The Ethereum liquid staking derivatives finance (LSDFi) ecosystem has seen a surge in growth this year as Ether (ETH) holders chose to stake rather than liquidate.
Despite ETH withdrawals being enabled with the Ethereum Shapella upgrade in April 2023, an Oct. 16 LSDFi report from crypto data aggregator CoinGecko said the sector has grown by 58.7x since January.
By August 2023, LSD protocols accounted for 43.7% of the total 26.4 million ETH staked, with Lido having the lion’s share at almost a third of the total staked market.
The LSDFi sector growth statistics show ETH holders would rather re-stake for better yield opportunities than liquidate their assets after withdrawing.
CoinGecko noted 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.
LSDs were introduced to enable smaller ETH holders to participate in staking and unlock liquidity after the Ethereum Beacon Chain launch in December 2020.
Multichain TVL across top 10 LSDFi protocols. Source: CoinGecko
Since the beginning of this year, the total value locked (TVL) across the 10 leading LSDFi protocols, not including Lido, has surged to over $900 million, according to the report.
TVL in LSDFi protocols has grown by 5,870% since January 2023. Comparatively, the total decentralized finance TVL contracted by around 8% over the same period, according to DefiLlama.
The average yield for LSD protocols since January 2022 has been 4.4%, though this will decline as the amount of staked ETH increases.
There are currently 27.6 million ETH staked valued at around $43.4 billion, according to Beaconcha.in.
Related: Liquid staking emerges as a game-changer for crypto investors
Over the past two weeks, Ethereum proponents have cheered on the rise of LSDFi platform Diva, which they say is carrying out a “vampire attack” on Lido, enticing users and liquidity from Lido by offering higher incentives.
The Diva vampire attack on Lido is picking up steam
Over 11k Steth deposited into making number go down https://t.co/L6uITU3Bdq pic.twitter.com/vtzVXdKypD
— Evan Van Ness (@evan_van_ness) October 13, 2023
Diva offers token rewards to stakers that lock up their ETH and Lido staked ETH (stETH) for divETH. Since the beginning of October, Diva’s TVL has surged 650% to 15,386 stETH valued at around $24 million, according to Divascan.
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