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 can contribute to the stable operation of blockchain networks while unlocking opportunities for passive income. Specifically, the benefits of participating in staking include:
Strengthening cryptocurrency economic security: Essentially, staking involves locking a certain amount of cryptocurrency to support the operation of blockchain networks. This process is particularly crucial 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.
Earn passive income: In addition to enhancing network security, staking also offers attractive economic incentives. By staking assets, investors can receive rewards, usually in the form of additional cryptocurrency tokens. This income-generating method fulfills the needs of both novice and seasoned investors looking to maximize returns without engaging in active trading. In some projects, staking may also involve airdrop activities, providing stakers with additional asset appreciation opportunities.
Kickstart new projects through restaking: A recent innovation in the staking industry 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 to effectively guide their development. For example, platforms like EigenLayer promote restaking by allowing users to stake their Ether or liquidity staking tokens, extending the economic security features 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 returns and strengthen network support, it also comes with complexities and risks that cannot be overlooked. As we approach 2025, the DeFi staking industry is expected to continue flourishing, providing investors with more choices. This article will guide you through top DeFi staking platforms worth keeping an eye on.
What is DeFi staking?
DeFi staking involves locking cryptocurrency assets in smart contracts to support the operation of blockchain networks, especially those using proof-of-stake (PoS) consensus mechanisms. In PoS networks, validators confirm transactions and create new blocks based on the amount of cryptocurrency they stake. Staking often requires deploying a full node and meeting the network's minimum staking requirements, allowing participants to validate transactions and partake in network consensus for 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 effectively become a validator (or delegator) for the network, collectively maintaining its security and stability. As a reward, 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 fee distributions, incentivizing participants to contribute to the network's security and operations.
Penalty mechanism: To maintain network integrity, PoS networks have implemented a penalty mechanism called 'slashing,' where validators can lose a portion of their staked funds if they engage in malicious activities or fail to fulfill their duties. This mechanism is designed 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 since they control their private keys. In contrast, centralized staking requires users to delegate their assets to third parties, thereby relinquishing direct control.
Transparency: DeFi platforms operate on open-source smart contracts, providing 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 enables users to better control their assets, reducing reliance on intermediaries and lowering counterparty risk. Centralized staking involves delegating assets to platforms, 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 network's consensus mechanism. Centralized staking platforms pool users' funds and stake them using validators selected by the platform, often 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 present challenges for beginners. Centralized platforms offer a more user-friendly, Web2-like experience, simplifying the staking process at the expense 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 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 main features, related tokens, and current annual percentage rates (APR) or annual yield rates (APY).
Image source: Techub News
Lido Finance
Lido Finance is a DeFi protocol focused on liquidity staking services. It allows users to stake their digital assets across multiple blockchain networks while maintaining liquidity, effectively addressing traditional staking limitations such as asset lockup and high barriers to entry. By issuing liquidity staking tokens (LSTs) like stETH for Ethereum, Lido enables users to earn staking rewards while using their assets within the broader DeFi ecosystem.
Main features of Lido Finance
Liquidity 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 the Lido 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 liquidity staking tokens have been widely accepted across various DeFi platforms, allowing users to participate in lending and yield farming activities while earning staking rewards.
Supported staking tokens
Lido supports staking for various cryptocurrencies across different networks, including:
Ethereum ($ETH): Stake Ether and receive stETH.
Polygon ($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 regarding 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 solidified its leading position in the DeFi industry. As of December 2024, its total value locked (TVL) has approached an all-time high of nearly $40 billion.
Image source: DefiLlama Lido's dominance as a leading LST platform is increasingly strengthening.
This growth reflects an increasing confidence among users in Lido's liquidity staking solutions and its 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 network's security and resilience.
Pendle Finance
Pendle Finance is a DeFi protocol that allows users to tokenize and trade future yields on yield-bearing assets. By separating the principal and yield portions of assets, Pendle adopts 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 (such as interest rate derivatives) into the DeFi industry, providing users with greater control and flexibility over their investments.
