> For the complete documentation index, see [llms.txt](https://deepnode.gitbook.io/docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://deepnode.gitbook.io/docs/ecosystem/liquid-staking-token.md).

# Liquid Staking Token

The DeepNode Liquid Staking Token ($stDN) is a core economic primitive of the ecosystem. Its purpose is to maximize network security by increasing the total staked supply while giving users a fully liquid, yield-bearing asset.

The LST mechanism follows given figure:

<figure><img src="/files/Jedd69JKM4nxYS1oCrIL" alt=""><figcaption></figcaption></figure>

***

### **1. Why Liquid Staking Exists**

Traditional staking locks tokens, forcing users to choose between:

* securing the network
* earning rewards
* or staying liquid

stDN removes this trade-off.\
Users can stake once, mint $stDN, and remain free to:

* provide liquidity
* participate in DeFi
* pay for computation
* or trade

all while still earning validator-powered staking rewards.

***

### **2. How $stDN Works**

1. Users deposit $DN into the staking contract.
2. They receive $stDN at a 1:1 ratio at genesis.
3. As validators earn revenue and emissions, $stDN grows in value, not in quantity.
4. At any time, users can unstake and receive their original $DN minus the withdrawal fee.

{% hint style="info" %}
$stDN = staked $DN + accrued validator revenue + protocol revenue share.
{% endhint %}

***

### **3. Flow Breakdown Based on the Diagram**

Below is the simplified version of the diagram’s economic flow.

***

#### **A. Stake → Mint $stDN**

* Users stake $DN into the Staking Contract.
* They receive the same amount of $stDN initially.
* This marks the start of their participation in staking rewards.

***

#### **B. Rewards Accrue to $stDN**

Emission rewards flow into the $stDN pool:

As rewards accumulate, the value of each $stDN increases, similar to how Lido’s stETH grows.

Users do not receive more $stDN. The *per-token value increases* as the pool grows.

***

#### **C. Validators & Stakers**

95% of stake rewards go to validators and stakers.\
These rewards accumulate in the staking pool, causing $stDN to grow in value over time and directly linking validator performance to $stDN yield.

***

#### **D. LSD Management Module**

A portion of staking revenue:

* 5% → LSD Management
* Of this, 4% goes to Foundation (ecosystem development)
* And 1% goes to Burn, permanently reducing supply

This introduces long-term sustainability and deflationary pressure.

***

#### **E. Unstaking Period**

Users can redeem their $stDN for $DN through the Unstake module.

* Unstaking triggers a pending period (t) before tokens are released
* A small withdrawal fee (z%) is applied
* The withdrawal fee is burned to strengthen $DN scarcity

After period *t* completes, the user receives $DN back.

{% hint style="info" %}
t = 14 days planned for Phase 1.
{% endhint %}