Liquid Staking

Liquid Staked Tokens (LSTs) represent ownership of staked assets, typically cryptocurrencies like Monad (MON). LSTs let users earn staking rewards while keeping their tokens liquid—meaning they can still use these tokens across the decentralized finance (DeFi) ecosystem.

sMON earns yield because it represents a share of the protocol's pool of staked MON. When MON is staked with validators on the Monad blockchain, the staking rewards earned are added back to this pool. As the pool grows relative to the total supply of sMON, the value of each sMON increases. Additionally, sMON can be used in DeFi to earn extra yield beyond the staking rewards.

sMON represents staked MON and earns yield over time, which causes its value to increase relative to MON. The protocol uses an Exchange Rate to reflect the difference in supply, as MON staking rewards are added to the total pool of staked MON. This means that holding sMON gives users access to both their initial MON and the yield earned.