Main features of Pendle Finance
Yield tokenization: Pendle allows users to wrap yield-bearing assets into standardized yield (SY) tokens, which can then be split into principal tokens (PT) and yield tokens (YT). This separation enables independent trading of principal and future yield portions, facilitating the implementation of 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 dynamic fee structures, improving 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 decision-making, provide 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 liquidity staking token).
Stablecoins: Tokens from lending protocols like Aave or Compound (such as USDC and DAI) can be utilized within Pendle's 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 primary functions include:
Governance: PENDLE holders can lock their tokens to receive vePENDLE, granting them voting rights to participate in governance decisions of the protocol, such as proposing and voting on upgrades, fee structures, and other key parameters.
Incentive measures: PENDLE tokens incentivize liquidity providers and users, promoting the growth and stability of the platform. Additionally, vePENDLE holders can direct incentives to specific liquidity pools, thereby increasing their reward rates.
Revenue sharing: vePENDLE holders have the right to share in the protocol's income, aligning the community's interests with the platform's success.
Summary
Pendle Finance has gradually become a significant force in the DeFi industry by introducing yield tokenization and specialized AMMs for yield trading. As of December 2024, Pendle's total value locked (TVL) has surpassed $5 billion (data from DefiLlama).
Image source: Pendle DApp Pendle shows the variable yield of the USDe token.
Pendle’s integration with various DeFi protocols and its expansion across multiple blockchain networks like Ethereum and Arbitrum further solidifies 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 liquidity 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 facilitates a shared security model and the development of application chains and rollup technologies without the need for independent validator sets.
Main features of EigenLayer
Restaking mechanism: EigenLayer allows Ethereum stakers and LST holders to restake assets and select new software modules for validation, referred to 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, allowing any ERC-20 token to be added as a restakable asset. This enhancement enables various tokens to contribute to the security of decentralized networks while fostering cross-ecosystem collaboration and enhancing the utility of different tokens.
EigenDA (Data Availability Layer): EigenLayer offers EigenDA, a low-cost data availability solution for rollups and other Layer 2 solutions. By ensuring that data is easily 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 based on their unique needs, fostering a more resilient and adaptive ecosystem.
Supported restaking assets
EigenLayer supports restaking of various assets, including:
Ethereum ($ETH): Users can participate in securing other services by restaking their natively staked Ether.
Liquidity staking tokens (LSTs): Tokens like stETH, 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 universal inter-subject 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 remains intact. By combining the EIGEN token with staked Ethereum, EigenLayer provides users with a higher level of cryptocurrency 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 groundbreaking 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 liquidity staking protocol that enhances users' capabilities by allowing Ethereum holders to stake their assets while retaining control over their private keys. Ether.fi issues liquidity staking tokens eETH, enabling users to earn staking rewards and participate in the broader DeFi ecosystem without the restrictions of traditional staking. This approach enhances the security, decentralization, and user autonomy of the Ethereum network.
Main features of Ether.fi
Non-custodial staking: Unlike many staking services, Ether.fi ensures that users maintain control of their private keys throughout the staking process, significantly reducing custodial risks.
Using eETH for liquidity staking: When users stake Ether, 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 features, 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
Ether.fi's native token ETHFI has various functions within the platform:
Governance: ETHFI holders have the right to participate in the governance of the protocol, influencing decisions related to treasury management, token utility, and ecosystem development.
Revenue sharing: A portion of the protocol's monthly income 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 motivating participation and aligning with the platform's development.
Summary
Ether.fi has become an important participant in the DeFi industry, with a TVL exceeding $9.54 billion as of December 2024, making it one of the leading restaking protocols in the Ethereum ecosystem.
Ethena Finance
Ethena Finance is an Ethereum-based DeFi protocol that offers a cryptocurrency native synthetic dollar known as 'USDe.' Unlike traditional stablecoins that rely on fiat reserves, USDe maintains its peg through delta hedging strategies and cryptocurrency collateral (primarily Ethereum), providing a censorship-resistant and scalable solution.
