The idea behind liquid staking is to enable people to stake without losing access to the liquidity of their tokens. This takes place through tokenization and issuance of on-chain representations of staked assets - derivative staked tokens - that are a claim on underlying staking positions.
When staking SOL to mSOL, you are not performing a swap between two different tokens as mSOL represents your original position. This process can be assimilated to wrapping a token or receiving a "proof-of-stake token" that has the perk of being a SPL token, thus staying liquid.
Liquid staking your SOL to mSOL is by essence the same operation as staking your SOL tokens. Since mSOL price (against SOL) is only impacted by staking rewards and nothing else, mSOL is not a speculative investment (when going from SOL to mSOL) but rather a way to diversify your stake and spread it across multiple validators, instead of locking your tokens into a single validator.
mSOL is only a derivative token representing a staked position, which should not make it different than a staking operation in regards to tax laws.
In our opinion, liquid staking really shines in solving the protocol design problems of PoS networks:
With a fully liquid derivative token, users can freely participate in DeFi and generate another layer of rewards on top of staking yields. Users don’t have to choose between staking or depositing their liquidity into an AMM, lending protocol, etc. They can do both!
Since derivative tokens can be immediately swapped for their underlying staked assets, users don’t have to wait for the regular unbonding period to unstake their tokens.
Diversifying across multiple validators minimizes exposure and serves as slashing insurance against malperformance of individual validator nodes. With our liquid staking solution, you can delegate your SOL to a multitude of validators rather than just one.