From Solo Staking to a Staking Economy, The Modular Evolution of PoS Staking

Section 1 - Why PoS Staking Needs Variants

While Ethereum’s transition to Proof-of-Stake (PoS) marked a milestone in crypto scalability and energy efficiency, the plain staking mechanism remains inaccessible to the vast majority of users. Validators receive full custody and the entirety of protocol rewards, including MEV, but the tradeoff is steep: both technically and financially, participation remains out of reach for the majority of token holders.

Technically Limitations

One major friction point lies in the technical and operational burden. To run a validator independently, users must maintain 24/7 network uptime, manage client configurations, monitor for slashing events, and react quickly to consensus changes. Even minor missteps—downtime, latency, or version mismatches—can result in penalties or lost rewards. This effectively restricts plain staking to highly technical participants or institutions with professionalized infrastructure teams.

Financially Limitations

From a financial standpoint, vanilla staking presents a high entry barrier and suboptimal capital efficiency. The rigid 32 ETH requirement locks out smaller holders and forces inefficient capital allocation—capital sits idle while staked, unable to earn elsewhere or be used as collateral. Withdrawals are gated by protocol-enforced exit queues, further limiting flexibility. The opportunity cost of staking in this form is especially acute in a dynamic DeFi environment, where yield, liquidity, and optionality are core to portfolio construction.

As the staking economy matures, these requirements have exposed a growing gap between protocol-level design and user-level usability.

Section 2 - The Staking Stack: Mapping the Models

To lower the barrier for broader participation—without compromising the underlying security of PoS networks—new service abstractions have emerged.

Type 1: stSaaS (Staking-as-a-Service)

stSaaS offers an on-ramp for users who want to operate full 32 ETH validators without handling infrastructure themselves. The user retains validator ownership while delegating the operation to a professional provider.

This model drastically reduces technical overhead and slash risk for individuals and institutions alike. However, stSaaS still requires the full capital amount, and often charges a performance fee, which modestly reduces the net yield. MEV access is partial, and these setups typically do not issue liquid staking tokens.

Type 2: Pooled Staking

By allowing multiple users to contribute smaller asset amounts into a shared validator setup, pooled staking lower the capital barrier and simplify participation to a few clicks. This opens participation to a much broader set of users who would otherwise be excluded by the 32 ETH minimum.

More importantly, the rise of its subtype, liquid pooled staking, marks a true milestone in the evolution of staking infrastructure. It fundamentally solves the financial limitations of staking, including capital lock-up and the associated opportunity cost. Through Liquid Staking Tokens (LSTs) like stETH, rETH, or eETH, users can earn staking rewards while still using their capital across DeFi, whether for lending, trading, collateralization, or restaking.

From a financial architecture standpoint, LSTs functionally resemble negotiable instruments or bearer securities in traditional finance—such as commercial paper or short-term notes. They confer ownership rights over an underlying income stream (staking yield), are transferable across markets, and can be pledged for leverage or liquidity. With “yield generation” and “secondary-market utility”, it is not a passive security operation but an active capital layer, unlocking new forms of financial engineering within crypto-native ecosystems.

Type 3: CEX Staking

Centralized exchanges like Coinbase, Binance, and Kraken offer the lowest-friction staking model. Users can stake with as little as 0.01 ETH, with no need to manage keys, validators, or interfaces. The trade-off is clear: full custody is surrendered to the exchange, yield is significantly reduced by opaque fee structures, and MEV rewards are typically not shared with the end-user. CEX staking serves a critical role in onboarding retail participants, but it sits at the opposite end of the decentralization and trust spectrum.

Section 3 - Overall Market Landscape of Staking Industry

The chart above illustrates a decisive reshaping of the ETH staking landscape over the past three years.

Solo staking and staking-as-a-service (stSaaS) have grown modestly from a marginal 5% to ~8%, indicating a stable but niche adoption among technically capable users or institutions seeking full custody. These models appeal to users prioritizing decentralization, governance power, or institutional compliance. They serve critical functions in Ethereum’s validator decentralization and trust-minimized security. In particular, stSaaS is gaining quiet traction among institutional players who seek non-custodial solutions without running infrastructure themselves.

