Liquid Proof of Stake (LPoS) is a form of Proof of Stake (PoS) in which coin holders can lend their block-producing weight to a validator while keeping their coins in their own wallet, unlocked and free to move. The term is most closely tied to Tezos (XTZ), where validators are called bakers and producing blocks is called baking. Delegating does not hand over ownership or private keys, and the holder can switch to another baker at any time.
"Liquid" here refers to two things: the delegated coins stay spendable, and the choice of baker is fluid rather than fixed by election. That sets LPoS apart from Delegated Proof of Stake (DPoS), where holders vote for a small, capped number of block producers, and from designs that lock coins for a period. Since the Paris protocol upgrade of 2024, Tezos has also offered a second, locked option called staking, so the network now combines liquid delegation with frozen, slashable stake.
Liquid Proof of Stake in plain terms
Imagine a neighbourhood where only people with a certain number of votes can sit on the residents' committee. You do not have enough votes to sit on it yourself, so you lend your votes to a neighbour you trust. You keep your house, your keys and your bank account; you have only told the committee to count your votes with hers. If she stops showing up or treats you badly, you can lend your votes to someone else the next day.
LPoS works the same way. Small holders support a baker of their choice without giving that baker their coins. The baker does the technical work and usually shares part of the reward with its delegators.
How LPoS works on Tezos
A baker is an account registered as a delegate that runs a Tezos node and baking software and keeps them online. According to the Tezos documentation, a delegate needs a baking power of at least 6,000 tez to be selected, and bakers must now also run a Data Availability Layer node. The protocol picks bakers in advance, in proportion to their baking power, to propose blocks, and other selected bakers check each block and publish attestations confirming it is valid. If the chosen baker misses its slot, a fallback baker takes over.
Holders who are not bakers have two ways to take part:
| Feature | Delegating | Staking |
|---|---|---|
| Funds | Stay liquid and can be spent at any time | Frozen with the chosen baker |
| Weight in baking power | About one-third | Full weight |
| Rewards | Paid by the baker, at the baker's discretion | Paid directly by the protocol |
| Exposure to slashing | None | Yes, if the baker misbehaves |
| Delay to withdraw | None | About two cycles |
Delegation is the original LPoS model. Staking, added with Adaptive Issuance, lets ordinary holders put tez at risk alongside a baker in return for protocol-paid rewards. Bakers decide how much outside stake to accept. Under Adaptive Issuance, the rate of new issuance falls as more tez is staked and rises as less is staked, with the design targeting roughly half of supply at stake.
Security and penalties
Bakers put up their own tez as a security deposit. If a baker double-bakes or double-attests, meaning it signs two different blocks for the same level, the protocol can slash staked tez. Delegated tez is never slashed, which is why delegation carries less weight: delegators bear no penalty if their baker cheats. Inactive bakers miss rewards and can be temporarily excluded from selection.
These rules address the double spending and equivocation risks that every PoS design must handle. Tezos blocks reach finality after a short number of confirmations under its Tenderbake algorithm, a design from the Byzantine Fault Tolerance (BFT) family, rather than relying only on the probabilistic finality of longest-chain systems.
Comparison with other staking models
LPoS sits between two common approaches. In solo staking on Ethereum, the holder runs a validator and locks 32 ETH. In staking pools and liquid staking, the holder usually gives up custody to a smart contract or provider and receives a receipt token. LPoS delegation keeps custody with the holder and needs no receipt token, at the cost of relying on a baker to pay out rewards fairly. It is a close cousin of delegated staking on other chains and of Qtum's offline staking, where a super staker stakes on behalf of holders who keep their coins.
Critics note that delegation tends to concentrate around large, well-known bakers and exchanges, which reduces how many independent validators effectively secure the chain. Supporters answer that the low barrier, open entry for bakers and freedom to redelegate at any time keep power more fluid than in DPoS. Because Tezos also uses on-chain governance, in which bakers vote on protocol amendments, the choice of baker also shapes how the network upgrades.