April 19, 2024
Ethereum LSDFi sector surges almost 60-fold since January post-Shapella
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Ethereum LSDFi sector surges almost 60-fold since January post-Shapella

The Ethereum liquid staking derivatives finance (LSDFi) ecosystem has experienced substantial growth throughout the year, with Ether holders opting to stake their tokens rather than liquidate them. Since the Ethereum Shapella upgrade in April 2023 enabled ETH withdrawals, the LSDFi sector has expanded by a remarkable 58.7 times since January, according to a recent report.

As of August 2023, LSDFi protocols represented 43.7% of the total 26.4 million ETH staked, with Lido leading the pack, accounting for almost one-third of the staked market. This impressive growth underscores the preference of ETH holders to reinvest their tokens for enhanced yield opportunities instead of selling their assets upon withdrawal.

Notably, despite the option to withdraw ETH being available, the LSDFi exit queue remained at zero for more than half of the time (55%) and stayed below 10 validators for 77% of the time.

The introduction of liquid staking derivatives (LSDs) aimed to enable smaller ETH holders to participate in staking and unlock liquidity following the Ethereum Beacon Chain’s launch in December 2020. Since the beginning of the year, the total value locked (TVL) across the top 10 LSDFi protocols, excluding Lido, has surged to over $900 million.

The TVL in LSDFi protocols has seen a remarkable 5,870% growth since January 2023. In comparison, the total value locked in decentralized finance (DeFi) has declined by approximately 8% during the same period, as reported by DefiLlama.

The average yield for LSD protocols since January 2022 has been 4.4%, although it is expected to decrease as the amount of staked ETH continues to rise.

Currently, there are approximately 27.6 million ETH staked, valued at around $43.4 billion, according to Beaconcha.in. Over the past two weeks, the Ethereum community has witnessed the emergence of Diva, an LSDFi platform that is allegedly conducting a “vampire attack” on Lido, enticing users and liquidity from Lido with more attractive incentives. Diva provides token rewards to stakers who lock up their ETH and Lido staked ETH (stETH) for divETH. Since the start of October, Diva’s TVL has surged by 650% to 15,386 stETH, valued at around $24 million, according to Divascan.

Image by wirestock on Freepik

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