaction and ensure you have enough funds to pay the transaction fees.
In liquid staking protocols, you will receive a derivative token (such as stETH or JitoSOL) that you can use in the DeFi ecosystem.
Step Six: Monitor and manage your stake
Regularly track your staking rewards and portfolio performance through a dashboard or the protocol's interface.
Consider utilizing the yield tokenization features of protocols like Pendle to develop additional strategies.
How to maximize DeFi staking returns
1. Diversify your staking portfolio: Spread investments across multiple protocols to minimize risk and optimize returns.
2. Reinvest rewards: Utilize earned rewards to increase returns through restaking or participating in yield farming opportunities.
3. Stay informed: Keep an eye on updates regarding protocol governance, tokenomics, and network upgrades that may affect your staking rewards or security.
4. Optimize gas fees: Schedule transaction times 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 using tokenized assets.
7. Use liquid staking tokens in DeFi: To accumulate additional returns on top of staking rewards, consider deploying derivative tokens (e.g., stETH, JitoSOL) in lending or yield farming.
The above steps and tips will help you start your DeFi staking journey and fully unlock the potential for generating passive income in the DeFi ecosystem.
Summary
This article explores some of the top platforms that may gain attention in 2025, including Lido Finance, Pendle Finance, EigenLayer, Ether.fi, Ethena, Jito, and Babylon. Each protocol offers unique features while providing core staking services, such as yield tokenization, restaking, or Bitcoin staking. Mastering and effectively utilizing these features will be key to unlocking real returns. As the cryptocurrency market enters a new bull cycle, the DeFi space in 2025 is showing immense potential, with DeFi staking expected to become a significant avenue for obtaining substantial rewards, driven by ongoing innovation and widespread adoption.
