Liquid staking is one of the most impactful innovations in decentralized finance—unlocking capital efficiency while keeping networks secure. But designing a liquid staking protocol that is scalable, fast, and secure is no trivial task.
At SnarkLabs, we’ve architected custom liquid staking systems tailored to high-performance blockchains. In this post, we break down the design principles, trade-offs, and engineering decisions that helped us build a liquid staking protocol optimized for speed and scalability.
What is Liquid Staking?
Traditional staking locks tokens, preventing users from using their capital elsewhere. Liquid staking changes that by issuing a derivative token (e.g., stakedETH, stDOT) representing staked assets—allowing users to continue participating in DeFi while earning staking rewards.
But behind the scenes, liquid staking requires careful management of delegation, withdrawal queues, validator selection, and reward distribution—all without compromising performance.
Design Objectives
When designing our system, we focused on four key pillars:
- Scalability – Handle thousands of users and validators with low latency.
- Speed – Instant minting and staking flows with minimal transaction lag.
- Security – Hardened smart contracts with robust validator safety.
- Modularity – Easy to adapt across EVM chains or substrate-based ecosystems.
Architecture Overview
Here’s a high-level look at how we structured our liquid staking system:
1. Stake Manager Smart Contract
The core contract that:
- Accepts deposits
- Stakes with a validator set
- Mints staking derivative tokens (e.g., sTOKEN)
2. Reward Distributor
Tracks and distributes staking rewards proportionally to stakers via rebasing or exchange rate updates.
3. Unstaking Queue
Implements delayed unbonding with an epoch-based queue, providing flexibility for unbonding requests without liquidity bottlenecks.
4. Validator Registry
Dynamically maintains the validator set, optimizing delegation to maximize rewards and decentralization.
Scaling Techniques
✅ Batch Delegation
We batch user deposits and delegate them at fixed intervals, reducing on-chain calls and gas consumption.
✅ Off-Chain Computation
Validator scoring and APR calculations are done off-chain and synced to contracts via oracle feeds or relayers, keeping on-chain logic lean.
✅ Rebasing via Oracles
For fast UX, we use an off-chain oracle to push rebasing data, ensuring token balances reflect real yield without needing constant on-chain updates.
Fast UX Without Compromise
We know that user experience = speed. Here’s how we improved staking flow:
- Instant Minting: sTOKEN is minted as soon as the stake request is confirmed—no waiting for validator delegation.
- Optimistic Unstaking: Users get a preview of their unstake amount and unbonding time, even before the epoch ends.
- Gas-Efficient: All major functions are single-transaction, with fallback paths for gas spikes.
Security First
Scalability means nothing without safety. Our contracts went through:
- Multi-layer audits
- Formal verification on core logic
- Continuous fuzz testing
- Validator slashing simulations
And all funds are protected by smart contract-level access controls and circuit breakers in case of unexpected events.
Multi-Chain Ready
Our liquid staking system is modular and compatible across ecosystems:
- EVM-compatible chains (Ethereum, Polygon, BNB Chain)
- Substrate-based chains (Polkadot, Kusama, custom parachains)
We designed it so that staking logic can evolve while keeping the interface consistent for users and integrators.
Final Thoughts
Liquid staking is more than a financial primitive—it’s an infrastructure layer for the next generation of capital-efficient protocols. Our experience shows that you can have speed, scalability, and security—but only with careful engineering and real-world testing.
Want to launch your own liquid staking protocol or integrate it into your DeFi product?
Let’s build it together. Contact Us
