Written by: Siddhant Kejriwal
Compiled by: Glendon, Techub News
The cryptocurrency industry has evolved to a point where staking has become an indispensable cornerstone, playing a vital role in network security and investor participation. By engaging 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 the security of crypto-economics: Essentially, staking involves locking a certain amount of cryptocurrency to support the operation of the 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 network security and aligns participants' interests with the healthy development of the blockchain.
2. Earn passive income: In addition to enhancing network security, staking offers attractive economic incentives. By staking assets, investors can earn rewards, typically distributed in the form of additional cryptocurrency tokens. This income generation method caters to both novice and experienced 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 method enables new projects to leverage the security and capital of existing networks, effectively guiding their development. For instance, platforms like EigenLayer facilitate restaking by allowing users to stake their ETH or liquid staking tokens and extend crypto-economic security to other applications on the network, providing further returns 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 is expected to continue thriving, offering investors more options. This article will guide you through the top DeFi staking platforms to watch closely.
What is DeFi staking?
DeFi staking involves locking cryptocurrency assets in smart contracts to support the operation of blockchain networks, especially those that employ 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 typically requires deploying a full node and meeting the network's minimum staking requirements, enabling participants to verify transactions and engage 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 effectively become a validator (or delegator) for 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 often include newly minted tokens and a share of transaction fees, incentivizing participants to contribute to network security and operation.
Slashing mechanism: To maintain network integrity, PoS networks implement a slashing mechanism, which reduces the staked funds of validators who 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 as they control their private keys. In contrast, centralized staking requires users to entrust 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 allows users better control over their assets, reducing reliance on intermediaries and minimizing 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 staked assets to a permissionless validator network, participating directly in the network's consensus mechanism. Centralized staking platforms, on the other hand, pool user funds and stake them through 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 can be challenging for beginners. Centralized platforms offer a more user-friendly, Web2-like experience at the expense of decentralization, simplifying the staking process.
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 likely to have an impact in 2025 and provide some insights.
DeFi staking platforms
Below is a comprehensive overview of the DeFi staking protocols we are about to discuss, highlighting their key features, associated tokens, and current annual percentage rates (APR) or annualized yield (APY).
Lido Finance
Lido Finance is a DeFi protocol focused on providing 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 lock-up and high entry barriers. 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 (e.g., 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 liquid staking tokens have been widely accepted across various DeFi platforms, allowing users to engage in activities like lending and yield farming while earning staking rewards.
Supported staking tokens
Lido supports staking of multiple 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
The native token LDO of Lido plays several key roles within the ecosystem:
Governance: LDO holders participate in Lido DAO, voting on key decisions regarding 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 now solidified its leading position in the DeFi space. As of December 2024, its total locked value (TVL) is nearing a historical high of $40 billion.
Lido's dominance as the leading LST platform is growing | 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 strengthening the network's security and resilience.
Pendle Finance
Pendle Finance is a DeFi protocol that allows users to tokenize and trade the future yields of 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 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 package 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 yields 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, 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, allowing holders to participate in protocol decisions, provide direct incentives to specific liquidity pools, and earn a portion of the protocol's revenue.
Supported staking assets
Pendle supports various yield-bearing 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 the right to participate in governance decisions regarding protocol upgrades, fee structures, and other key parameters.
Incentives: 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 to enhance their returns.
Revenue sharing: vePENDLE holders are entitled to share in the protocol's revenue, aligning the interests of the community with the success of the platform.
Summary
Pendle Finance is gradually becoming a significant force in the DeFi space by introducing yield tokenization and dedicated AMMs for yield trading. As of December 2024, Pendle's total locked value (TVL) has exceeded $5 billion (data from DefiLlama).
Pendle shows variable returns of USDe tokens | Image from Pendle DApp
Pendle's integration with various DeFi protocols, along with its expansion across different blockchain networks like Ethereum and Arbitrum, further solidifies its position in the DeFi ecosystem as a versatile and valuable tool for yield management.
EigenLayer
EigenLayer is an innovative protocol based on Ethereum that introduces the concept of 'restaking,' allowing users to redeploy 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 fosters a shared security model and facilitates the development of application chains and Rollup technologies without needing a separate set of validators.
Key features of EigenLayer
Restaking mechanism: EigenLayer allows ETH stakers and LST holders to restake assets and choose to validate new software modules, known as Active Validation Services (AVSs). This process extends the security of Ethereum 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 multiple tokens to contribute to the security of decentralized networks while enhancing the utility of various tokens and fostering cross-ecosystem collaboration.
EigenDA (data availability layer): EigenLayer provides EigenDA, a low-cost data availability solution for Rollups and other Layer 2 solutions. By ensuring data is easily accessible and secure, EigenDA improves 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, fostering a more resilient and adaptable ecosystem.
Supported restaking assets
EigenLayer supports restaking with various assets, including:
Ethereum (ETH): Users can participate in securing other services by restaking their native staked ETH.
Liquid staking tokens (LSTs): Tokens like stETH, rETH, etc., 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 the 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's modular stack is not compromised. By combining the EIGEN token with restaked ETH, EigenLayer provides users with a higher level of crypto-economic security.
