LSTs in Automated Vaults excel at maximizing capital efficiency and composability. By using tokens like Lido's stETH or Rocket Pool's rETH, protocols can simultaneously earn staking yield and deploy the asset as collateral for lending, liquidity provision, or leveraged strategies. For example, the $30B+ LST ecosystem on Ethereum demonstrates the deep liquidity and integration across DeFi pillars like Aave, MakerDAO, and Curve Finance. This approach unlocks higher potential APY through yield stacking but introduces smart contract and oracle dependencies beyond the base chain.
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Comparisons
LST in Automated Vaults vs Native Stake in Automated Vaults
A technical comparison of automated yield strategies, analyzing the trade-offs between composable Liquid Staking Token (LST) vaults and direct native stake management vaults for risk-adjusted returns.
Chainscore © 2026
introduction
THE ANALYSIS
Introduction: The Automated Staking Dilemma
Choosing between Liquid Staking Tokens (LSTs) and native stake for automated vaults is a foundational decision that impacts capital efficiency, yield strategy, and protocol risk.
Native Stake in Automated Vaults takes a different approach by interacting directly with the blockchain's consensus layer, as seen with EigenLayer's restaking or native delegation pools on Cosmos. This strategy results in a simpler security model, eliminating reliance on external LST issuers and capturing the full, native staking reward without intermediate token layers. The trade-off is reduced immediate liquidity; capital is locked in the vault's validator set, making it less suitable for protocols requiring frequent asset reallocation or serving as money markets.
The key trade-off: If your priority is maximizing capital flexibility and integrated DeFi yield, choose an LST-based vault. If you prioritize minimizing third-party dependencies and capturing pure staking rewards with a focus on validator security, choose a native-stake vault. The decision hinges on whether you value composability or sovereignty more for your protocol's treasury or product design.
tldr-summary
LSTs vs Native Stake in Automated Vaults
TL;DR: Core Differentiators
Key strengths and trade-offs at a glance for CTOs and architects.
01
LSTs: Superior Capital Efficiency
Liquidity & Composability: LSTs like Lido's stETH, Rocket Pool's rETH, and Frax's sfrxETH can be used as collateral across DeFi (e.g., Aave, MakerDAO, Uniswap V3). This unlocks yield stacking via leveraged staking strategies and immediate access to capital without unbonding periods.
$40B+
Total LST Market Cap
02
LSTs: Mitigated Slashing Risk
Risk Transfer: The vault delegates slashing risk to the underlying LST provider (e.g., Lido's curated node operator set, Coinbase's institutional infrastructure). This simplifies vault design and provides a more predictable yield profile for end-users.
03
Native Stake: Maximum Yield & Control
No Middleman Fees: Direct staking avoids LST provider fees (e.g., Lido's 10% commission), capturing the full protocol rewards. Offers sovereign validator control for protocols like EigenLayer, where running your own operators is a core security requirement.
5-10%
Typical LST Fee Avoidance
04
Native Stake: Reduced Protocol Dependency
Eliminates Smart Contract & Centralization Risks: Removes reliance on LST protocols' governance (e.g., Lido DAO upgrades) and potential de-pegs. Crucial for long-tail assets or new L1s where mature LST ecosystems don't yet exist.
HEAD-TO-HEAD COMPARISON
Feature Comparison: LST Vaults vs Native Stake Vaults
Direct comparison of key metrics and features for automated yield strategies.
| Metric | LST Vaults (e.g., Lido stETH, Rocket Pool rETH) | Native Stake Vaults (e.g., EigenLayer, Symbiotic) |
|---|---|---|
Liquidity & Withdrawal | Instant via DEXs (e.g., Uniswap) | Unbonding Period (7-28 days) |
Base Yield Source | Consensus + Execution Layer Rewards | Consensus Layer Rewards Only |
Additional Yield (Restaking) | ||
Protocol Dependencies | Underlying LST Protocol (e.g., Lido) | Native Blockchain (e.g., Ethereum) |
Typical TVL per Major Vault | $10B+ (stETH) | $1B - $5B |
Smart Contract Risk Surface | LST + Vault Strategy | Vault Strategy Only |
Exit Flexibility for DeFi | High (Composable LST) | Low (Locked Position) |
pros-cons-a
PROS AND CONS
LST-Based Vaults vs. Native Stake
Key strengths and trade-offs for automated yield strategies at a glance. Choose based on your protocol's need for liquidity, yield optimization, and risk tolerance.
02
LST Vaults: Multi-Chain Yield
Cross-Chain Strategy Access: LSTs are natively bridged to L2s and alt-L1s (e.g., stETH on Arbitrum, rETH on Base). Vaults can farm yield on networks with higher APY opportunities (like EigenLayer, Pendle) while the principal remains secured by Ethereum consensus.
$30B+
LST TVL
04
Native Stake: Predictable Economics
No Fee Stack or Premium/Discount: Earns pure consensus rewards + MEV, without LST protocol fees (typically 5-10%). Avoids trading at a premium/discount to NAV, which can erode returns during market volatility or withdrawal queues.
~3.5%
Base APR
pros-cons-b
LSTs vs Native Stake in Automated Vaults
Native Stake Vaults: Pros and Cons
Key strengths and trade-offs for protocol architects choosing a staking strategy for yield-bearing vaults.
01
LST Vaults: Superior Capital Efficiency
Liquidity & Composability: LSTs like Lido's stETH ($30B+ TVL) or Rocket Pool's rETH can be used as collateral across DeFi (Aave, MakerDAO) while earning staking yield. This enables leveraged staking strategies and unlocks capital for protocols like Pendle and EigenLayer restaking.
