Ethereum LSDFi Market Growth: Shapella’s Impact

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Amidst the surging landscape of Ethereum’s liquid staking derivatives finance (LSDFi) sector, the total value locked has undergone an astonishing 5,870% surge since January, fueled by ETH holders seeking enhanced yields.

Despite the option for ETH holders to withdraw being introduced with the Ethereum Shapella upgrade in April 2023, a recent LSDFi report from crypto data aggregator CoinGecko, dated October 16, underscores an exceptional 58.7x growth in the sector since the beginning of the year.

Fast forward to August 2023, and LSD protocols command a substantial 43.7% share of the overall 26.4 million ETH staked. Notably, Lido claims a lion’s share, constituting nearly a third of the total staked market.

The growth statistics within the LSDFi sector reveal a preference among ETH holders to opt for restaking, driven by the prospect of superior yield, rather than liquidating their assets post-withdrawal.

CoinGecko’s insights highlight that even with withdrawals enabled, the exit queue has remained dormant for more than half the time (55%) and consistently below 10 validators for a substantial 77% of the time.

The introduction of LSDs aimed to democratize staking, providing an avenue for smaller ETH holders to engage and unlock liquidity following the launch of the Ethereum Beacon Chain in December 2020.

As we traverse the year’s journey, the total value locked (TVL) across the top 10 LSDFi protocols (excluding Lido) has skyrocketed, exceeding the $900 million mark, as per the report.

Comparatively, TVL within LSDFi protocols has witnessed a staggering 5,870% surge since January 2023. In contrast, the total decentralized finance TVL has contracted by approximately 8% over the same period, according to DefiLlama.

The average yield for LSD protocols from January 2022 onward has held at 4.4%, a figure poised to decrease as the amount of staked ETH continues to climb.

Presently, there are 27.6 million ETH staked, valuing around $43.4 billion, as reported by Beaconcha.in.

In recent weeks, the Ethereum community has enthusiastically cheered on the ascent of LSDFi platform Diva, which is purportedly executing a “vampire attack” on Lido. This entails luring users and liquidity away from Lido by presenting more enticing incentives.

Diva entices stakers with token rewards for locking up both their ETH and Lido staked ETH (stETH) for divETH. Starting October, Diva’s TVL has witnessed an impressive 650% surge, reaching 15,386 stETH and valuing approximately $24 million, according to Divascan.