The Ethereum liquid staking derivatives finance (LSDFi) ecosystem has experienced significant growth in 2023 as more Ether (ETH) holders choose to stake their assets rather than liquidate them. This growth has been observed despite the ability to withdraw ETH, which was enabled with the Ethereum Shapella upgrade in April 2023. According to a report from crypto data aggregator CoinGecko, the LSDFi sector has grown by a staggering 58.7 times since January.
As of August 2023, LSD protocols accounted for 43.7% of the 26.4 million ETH staked, with Lido being the largest contributor with almost a third of the total staked market. These statistics clearly show that ETH holders prefer to re-stake their assets for better yield opportunities instead of liquidating them after withdrawal.
CoinGecko’s report also highlighted that since withdrawals were enabled, the exit queue remained at zero for more than half of the time (55%) and stayed below 10 validators for 77% of the time. This indicates that LSDs have successfully enabled smaller ETH holders to participate in staking and 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 2023, according to the report. This represents a growth of 5,870% in TVL for LSDFi protocols, while the total decentralized finance (DeFi) TVL has contracted by around 8% over the same period, according to DefiLlama. The average yield for LSD protocols since January 2022 has been 4.4%, although this is expected to decline as the amount of staked ETH increases.
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Currently, there are 27.6 million ETH staked, valued at around $43.4 billion, according to Beaconcha.in. This demonstrates the growing popularity and trust in LSDFi as a viable investment option within the Ethereum ecosystem.
In recent weeks, Ethereum proponents have witnessed the rise of LSDFi platform Diva, which has been described as carrying out a “vampire attack” on Lido. Diva offers token rewards to stakers who lock up their ETH and Lido staked ETH (stETH) in exchange for divETH. Since the beginning of October, Diva’s TVL has surged by 650% to 15,386 stETH, valued at around $24 million.
The continued growth and innovation within the LSDFi ecosystem indicate that Ethereum holders are increasingly realizing the long-term benefits of staking their assets instead of simply liquidating them. This trend is further supported by the fact that LSDFi protocols have outperformed the overall DeFi market in terms of TVL growth. LSDFi not only enables greater participation for smaller ETH holders but also offers attractive yield opportunities.
Moving forward, as more investors recognize the value of staking their ETH, LSDFi is likely to continue its upward trajectory. This sector has proven to be a game-changer for crypto investors, allowing them to unlock liquidity and earn attractive yields while still actively participating in the Ethereum network. As the LSDFi ecosystem continues to evolve, it will play a critical role in shaping the future of decentralized finance and the Ethereum ecosystem as a whole.
In conclusion, the Ethereum LSDFi sector has witnessed exponential growth in 2023, with ETH holders opting to stake their assets rather than liquidate them. The introduction of LSDs has enabled smaller ETH holders to participate in staking and unlock liquidity. The total value locked across LSDFi protocols has experienced significant growth, outperforming the overall DeFi market. The LSDFi ecosystem offers attractive yield opportunities for investors and is set to play a crucial role in the future of decentralized finance.
