How LSD Tokens Transformed Ethereum

[Chawla Solutions]

Liquid Staking Derivatives (LSDs) completely reshaped the Ethereum economy and pushed DeFi into a new era of capital efficiency. Before LSDs existed, staking ETH meant locking it away and sacrificing liquidity — you earned staking
rewards, but you couldn’t use your assets anywhere else. The introduction of tokens like stETH, rETH, frxETH, and mETH changed that dynamic forever.
With LSDs, users receive a liquid token that represents staked ETH and continues earning yield. This simple shift created an entirely new economic loop. Instead of choosing between staking rewards or DeFi participation, users gained the ability to do both. Capital that was once frozen could now move freely across lending platforms, liquidity pools, yield farms, options markets, and collateral systems — all while the underlying ETH kept securing the network.

This innovation didn’t just boost liquidity; it multiplied Ethereum’s economic bandwidth. Every staked ETH now supports multiple layers of activity, powering a “double yield” effect that traditional finance can’t replicate. As restaking protocols and modular architectures rise, LSDs have become the backbone of next-gen DeFi. Assets like eETH, ezETH, and rsETH allow users to earn staking yield, restaking yield, and DeFi yield simultaneously.

In many ways, LSDs turned Ethereum into a productive economic engine rather than a passive asset. They unlocked dormant liquidity, drove TVL growth, and established the foundation for the restaking economy — setting the stage for Ethereum’s most powerful DeFi cycle yet.