Main features of Ethena Finance
Synthetic dollar (USDe): USDe is a fully-supported synthetic dollar backed by crypto assets and managed through delta hedging. This approach ensures stability without reliance on traditional banking systems, providing a flexible alternative for the DeFi industry.
Network bonds (sUSDe): By staking USDe, users can earn sUSDe, a yield-bearing asset that accumulates revenue generated by the protocol over time. This mechanism allows users to earn passive income while maintaining exposure to stable assets.
Delta hedging mechanism: Ethena employs delta hedging, utilizing short positions in the derivatives market to offset price volatility of collateral assets. This strategy maintains USDe's peg to the dollar, ensuring stability even during market fluctuations.
Non-custodial and decentralized: Ethena operates independently of 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 Ether into the protocol to generate USDe, which can then be staked to receive sUSDe, thereby participating in the protocol's yield generation mechanism.
ENA tokens and their utility
Ethena's native governance token $ENA plays several key roles within the ecosystem:
Governance: ENA holders can participate in protocol governance and influence decisions related to system upgrades, parameter adjustments, and overall strategic direction through voting.
Staking rewards: By staking $ENA, users can earn sENA, which may accumulate additional rewards within the protocol’s incentive mechanisms and provide higher reward multiples.
Summary
Data from DefiLlama shows that as of December 2024, Ethena Finance's TVL exceeded $5.9 billion.
Jito
Jito is a liquidity staking protocol operating on the Solana blockchain, focusing on maximizing extractable value (MEV) strategies. By allowing users to stake their $SOL tokens in exchange for JitoSOL—a liquidity staking token—Jito enables participants to earn staking rewards boosted by MEV revenue.
Main 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 liquidity staking: After staking $SOL, users receive JitoSOL tokens, which represent their staked assets. These tokens remain liquid, 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 optimized software validators.
Supported staking assets
Jito primarily supports staking of the Solana token $SOL. Users can stake any amount of $SOL and receive JitoSOL as their return.
JTO tokens and their uses
Jito has launched its native token $JTO, which serves multiple functions in 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 data from its website, as of December 2024, over 14.5 million $SOL tokens have been staked through Jito, with about 204 Solana validators participating. The staking annual percentage yield (APY) provided by the platform exceeds 8%, reflecting its competitive advantage in the liquidity staking market.
A hallmark feature of Jito 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 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 contributing to the security of proof-of-stake blockchains. This innovative approach eliminates the need to bridge, wrap, or transfer Bitcoin to third-party custodians, preserving Bitcoin's inherent security and decentralization.
Main features of Babylon
Self-custodial staking: Babylon's protocol allows Bitcoin holders to stake their assets without transferring 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 Bitcoin, 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 with returns.
Quick unbinding: Babylon employs a Bitcoin timestamp protocol that allows staked Bitcoin to be quickly unbound. This feature ensures that users can quickly withdraw assets without relying on social consensus, thus maintaining liquidity and flexibility.
Scalable restaking: The protocol's modular design supports scalable restaking, allowing a single Bitcoin stake to simultaneously secure multiple PoS chains. This feature 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
Potential for high yields through yield farming: DeFi staking often provides substantial rewards, especially when combined with yield farming strategies.
Enhanced control over funds: Users retain full ownership of their funds through decentralized wallets without relying on third-party custodians.
Participate in governance: Staking governance token users can vote on protocol decisions and influence the platform's future development.
Contributions to network security and operations: By staking, users can help protect blockchain networks and maintain decentralized operations.
Liquidity staking tokens: Liquidity staking token users can access staked capital while still accruing rewards.
Flexibility of yield strategies: DeFi staking offers opportunities for various innovative strategies, such as compounding by restaking or using staking tokens to participate in other DeFi activities.
