The Ethereum liquid staking derivatives finance (LSDFi) sector has experienced a remarkable surge in growth, with a substantial increase in total value locked (TVL) and a surge in demand for staking services. Despite the introduction of the Ethereum Shapella upgrade, which allowed for ETH withdrawals, a recent report by CoinGecko has revealed that the LSDFi sector has grown by an astonishing 58.7 times since January. This article delves into the significant developments in the LSDFi sector, highlighting key insights from the report.
The data report paints a clear picture of the LSDFi sector’s impressive growth. LSDFi protocols accounted for 43.7% of the total 26.4 million ETH staked. Notably, Lido emerged as the frontrunner, holding a substantial portion of the total staked market, with nearly a third of the pie.
One of the standout findings in the report is that even after enabling ETH withdrawals with the Ethereum Shapella upgrade, ETH holders have opted to re-stake their assets rather than liquidate them. This preference for staking can be attributed to the pursuit of better yield opportunities in the LSDFi ecosystem.
The data from CoinGecko indicates that the exit queue for withdrawals has remained at zero for over half of the time, amounting to 55%, and has stayed below 10 validators for 77% of the time, suggesting that the demand for staking services remains consistently high.
LSDFi’s remarkable growth and Ethereum’s pivotal role
LSDFi protocols were introduced to enable smaller ETH holders to participate in staking and unlock liquidity after the Ethereum Beacon Chain launch. Since the beginning of 2023, the TVL across the ten leading LSDFi protocols, excluding Lido, has surged to over $900 million. This surge in TVL represents an astonishing 5,870% increase since January 2023. In contrast, the total decentralized finance TVL saw a decline of approximately 8% over the same period, as reported by DefiLlama.
LSDFi protocols have been attractive to ETH holders primarily due to the opportunity to earn higher yields. The report highlights that the average yield for these protocols has been 4.4%. However, it’s essential to note that this yield is subject to decline as the amount of staked ETH continues to increase, a natural consequence of higher participation.
Currently, there are approximately 27.6 million ETH staked, valued at around $43.4 billion, according to data from Beaconcha. in. This substantial amount of locked value reflects the community’s trust in the LSDFi sector and its potential for offering consistent returns.
In recent weeks, the LSDFi ecosystem has witnessed the rapid ascent of Diva, a prominent platform in the sector. Ethereum enthusiasts have been closely following Diva’s progress as it has been described as carrying out a “vampire attack” on Lido. This refers to Diva’s strategy of enticing users and liquidity away from Lido by offering more attractive incentives.
Diva’s approach involves offering token rewards to stakers who lock up their ETH and Lido staked ETH (stETH) for divETH. Since the beginning of October, Diva’s TVL has experienced an impressive surge of 650%, reaching 15,386 stETH valued at around $24 million, based on data from Divascan. This sudden growth underscores the competitive dynamics within the LSDFi sector, as platforms strive to provide users with the best possible yields and incentives.
