Affordable liquid staking soars after Ethereum Shapella upgrade
After the Ethereum Shanghai upgrade, Liquid Staked ETH derivatives received a strong boost.
Metrics Minds Weekly #2
Liquid Staking Derivatives (LSDs) have surged in popularity in recent months. LSDs are tokens that represent staked Ethereum, and are a way to earn rewards by locking up funds while still retaining access to them. Because LSDs allow users to stake any amount and withdraw whenever they need, investors can utilize staked tokens as collateral for borrowing or trading without forfeiting their staking rewards.
LSDs have democratized staking by making it more affordable. Traditional staking on the Beacon chain requires a minimum investment of 32 ETH. As we saw in our previous blog featuring MetricsDAO analysis, more than half of users staked less than 1 ETH each through LSDs right after Ethereum’s Shanghai upgrade, also known as Shapella.
MetricsDAO community analyst h4wk did a deep dive into the world of LSDs a week after Shapella, using data from our partner Sentio, which offers data on more than 20 blockchains. Here are their findings:
Liquid staking’s time has come
The total net staking in the analyzed LSDs reached an all-time high after Shapella. The top LSDs powering this growth are Lido, a clear leader, followed by cbETH, FrxETH, AnkrETH and Rocket Pool. (While some sources put Rocket Pool staking at more than 400k ETH or even 800k ETH, that still does not make a dent in Lido's lead.)
All hail Lido
Lido has emerged as the clear leader among LSDs on Ethereum, with the highest TVL (Total Value Locked), transfer count and transfer volume. Since its launch two years ago, Lido’s TVL has skyrocketed, experiencing a phenomenal rise of 20 times its launch price. Coinbase’s staking token, cbETH, is a distant second (although it grew 4 times since its launch). Lido’s dominant presence is likely due to its early entry, allowing it to amass a larger user base.
The world of LSDs
Thanks to LSDs like Lido’s stETH and others, a vast number of new investors are now able to participate in ETH staking. h4wk's data shows that they are increasingly recognizing the potential benefits of staking in the Ethereum ecosystem. Shapella gave a boost to Ethereum LSDs, with Lido having the highest supply and daily transfer count.
Our takeaway
With the Shapella upgrade allowing users to withdraw their staked ETH, the popularity of LSDs – already high – received a strong boost. The illiquidity of the underlying asset became history, and staking derivatives remain a low-barrier way to get access to the rewards.
You may remember how ETFs had democratized investing in the stock market. LSDs are having a similar impact in crypto, and on a much larger scale, having brought the investment threshold crashing down from 32 ETH to less than 1 ETH.
Dive Deeper
See how h4wk analyzed LSDs by visiting their dashboard: https://app.sentio.xyz/h4wk/lsds-watcher/dashboards/9Yabt9dv
You can explore and request the work of these and other stellar community data analysts on the new Metrics App! Give it a whirl.