The Growing Popularity of Ethereum Liquid Staking Derivatives Finance

The Growing Popularity of Ethereum Liquid Staking Derivatives Finance

Staking Ethereum (ETH) has become an increasingly popular choice for ETH holders rather than liquidating their assets. The Ethereum liquid staking derivatives finance (LSDFi) ecosystem has experienced significant growth this year, according to a recent report from CoinGecko. Despite the ability to withdraw ETH introduced in the Ethereum Shapella upgrade, the LSDFi sector has grown by 58.7 times since January. This surge in growth demonstrates that ETH holders prefer to re-stake their assets for better yield opportunities rather than immediately liquidating them.

By August 2023, LSD protocols accounted for 43.7% of the total 26.4 million ETH staked. Among the various LSD protocols, Lido had the largest share, with almost one-third of the total staked market. These figures highlight the preference for these protocols as a means to unlock liquidity after the launch of the Ethereum Beacon Chain in December 2020.

The total value locked (TVL) across the top 10 LSDFi protocols, excluding Lido, has surged to over $900 million since the beginning of this year. This represents a remarkable increase of 5,870% since January 2023. In comparison, the total decentralized finance TVL decreased by approximately 8% during the same period. This growth in TVL further strengthens the position of LSDFi protocols within the broader DeFi landscape.

The average yield for LSD protocols since January 2022 has been 4.4%. However, with the increasing amount of staked ETH, this yield is expected to decline. As of now, there are approximately 27.6 million ETH staked, valued at around $43.4 billion, according to Beaconcha.in. These figures indicate the significant amount of ETH locked in staking contracts, highlighting the confidence investors have in the LSDFi ecosystem.

One notable development within the LSDFi sector is the rise of the platform Diva. Ethereum proponents have enthusiastically embraced Diva, which they believe is carrying out a “vampire attack” on Lido. Diva entices users and liquidity from Lido by offering higher incentives. Stakers who lock up their ETH and Lido staked ETH (stETH) on Diva receive token rewards in the form of divETH. Since the beginning of October, Diva’s TVL has skyrocketed by 650%, reaching 15,386 stETH valued at approximately $24 million, as reported by Divascan.

The Bright Future of LSDFi

The growth and popularity of the Ethereum liquid staking derivatives finance ecosystem show no signs of slowing down. The emergence of new protocols, such as Diva, further diversifies the options available to ETH holders. As more investors recognize the benefits of staking their assets rather than liquidating them, LSDFi protocols will continue to gain traction. The ability to stake and earn rewards while maintaining access to liquidity bodes well for the future of Ethereum and its ecosystem.

Ethereum

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