Deposit tokens, receive a claim you can actually use
Liquid staking works through a fairly simple substitution. Instead of staking directly with a validator and having your tokens locked under your own name, you deposit your tokens into a liquid staking protocol. That protocol pools deposits from many users and stakes them on everyone's behalf, handling validator selection and operations so individual depositors don't have to run infrastructure themselves. In exchange for the deposit, the protocol mints and issues the depositor a liquid staking token (LST), a separate, freely tradeable token that represents a claim on a share of the underlying staked assets, plus the staking rewards those assets are accruing over time.
The key shift is what the depositor is now holding. Instead of an illiquid, locked position, they hold a normal, transferable token that lives in their wallet like any other asset. That LST isn't just a receipt, it's designed to be usable: it can be sent, sold, or plugged into other protocols, all while the underlying deposit keeps earning staking rewards in the background. The depositor gets the yield of staking without inheriting the immobility that made native staking costly in the first lesson.