Access to emerging ecosystems: Staking supports innovation by helping guide new protocols and ecosystems.
Risks of DeFi staking
Smart contract vulnerabilities: Malicious attacks or vulnerabilities in smart contracts may lead to the loss of staked assets.
Impermanent loss in liquidity pools: Fluctuations in token prices may reduce the value of assets within liquidity pools, affecting overall returns.
Volatility of token prices: The volatility of cryptocurrencies may impact the value of staking rewards.
Slashing penalties: In some networks, improper validator behavior may lead to penalties that reduce the amount of staked funds.
Protocol-specific risks: Emerging platforms may lack sufficient audits or experience, increasing the risk of operational failure.
Lack of liquidity: Staked assets may be locked for a certain period, limiting immediate availability of funds.
Strategies to reduce DeFi staking risks
Diversifying staking across multiple platforms: Distributing your staked assets across different protocols can minimize the impact of a single platform's failure.
Research platform audits and security history: Choose platforms with good security records and regular third-party audits to ensure the safety of your funds.
Pay attention to token economics and protocol changes: Closely monitor changes in token supply, reward mechanisms, and governance decisions that may affect your staking strategy.
Utilize liquidity staking options: Use protocols that offer liquidity staking tokens to maintain liquidity and flexibility while earning rewards.
Set risk limits: To manage risk exposure, determine the maximum percentage allocated to staking in your portfolio and adhere strictly to it.
Use reputable wallets and hardware security devices: Store your staking assets in secure wallets to prevent potential hacking or phishing attacks.
How to start DeFi staking: 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 liquidity 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 the 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 recovery phrase and enabling two-factor authentication.
Step 3: Obtain tokens
Purchase the tokens required for staking through cryptocurrency exchanges (such as Ethereum from Lido, SOL from Jito).
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 your assets
Choose the token you want to stake and determine the amount.
Confirm the staking transaction and ensure you have sufficient funds to cover transaction fees.
In liquidity staking protocols, 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 stakes
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 develop additional strategies.
How to maximize DeFi staking returns
Diversify your staking portfolio: Spread investments across multiple protocols to minimize risk and optimize returns.
Reinvest rewards: Use earned rewards to increase returns by restaking or participating in yield farming opportunities.
Stay informed: Keep an eye on updates regarding protocol governance, token economics, and network upgrades that may affect staking rewards or security.
Optimize gas fees: Schedule transaction times during periods of low network activity to reduce transaction costs.
Explore advanced strategies: Consider using protocols like Pendle Finance to lock in fixed income or speculate on future yields with tokenized assets.
Using liquidity staking tokens in DeFi: To accumulate additional yield on top of staking rewards, deploy derivative tokens (such as stETH, JitoSOL, etc.) in lending or yield farming.
The steps and tips outlined above will help you begin your DeFi staking journey and fully unlock the potential for generating passive income in the DeFi ecosystem.
Summary
This article discusses several top platforms that may attract attention in 2025, including Lido Finance, Pendle Finance, EigenLayer, Ether.fi, Ethena, Jito, and Babylon. Each protocol offers unique features, such as yield tokenization, restaking, or Bitcoin staking, in addition to providing foundational staking services. Mastering and effectively utilizing these features will be key to unlocking actual returns. With the cryptocurrency market entering a new bull cycle, the DeFi industry in 2025 is poised to showcase infinite possibilities, and with continuous innovation and widespread adoption, DeFi staking is expected to become a significant avenue for us to achieve substantial returns.
[Disclaimer] Markets carry risks, and investments should be made cautiously. This article does not constitute investment advice, and users should consider whether any opinions, perspectives, or conclusions in this article align with their specific circumstances. Invest at your own risk.
This article is republished with permission from: (Foresight News)
Original author: Siddhant Kejriwal
‘2025 DeFi Staking Outlook! A Review of 7 Platforms: How to Maximize Returns?’ This article was first published in ‘Crypto City’