02
LST Vaults: Mitigated Slashing Risk
Risk Transfer: The slashing risk is borne by the LST provider's node operators (e.g., Lido's curated set, Rocket Pool's permissionless operators). For vault users, this means yield is more predictable and the underlying asset is not directly at risk from validator penalties.
03
Native Stake Vaults: Maximum Yield & Protocol Alignment
No Middleman Fees: Direct staking captures the full consensus and execution layer rewards (~3-5% APY), avoiding LST provider fees (e.g., Lido's 10% fee on staking rewards). This is critical for protocols like Frax Finance's sfrxETH where yield optimization is paramount.
04
Native Stake Vaults: Reduced Systemic & Depeg Risk
No Secondary Market Dependency: Value is tied directly to the native asset, eliminating depeg risk events seen with stETH during the Merge or regulatory uncertainty. This simplifies vault accounting and reduces dependency on external liquidity pools like Curve.
CHOOSE YOUR PRIORITY
Strategic Use Cases: When to Choose Which
LSTs (e.g., stETH, rETH) for Yield Optimization
Verdict: The superior choice for maximizing capital efficiency. Strengths: LSTs unlock composability. You can stake your ETH, receive a liquid token (stETH), and simultaneously deploy it into DeFi protocols like Aave, Curve, or EigenLayer for additional yield layers. This creates a "yield stack" (e.g., staking yield + lending yield + restaking points). Automated vaults like Yearn or Sommelier automate this strategy. Trade-offs: Introduces smart contract risk from the LST and the integrated DeFi protocols. Yield is variable and depends on DeFi market conditions.
Native Stake for Yield Optimization
Verdict: Suboptimal for pure yield; capital is locked and idle. Strengths: Provides the base, protocol-guaranteed staking yield (~3-5% APY). It's the safest yield source with no extra smart contract exposure beyond the beacon chain. Trade-offs: Zero composability. Your staked ETH is illiquid and cannot be used elsewhere, creating a significant opportunity cost. Automated vaults here only manage validator operations, not capital deployment.
risk-profile
Liquid Staking Tokens (LSTs) vs. Native Stake
Comparative Risk Profile
Key strengths and trade-offs for automated vaults at a glance.
01
LSTs: Enhanced Capital Efficiency
Unlocked Liquidity: LSTs like Lido's stETH or Rocket Pool's rETH can be used as collateral in DeFi protocols (e.g., Aave, MakerDAO) while still earning staking rewards. This matters for protocols seeking to maximize yield stacking and leverage.
02
LSTs: Diversified Validator Risk
Reduced Slashing Exposure: Major LST providers use decentralized validator sets (e.g., Lido's 30+ node operators). This dilutes the impact of a single validator's slashing event, which matters for large-scale institutional deployments.
03
Native Stake: Direct Protocol Security
No Smart Contract Risk: Bypasses the attack surface of LST issuance contracts (e.g., the Lido stETH contract). This matters for ultra-conservative vaults where the primary threat model is smart contract exploits.
04
Native Stake: Predictable Yield & No Depeg
Eliminates LST Premium/Discount Risk: Yield is derived directly from the consensus layer, avoiding the secondary market price volatility of LSTs (e.g., stETH/ETH depeg events). This matters for vaults with strict NAV stability requirements.
05
LSTs: Counterparty & Governance Risk
Reliance on LST Issuer: Vaults are exposed to the centralization and governance decisions of the LST DAO (e.g., Lido DAO's validator set changes). This matters for long-term, trust-minimized infrastructure.
06
Native Stake: Liquidity & Exit Queue Risk
Capital Lock-up During Unstaking: Subject to protocol-level exit queues (e.g., Ethereum's ~5-day queue during high demand). This matters for vaults requiring predictable, rapid withdrawals for user redemptions.
verdict
THE ANALYSIS
Verdict and Strategic Recommendation
A final assessment of the composability versus capital efficiency trade-off for automated vault strategies.
Liquid Staking Tokens (LSTs) in automated vaults excel at maximizing composability and yield stacking. By using a tokenized derivative like Lido's stETH or Rocket Pool's rETH, your capital remains unlocked for use in DeFi's broader ecosystem. This enables strategies like collateralizing LSTs on Aave, providing liquidity in Curve pools, or leveraging them in Pendle's yield-tokenizing vaults, often achieving a combined APY significantly higher than native staking alone. For example, a vault using stETH as collateral for a leveraged loop on Aave can target yields of 15-25%+, far exceeding Ethereum's ~3-4% base staking reward.
Native Stake in automated vaults takes a fundamentally different approach by prioritizing capital efficiency and protocol alignment. Services like EigenLayer or Symbiotic allow you to restake your natively staked ETH (or other assets) to secure additional Actively Validated Services (AVSs), earning extra rewards without locking additional capital. This results in a trade-off: you gain higher yield on the same principal and deeper integration with the base layer's security, but you sacrifice the immediate liquidity and DeFi composability that an LST provides. Your capital is effectively "double-duty" but not freely transferable.
The key trade-off is between liquidity & composability and capital efficiency & base-layer integration. If your priority is flexible capital that can be rapidly deployed across DeFi protocols (e.g., for a treasury management strategy or a yield-aggregating dApp), choose LST-based vaults. If you prioritize maximizing yield on a fixed, long-term stake and are willing to accept lower liquidity to contribute to and benefit from emerging Ethereum restaking ecosystems, choose Native Stake vaults.
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