The 27-year-old joined the Blues from West Ham on a free transfer in 2011.
“His versatility is a big thing for us as he can cover different positions,” boss Lee Clark told the club site.
“As well as midfield he can play as a full-back, although I ultimately think that as he goes on he could be a decent centre-half because he’s an aggressive player, he’s got good aerial ability and he’s mobile.
“In terms of football he’s still young, but he’s a very experienced player in terms of the games he’s had for a player of his age.”
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Liverpool have unveiled their new home kit for next season, sticking with the hugely popular retro styling of the current shirt.
The reputation of the Premier League means it is the most popular and one of the most watched leagues in the world.