Authentic investigative journalism and unfiltered creative commentary

Monday, May 19, 2025

Everyone wants yield. No one wants to wait.

Enter liquid staking: the shiny new layer of abstraction that promises you can stake your assets and use them at the same time. Magic? No.  Just another way to sell leverage to people who think APR means “Always Printing Rewards.”

Staking was supposed to secure networks. Lock up your tokens, support consensus, earn a cut. But somewhere along the way, staking turned into a farmable asset class — and consensus became a side quest. Protocols now issue “liquid staking derivatives” (LSDs), promising users they can have their cake, eat it, and then lend it to a DEX for more cake.

But the cake is poisoned.

Here’s the problem: LSDs uncouple economic exposure from the actual staking activity. The token you hold (stETH, rETH, etc.) isn’t doing the validating — it’s a receipt. A claim. And as with all receipts in DeFi, that claim only matters until the music stops.

Because in a crisis — say, a validator slash, a bug in the withdrawal queue, or just a good old-fashioned liquidity crunch — your staked asset isn’t as “liquid” as advertised. Unwinding these positions takes time. And DeFi doesn’t like time. It likes instant exit liquidity. So instead of patiently waiting for redemptions, users dump their LSDs into pools. Peg breaks. Panic spreads. Sound familiar?

We’ve seen this movie before. It's called Terra. It's called FTX. It's called "the peg is only broken if you check."

Even worse: the more popular liquid staking becomes, the more centralization it creates. Decentralized staking becomes oligopoly staking — with governance captured and protocol risk bundled into your DeFi stack like an invisible landmine.

And don't forget the rehypothecation spiral. Your LSD gets LP’d on a DEX, used as collateral on a money market, then leveraged into oblivion by some degenerate on-chain hedge fund. One crack in the chain? Everyone holding the receipt gets rekt.

Liquid staking sells itself as capital efficiency. What it really offers is a slow bleed of network security in exchange for short-term yield.

You’re not staking anymore. You’re yield farming with validator receipts.

And when the exit door gets small — as it always does — don’t be surprised if your “liquid” staking token turns into the most illiquid thing on the chain.

Welcome to consensus-as-collateral. Enjoy the ride.

•This firm studied DeFi hacks and found riskier protocols share one trait [Read more]

•‘Dark stablecoins’ could emerge as regulations tighten [Read more]

•Case Study: MEXC API Keys Hijack - A Wake Up Call For Traders [Read more]

•Xinbi: The $8 Billion Colorado-Incorporated Marketplace for Pig-Butchering Scammers and North Korean Hackers [Read more]

•Ethereum Foundation: Announcing the Trillion Dollar Security Initiative [Read more]

A nation on fire, a meme coin promo, and $2B gone faster than you can say “Dogecoin discount.” Thodex wasn’t an exchange — it was an exit plan with a login screen. Faruk didn’t rug a few degens — he rugged a country.

We provide an anonymous platform for whistleblowers and DeFi detectives to present their information to the community. All authors remain anonymous. 
We are all rekt.