Liquid Staking on Walrus
Learn how liquid staking can be used to turn staked WAL into liquid, usable tokens that provide enhanced flexibility.
Staking Walrus's native token, WAL, plays a vital role in securing the Walrus network. As a Delegated Proof-of-Stake (DPoS) network, Walrus relies on token holders to delegate WAL to the network’s storage nodes.
A storage node's total delegated stake is proportional to the amount of data it’s assigned to store. This system ensures data integrity by allocating more responsibility to the nodes that stakers have entrusted with the most capital. By staking your WAL, you're putting your tokens to work, actively helping to secure the network while earning WAL token rewards in return.
However, the native staking process locks up your staked WAL for an extended period. While staked, that WAL can’t be used in other decentralized finance (DeFi) opportunities, like lending, borrowing, or providing liquidity.
Liquid staking tokens (LSTs) solve the challenge of Walrus’s native staking lockup, letting you support the Walrus network’s security without sacrificing the liquidity of your WAL.
What is Liquid Staking?
Liquid staking is a cornerstone of capital efficiency within PoS blockchain ecosystems. By issuing a fungible, tradeable token—a LST—to represent ownership of a user’s staked tokens, liquid staking protocols unlock the value of otherwise illiquid staked capital, allowing it to be swapped, sent to a new wallet, or deployed in decentralized finance (DeFi), while continuing to accrue staking rewards.
The liquid staking protocols that provide access to WAL LSTs are separate, independent projects built on top of Walrus, not core pieces of the Walrus protocol. By participating in the ecosystem of LSTs built on Walrus, stakers can unlock additional opportunities to participate in the DeFi ecosystem using their staked WAL.
The Challenge with Native WAL Staking
When you stake WAL tokens on the Walrus network, your stake directly secures data storage contracts. In return for this delegation, the protocol issues a StakedWal object to your wallet.
You can think of the StakedWal object as a unique digital receipt, representing your specific stake, delegated to a specific storage node, at a specific time. When you’re ready to un-stake and withdraw your WAL, you must first wait for the Walrus network’s unstaking period of one to two epochs, which translates to a 14 to 28-day waiting period.
The uniqueness of your specific staking deposit means the StakedWal object is a non-fungible token (NFT). This design is uniquely equipped for tracking staking rewards, and opens up the opportunity for creating LSTs given the NFT-like features. But because each StakedWal object differs based on the storage node selected and timing of the stake, note that it can’t be transferred from your wallet to someone else’s wallet.
How WAL Liquid Staking Creates Liquidity
Liquid staking protocols offer a smart design to overcome these native barriers. They transform your illiquid staked WAL position into a flexible, tradeable LST.
The process works in a few steps:
- Deposit your WAL tokens into a liquid staking protocol’s smart contract
- The liquid staking protocol stakes these tokens on Walrus on your behalf, then holds and manages the non-fungible StakedWal objects in a secure, shared vault
- To represent ownership of your staked WAL, the liquid staking protocol mints a fungible, transferrable LST to your wallet
- Your Walrus LST represents your proportional claim on the total pool of staked WAL the liquid staking protocol holds, including WAL token rewards received for staking, usually minus an administrative fee
The resulting WAL LST is a standard, liquid token that you can trade or use in DeFi. All the while, your underlying staked WAL continues to secure the Walrus network and generate WAL staking rewards in return, which are automatically compounded in the value of your LSTs.
Getting your WAL back: Flexibility is Key
The ability to quickly convert a WAL LST back to WAL is essential. Because of the Walrus network’s 14 to 28-day native unstaking period, a key value that liquid staking protocols provide is the multiple unstake pathways they offer access to:
- The liquid advantage: Because WAL LSTs are fungible, transferable tokens, you can exit WAL staking by selling or swapping your WAL LST with someone who wants to start liquid staking WAL. While this path is dependent on secondary market conditions, it’s a key value proposition of using a LST.
- The express lane: For immediate liquidity, some liquid staking protocols provide an “instant unstake” feature. These protocols maintain a pool of WAL from new staking deposits, and allow you to instantly exchange your LST for WAL from this available pool, typically for a small fee. This path provides a capital-efficient solution to access liquidity directly from the liquid staking protocol, but it may depend on the amount of liquidity available in the protocol’s deposit buffer.
