Native Staking vs. Liquid Staking: Everything You Need to Know

Native Staking and Liquid Staking are two different ways to earn rewards from your crypto while supporting a blockchain’s security. Native staking allows you to commit your tokens directly to the network, strengthening its security and reliability while earning consistent rewards.

While liquid staking also provides rewards but adds flexibility by letting you use tokenized versions of your assets in other opportunities across DeFi.

Understanding the difference helps you choose the best strategy for maximizing yield and flexibility. If you want to get the most out of your crypto, this is a must-read.

What is Native Staking?

Native Staking is when you lock your tokens directly into a blockchain’s network to help secure it and validate transactions. In return, you earn rewards, usually in the same token you staked. If you are Staking SOL, then your rewards will also be SOL.

However, your tokens are locked during the staking period, meaning you can’t move, trade, or use them until they are unstaked. It is the most straightforward and traditional way to participate in proof-of-stake blockchains.

Here are some benefits of native staking:

• Direct Network Support - You help secure and decentralize the blockchain by staking directly with validators.
• Steady Rewards - Earn predictable staking rewards. Often higher than liquid staking, since no extra fees are taken by third-party protocols.
• Lower Risk of Smart Contract Bugs - Unlike liquid staking, there’s no extra protocol layer involved, so you avoid risks tied to smart contract exploits.
• Simplicity - Native staking is straightforward: lock your tokens, delegate to a validator, and earn.
• Long-Term Commitment - Encourages holding your tokens instead of frequent trading, which can benefit those with a long-term investment outlook.

How Does Native Staking Work?

Native Staking works by locking your tokens directly into a blockchain to support its security and transaction validation. You delegate your tokens to a validator, who uses them to help run the network, and in return, you earn staking rewards.

Imagine you have some tokens and decide to “lend” them to a trusted guardian of the blockchain, called a validator. The validator uses your tokens as part of their power to keep the network safe and process transactions.

In return, you get rewarded with more tokens, like earning interest. The catch is that your tokens are locked away during this time, so you can’t use them until you unstake them.

Here’s a simple guide on how native staking works:

• Choose a Validator - You select a validator (a node operator who helps run the network, just like Ivy Oracle) to delegate your tokens to.
• Lock Your Tokens - You stake your tokens directly on the blockchain by delegating them to that validator. These tokens are locked during the staking period.
• Validator Participation - Your chosen validator uses your delegated stake to help validate transactions and secure the network.
• Earn Rewards - You receive rewards based on the validator’s performance and the amount you staked.
• Unstaking Period - You can choose to unstake your SOL at any time since there is no locked-up period. But the epoch-based system of the Solana network may cause some delay, usually 1-3 days.

Pros and Cons of Native Staking

Here are some Pros and Cons of Native Staking:

Native Staking Pros:

• Direct Reward - You earn staking rewards without third-party fees.
• Supports the Network - Helps secure and decentralize the blockchain.
• Lower Risk Exposure - No extra smart contract risks since you stake directly on-chain.
• Simplicity - Easy process: pick a validator, stake, and earn.

Native Staking Cons:

• Lock-Up Periods - Your tokens are locked and can’t be traded or used immediately.
• Validator Risk - If your validator is penalized, you could lose part of your stake. But this happens in rare cases.
• Unstaking Delay - Withdrawing stake tokens often requires waiting for 1-3 days, sometimes, the timing of the network matters.

How to Stake SOL With Ivy Oracle

You can stake SOL using native staking directly in your Phantom or Solflare wallet. First, make sure that your wallet is funded with SOL. If you need more guidance on how to set up and deposit into your wallet, you can check these guides:

• Phantom Wallet Extension: Setup, Features, & Complete Guides
• Complete Solflare Wallet Tutorial: Your First Steps on Solana

Let’s assume that you already have a SOL in your Phantom wallet. Here’s a step-by-step guide on how to stake Solana with Ivy Oracle:

• Open Phantom Wallet and select your SOL balance.
• Tap or click on “More”, then “Stake SOL”.

• Choose Native Staking, and select a validator. You can search on ‘Ivy Oracle’ or enter this wallet address: 5eJQDSbgTZSEmH3zSWDEdAKgjavUUn9BkouCFNLz1x93
• Enter the amount of SOL you want to delegate, and tap or click on Stake.

That’s it! It may take a few seconds for your stake account to appear. But it will become active and start earning around 2-3 days (one epoch).

What is Liquid Staking?

Liquid staking is a way to stake your tokens while still keeping them usable. Instead of locking your tokens directly with the network (like in native staking), you delegate them through a liquid staking protocol.

But in return, you get a “receipt token” (like mSOL, jitoSOL, or similar) that represents your staked tokens. This liquid token can be traded, lent, or used in DeFi while your original tokens remain staked and continue earning rewards.

Here are some benefits of liquid staking:

• Liquidity & Flexibility - You can use the liquid token assets in DeFi (trading, lending, yield, farming) while earning staking rewards.
• No Long Lock-Up - You don’t need to wait through a long unstaking period, you can swap or sell your liquid staking token anytime.
• Compounding Opportunities - The liquid staking token can be reinvested to earn additional yields on top of staking rewards.

