Liquid staking derivatives are explained as part of liquid staking, which covers how the system works, its main providers and its risks. This page explains the name.
When someone stakes coins through a liquid staking service, the service stakes them with validators and gives the user a receipt token in return. That receipt rises in value, or grows in number, as staking rewards accrue, and it can be traded, lent or used as collateral while the original coins stay locked. The best-known example is the stETH token issued through Lido on Ethereum. Similar tokens exist on Solana, Cosmos and other staking networks.
Early writers called these receipts "liquid staking derivatives" or LSDs, because their value derives from the staked asset. Much of the industry now prefers "liquid staking tokens" (LSTs), partly because the tokens are claims on deposited coins rather than derivatives in the sense of futures or options, and partly to avoid a different meaning of the abbreviation. The same idea has been extended to liquid restaking, whose tokens represent coins staked again to secure other services. Like any receipt, a liquid staking token can trade below the value of the coins behind it in stressed markets, and its safety depends on the smart contracts and validators of the issuing protocol.