- The standard path: You can still unstake your LST through the Walrus network’s regular unstaking period, a safe-bet solution that provides access to your staked WAL even if your WAL LST is experiencing secondary market instability or other security challenges. When you select this option, the liquid staking protocol begins the native Walrus unstaking process, and you receive your WAL tokens back after the 14 to 28-day unstaking period concludes.
Explore the Walrus Liquid Staking Ecosystem
Several protocols on Walrus offer liquid staking solutions. Haedal and Winter Walrus provide two prominent examples of how LSTs can offer value and flexibility to WAL token holders.
Haedal (haWAL)
Haedal is a liquid staking protocol focused on spreading one’s staked WAL across a diversity of professional storage node operators, allowing WAL stakers to participate without having to diligence and choose which storage node operators to delegate WAL to themselves.
Haedal implements a classic, value-accruing, single-LST model:
- When you stake WAL with Haedal, you receive the haWAL token
- The Haedal protocol gathers the WAL staking rewards earned by all its delegated WAL, increasing the value of haWAL relative to WAL over time
- Your staking rewards compound automatically within the haWAL token itself, as the haWAL/WAL exchange rate is updated periodically to reflect the new WAL staking rewards received
Haedal offers multiple pathways to unstake, including an instant unstake feature that allows users to instantly swap haWAL for WAL (subject to pool capacity and a fee), and a fee-free regular unstake option that mirrors the native Walrus unstaking period.
Winter Walrus
Winter Walrus differentiates by offering a multi-LST standard, positioning itself as a liquid staking standard for a diverse ecosystem of WAL LSTs:
- Winter Walrus provides a platform for different projects to launch their own WAL LSTs (like upWAL or mWAL), with each LST able to choose its own set of storage node operators to delegate to
- Stakers can choose which LST to stake WAL through, allowing communities to liquid stake together and provide their own parameters around token distribution and storage node delegation
- Winter Walrus also has its own primary LST, wWAL, which is designed to have deep liquidity against WAL and the other LSTs on the Winter Walrus platform
Winter Walrus’s core innovation is its transmute mechanism, which allows any LST issued on the Winter Walrus standard to be instantly converted into the protocol’s primary LST, wWAL, providing a path to access liquidity even if facing liquidity challenges with one of the smaller LSTs issued on the platform. Winter Walrus also has a native unstaking process that uses a priority queue to provide faster unstake timelines.
Understand the Risks of Liquid Staking
While liquid staking offers access to enhanced flexibility and liquidity, it also introduces specific risks that users should consider.
- Smart contract risk: Liquid staking protocols operate using smart contracts to vault staked WAL and issue LSTs. This process introduces smart contract risk centered on the integrity of the liquid staking protocol’s own code. All participants should conduct their own due diligence before participating in a liquid staking protocol, such as evaluating its smart contract audit history and security positioning.
- Operator performance: When you stake WAL through a liquid staking protocol, you trust that protocol to choose storage node operators to delegate the pool’s staked WAL to. The amount of native WAL token rewards you receive for staking will depend on the performance of the storage nodes chosen by the liquid staking protocol. Diversifying stake across multiple storage node operators is one strategy that a liquid staking protocol might use to mitigate the impact of any single operator underperforming.
- Liquidity risk: The "instant unstake" feature offered by some liquid staking protocols relies on a dedicated liquidity pool of WAL tokens. The availability of this option is contingent on a continuous inflow of new stakers to supply the pool. If the pool is depleted, the instant unstake option can become temporarily unavailable.
- Market risk: A LST’s market price is separate and independent from its native, “standard path” redemption rate; the market price can fluctuate and trade at a discount to the value of the underlying WAL it represents. This risk can increase if instant liquidity options are unavailable, potentially meaning a user must choose to either sell on the open market at a loss or wait through the native unstaking period of 14 to 28 days.
Do More with Your Staked WAL
Liquid staking protocols on Walrus transform locked, non-fungible staked WAL into a dynamic and programmable asset. It provides an elegant solution to the challenges of long unstaking periods and illiquidity inherent in the native staking system.
By using LSTs, you can help secure the Walrus network and continue earning rewards, all while keeping your staked WAL free for other opportunities.
- Learn more about WAL staking and how it works
- Check out the Walrus Staking Dashboard to view current staking and operator data
- Explore the ecosystem of projects building on Walrus, including liquid staking protocols
