Liquid Staking and the Control-Exposure Wedge

Marc Dordal Carreras, Gloria Christina Heesen and Kohei Kawaguchi

No gebkq_v1, SocArXiv from Center for Open Science

Abstract: Proof-of-stake deters attacks by keeping validator stake exposed to slashing and depreciation losses. Liquid staking lets operators obtain voting power using pooled stake while reducing their own exposure by selling liquid staking tokens (LSTs) and shifting uncovered slashing losses onto token holders. We study the security implications of this control-exposure wedge and the protocol design problem it creates. Competitive LST pricing can partly deter attack by lowering the resale value of claims when risk rises, but it cannot fully restore deterrence because liquid staking participants do not internalize ETH-wide depreciation losses. A fee-charging protocol prefers the no-attack regime because it maximizes total stake, yet collateral requirements alone do not generally make that outcome unique. Robust security may therefore require additional tools, including permissioned participation, screening or reserve capacity.

Date: 2026-04-06
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://osf.io/download/69d0aa408b7d26235686577e/

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:gebkq_v1

DOI: 10.31219/osf.io/gebkq_v1

Access Statistics for this paper

More papers in SocArXiv from Center for Open Science
Bibliographic data for series maintained by OSF ().