The Ethereum liquid staking derivatives finance (LSDFi) ecosystem has experienced remarkable growth this year as Ether (ETH) holders have chosen to stake their coins instead of liquidating them. Despite the availability of ETH withdrawals with the Ethereum Shapella upgrade in April 2023, a recent report from CoinGecko reveals that the LSDFi sector has grown by an astonishing 58.7 times since January.
By August 2023, LSD protocols accounted for 43.7% of the total 26.4 million ETH staked, with Lido being the dominant player, controlling almost a third of the staked market.
The statistics on LSDFi sector growth indicate that ETH holders prefer to restake their coins for better yield opportunities rather than liquidating their assets after withdrawing. CoinGecko points out that since withdrawals were enabled, the exit queue has remained at zero for more than half of the time (55%) and has stayed below 10 validators for 77% of the time.
Liquid staking derivatives (LSDs) were introduced to allow smaller ETH holders to participate in staking and unlock liquidity following the launch of the Ethereum Beacon Chain in December 2020.
According to the report, the total value locked (TVL) across the ten leading LSDFi protocols, excluding Lido, has surged to over $900 million since the beginning of this year. This represents a growth of 5,870% in TVL within LSDFi protocols since January 2023. In comparison, the total TVL in decentralized finance has contracted by approximately 8% over the same period.
The average yield for LSD protocols since January 2022 has been 4.4%, although this figure is expected to decline as the amount of staked ETH increases. Currently, there are 27.6 million ETH staked, valued at around $43.4 billion, as reported by Beaconcha.in.
In recent weeks, Ethereum enthusiasts have been celebrating the emergence of the LSDFi platform Diva, which is said to be executing a “vampire attack” on Lido. Diva has been luring users and liquidity away from Lido by offering higher incentives for stakers to lock up their ETH and Lido staked ETH (stETH) in exchange for divETH. Since the beginning of October, Diva’s TVL has skyrocketed by 650% to 15,386 stETH, equivalent to around $24 million, according to Divascan.
The growth of LSDFi and the rise of platforms like Diva highlight the increasing popularity and adoption of liquid staking solutions, providing more opportunities for ETH holders to earn rewards while maintaining their exposure to the Ethereum ecosystem. As the demand for staking derivatives continues to grow, it will be interesting to see how the broader ecosystem evolves and adapts to accommodate the needs of ETH holders and investors.