Summary
According to DefiLlama data, as of December 2024, the TVL of EigenLayer 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 the capabilities of Ethereum holders by allowing them to stake their assets while retaining control over their private keys. Ether.fi issues the liquid staking token eETH, enabling users to earn staking rewards and participate in the broader DeFi ecosystem without the limitations of 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 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 across various DeFi platforms while accruing 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 validator nodes through the Operation Solo Staker program, promoting decentralization.
ETHFI tokens and their utility
The native token ETHFI of Ether.fi has multiple functions within the platform:
Governance: ETHFI holders have the right to participate in protocol 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 repurchase 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 growth.
Summary
Ether.fi has become a significant player in the DeFi space, with its TVL exceeding $9.54 billion in 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 provides 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), offering a censorship-resistant and scalable solution.
Key features of Ethena Finance
Synthetic dollar (USDe): USDe is a fully-backed synthetic dollar, managed through delta hedging and collateralized by crypto assets. 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 over time. This mechanism allows users to earn passive income while maintaining exposure to stable assets.
Delta hedging mechanism: Ethena employs delta hedging to offset price volatility of collateral assets using short positions in the derivatives market. This strategy maintains USDe's peg to the dollar, ensuring stability even amid 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 ETH into the protocol to generate USDe, which can then be staked to receive sUSDe, participating in the protocol's yield generation mechanism.
ENA tokens and their utility
The native governance token ENA of Ethena plays several key 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, potentially accumulating additional rewards in the protocol's incentive mechanisms and providing higher reward multipliers.
Summary
DefiLlama data shows that as of December 2024, Ethena Finance's TVL exceeds $5.9 billion.
Jito
Jito is a liquid staking protocol operating 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 augmented by MEV revenue.
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 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 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 achieved 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 in the process. The annual percentage yield (APY) offered by the platform exceeds 8%, reflecting its competitive advantage in the liquid 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 an innovative protocol that introduces Bitcoin staking to 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, 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 unbinding: Babylon employs a Bitcoin timestamp protocol, allowing staked BTC to be quickly unbound. This feature ensures users can quickly 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 protect multiple PoS chains simultaneously. This feature maximizes yield potential.
Supported staking assets
Babylon focuses on leveraging 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 surpassed $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. 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 operation: Through staking, users can help protect blockchain networks and maintain decentralized operations.
5. Liquid staking tokens: Liquid staking tokens enable users to access staked capital while still earning rewards.
6. Flexibility in yield strategies: DeFi staking offers opportunities for various innovative strategies, such as compounding by restaking or utilizing staking tokens to participate in other DeFi activities.
7. Entering 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 may lead to the loss 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: Cryptocurrency volatility can affect the value of staking rewards.
4. Slashing penalties: In some networks, improper validator behavior may result in 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 the immediate availability of funds.
Strategies for reducing DeFi staking risks
1. Diversify your staking across multiple platforms: Spread your staked assets across different protocols to mitigate 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 your funds are safe.
3. Pay attention to token economics 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 offer 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 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 guideline:
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 the security of your wallet by backing up your mnemonic phrase and enabling two-factor authentication.
Step 3: Acquire tokens
Purchase the tokens required for staking through cryptocurrency exchanges (e.g., ETH from Lido, SOL from Jito).
Transfer 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: Staking assets
Choose the token you wish to stake and determine the amount.
Confirm the staking transaction and ensure you have enough funds to cover the transaction fees.
In liquid staking protocols, you will receive a derivative token (e.g., 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 dashboards or the protocol's interface.
Consider utilizing yield tokenization features of protocols like Pendle to devise additional strategies.
How to maximize DeFi staking yields
1. Diversify your staking portfolio: Spread investments across multiple protocols to minimize risk and optimize returns.
2. Reinvest rewards: Use earned rewards to enhance returns through restaking or participating in yield farming opportunities.
3. Stay informed: Keep an eye on updates regarding protocol governance, token economics, and network upgrades that may affect staking rewards or security.
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 yields or speculate on future yields using tokenized assets.
7. Use liquid staking tokens in DeFi: To accumulate additional returns on top of staking rewards, deploy derivative tokens (e.g., stETH, JitoSOL) in lending or yield farming.
The steps and tips outlined above will help you embark on your DeFi staking journey and fully unleash the potential for generating passive income within 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 alongside foundational staking services, such as yield tokenization, restaking, or Bitcoin staking. Mastering and effectively utilizing these features will be key to unlocking tangible returns. As the cryptocurrency market enters a new bull run, the DeFi space in 2025 is showcasing immense possibilities, with DeFi staking poised to become an important avenue for us to achieve substantial rewards, driven by continuous innovation and widespread adoption.
Author: TechubNews; from the ChainDee content open platform “DeeDee”, this article only represents the author's views and does not represent the official position of ChainDee. All articles from 'DeeDee' are guaranteed for originality and content authenticity by the submitter. The submitter is responsible for any legal consequences arising from plagiarism or other misconduct. If there is any infringement, violation, or other inappropriate remarks in the content of the article, readers are encouraged to supervise, and once verified, the platform will immediately take it offline. For any content-related issues, please contact WeChat: chaindd123.