The rise of pooled staking is driven by both capital efficiency and composability. Liquid staking protocols lower capital barrier and created yield-bearing derivatives (LSTs) that plug into DeFi. This dual utility—staking rewards plus DeFi mobility—makes them vastly superior for capital allocators. Moreover, the protocol-native integration of restaking and composable modules (e.g., EigenLayer, Pendle, Morpho Blue) has reinforced pooled staking's central role in the on-chain economy. In short, these protocols turned staking into a programmable base layer for yield strategies and risk transformations.

Centralized exchanges (CEXs) initially held the majority share, commanding nearly 50% of all staked ETH, but their dominance has gradually eroded to ~25%. Centralized custodians provide lower transparency, take large fee cuts, and typically do not share MEV or restaking yields. As users become more yield-sensitive and security-conscious, they are likely to migrate.

In sum, the market is consolidating around pooled staking protocols as the dominant layer, with CEXs becoming a utility backend for non-power users, and solo/stSaaS occupying a governance-aligned, high-trust niche.

Section 4 - Deeper into the Rising Sector: Pooled Staking and Its Subtypes

As shown above, participants in staking pools may engage in three distinct subtypes, each offering progressively greater capital flexibility, financial composability, and risk-reward complexity.

Subtype 1: Plain Pool Staking

This is the simplest form of pooled staking, where users deposit ETH into a pool and wait passively to receive staking rewards. There is no tokenization of stake, and users typically have limited interaction beyond initial deposit and withdrawal.

Functionally, this model resembles a fixed-income product or non-tradeable trust structure in traditional finance: it generates steady returns but offers no liquidity or reuse of the staked position.

Subtype 2: Liquid Staking

Liquid staking protocols introduce a major innovation: they issue liquid staking tokens (LSTs) that represent a user’s claim on their staked assets. These LSTs (e.g., stETH, rETH, eETH) are freely transferrable and can be used as collateral, swapped, lent, or composed into other DeFi protocols.

This unlocks the full financial utility of staked capital, enabling users to earn staking rewards without sacrificing liquidity or optionality. In traditional finance, this is analogous to a tradable interest-bearing note, such as a commercial paper or tokenized bond, that can be pledged, traded, or reinvested at will.

Subtype 3: Liquid Restaking

The most advanced subtype is liquid restaking. Original staker use their staking receipt (LST) as collateral: you lock up stETH to secure a rollup or oracle and earn its fees, while still retaining your claim on the underlying ETH locked in the official staking contract.

Finance-Industry Analogy:

• Warehouse-Receipt Financing: In commodities, you deposit grain or metal in a warehouse and receive a “warehouse receipt” you can pledge to banks for loans. Here, your LST is that receipt—your ETH remains custodied by the protocol, while you use the LST to finance other activities.
• Pledge-of-Claim: More generally, it’s like taking a debt-claim certificate against an asset (your staked ETH) and using that claim as collateral for a new loan or investment.

This model delivers two major advantages. First, it improves capital efficiency by generating multiple income streams from a single ETH unit—base-chain staking rewards plus additional restaking incentives. Second, it helps bootstrap new protocols without fresh token issuance by pooling existing LST collateral to enhance their security. In effect, EigenLayer prototype mainnet launched in 2024, quickly accumulating >$8 billion in restaked LST capital. Projects securing specialized functions, ranging from decentralized compute (e.g., Akash) to cross-chain bridges, are onboarding restaked collateral.

There are, however, significant risks and regulatory considerations. Reusing the same collateral across multiple protocols creates systemic exposure; if one layer suffers a failure or exploit, every dependent service is at risk. Markets will need robust risk-assessment frameworks that evaluate collateral concentration, enforce slashing isolation, and quantify inter-protocol linkages. At the same time, layered staking tokens may fall under securities or derivatives regulations, so legal classification and compliance guidelines will play a critical role in the space’s long-term viability.