These are really good benefits, but you sacrifice some control and decentralization in exchange for ease of use. Since you don’t hold your private keys and you rely on their security and reliability.

How Does Liquid Staking Work?

Liquid Staking works by letting you stake your tokens through a protocol while receiving a “liquid token” in return. This liquid token acts as proof of your staked assets and automatically grows in value or balance as rewards accumulate.

The liquid token you receive can still be used across DeFi platforms. It removes the drawback of being locked out of your funds and gives you more flexibility to maximize returns in the broader crypto ecosystem.

Here’s a simple guide on how liquid staking works:

• Deposit Tokens - You send SOL (or other tokens) into a liquid staking protocol like Jito or Marinade.
• Protocol Stakes for You - The protocol stakes those tokens with validators on your behalf.
• Receive a Liquid Token - In return, you get a “receipt token” that represents your staked tokens plus rewards.
• Use the Liquid Token - You can trade it, lend it, or use it in DeFi apps while your original tokens keep earning staking rewards in the background.
• Redeem Anytime - When you want your original tokens back, you swap or redeem your liquid staking tokens for the underlying assets.

Pros and Cons of Liquid Staking

Here are the Pros and Cons of Liquid Staking:

Liquid Staking Pros:

• Liquidity & Flexibility - You earn staking rewards while still being able to trade or use your assets.
• DeFi Opportunities - Liquid staking tokens can be used in lending, farming, or other protocols to compound returns.
• No Lockup Periods - You don’t need to wait for weeks to unstake, you can usually swap your liquid tokens instantly.

Liquid Staking Cons:

• Smart Contract Risk - Since it runs on protocols, bugs or exploits could put funds at risk.
• Centralization Risk - Large liquid staking platforms may concentrate control over validators, reducing decentralization.
• Price Fluctuations - Liquid tokens can sometimes trade below their underlying value, especially in volatile markets.
• Extra Fees - Protocols may charge commissions on top of validator fees, lowering your net rewards.

Native Staking vs Liquid Staking: Key Differences

Here are the key differences between Native Staking and Liquid Staking.

Liquidity

In Native Staking, users lock their crypto directly into a blockchain protocol to help secure the network and keep it running smoothly. While these assets remain locked for a set period, this approach ensures stability and rewards users with staking incentives.

It’s a straightforward and reliable way to earn passive income while actively contributing to the strength of the blockchain.

Liquid Staking builds on these benefits by adding flexibility. It issues derivative tokens that represent the staked assets, which users can trade, lend, or use in decentralized finance (DeFi) protocols.

This way, the original assets continue to earn staking rewards, while the derivative tokens provide immediate liquidity and open up more opportunities in the broader crypto ecosystem.

Risk

Native Staking offers a direct and secure way to participate in the blockchain’s network by delegating assets to validators. While there are risks, such as slashing if a validator goes offline or acts maliciously, these risks are generally low when users choose a reputable validator.

With the right provider, native staking becomes a reliable method to earn rewards while actively supporting the stability and security of the blockchain.

Liquid Staking comes with its own set of risks. In addition to validator risk, like slashing, it also depends on smart contracts to handle the staking process and issue derivative tokens. If these contracts contain bugs or vulnerabilities, they could expose funds to potential loss.

In addition, derivative tokens may experience price fluctuations that don’t always move in line with the underlying asset, creating an added layer of market risk.

Rewards

With Native Staking, users earn rewards in the form of additional tokens, usually at a fixed or relatively predictable rate (APR). You earn your rewards directly from blockchain, and since there’s no extra layer, you usually keep the full staking yield (minus validator fees).

If you are lucky enough to meet a validator like Ivy Oracle with 0% commission fees, then you get the full rewards.

Liquid Staking provides a similar reward structure since the underlying assets are still staked on the same blockchain. However, the APR may vary slightly due to platform fees or changes in the value of derivative tokens.

And because these tokens can be traded in the open market, price movements may influence overall returns, making liquid staking rewards somewhat less predictable at times.

Native Staking or Liquid Staking? Which is Better?

Deciding between native staking and liquid staking is really depends on your priorities as an investor. If you value security, simplicity, and reliable rewards, Native Staking is the safer option.

With this method, you can delegate your tokens directly to a validator on the blockchain. This minimizes risks since there are no extra layers involved.

The trade-offs are that your tokens are locked during the staking period, and unstaking often requires waiting (1-3 days) through a cooldown. This makes native staking ideal for long-term holders who are comfortable leaving their tokens untouched in exchange for steady, consistent rewards.

Liquid staking, on the other hand, is better suited for active users who want more flexibility and the potential to maximize yields. When you stake through a liquid staking protocol, you receive a liquid token that represents your staked assets.

This token continues to earn staking rewards but can also be used in DeFi for lending, trading, or yield farming. The big advantage is liquidity, you don’t have to wait to access your funds.

However, the added convenience comes with higher risks, including smart contract vulnerabilities, protocol fees, and the possibility that your liquid token could lose value compared to the underlying asset.

In short, native staking is like a fixed savings account, secure and predictable, but locked. While liquid staking is like a savings account with a tradeable voucher, flexible and potentially more profitable, but with extra risks to consider