Liquid Staking Derivatives Surpass Lending TVL

Investors will soon be able to withdraw their staked ether from Ethereum validators, but meanwhile LSDs are surging

March 1, 2023 06:49 am

Source: Shutterstock / WindAwake, modified by Blockworks

Liquid staking derivatives (LSDs) are gaining momentum in the cryptocurrency market as the long-awaited Ethereum Shanghai hard fork nears.

LSDs have edged past lending in combined total volume locked (TVL), making it the second-largest decentralized finance (DeFi) service, behind liquidity in decentralized exchange protocols.

An estimated $14.3 billion is currently locked up in LSDs, data from DeFiLama shows, with Lido dominating the space, making up almost 93% of the total liquid staking market share.

Newsletter

Subscribe to Blockworks Daily

Following Shanghai, investors who have locked their ether in the Beacon chain will be able to finally withdraw their staked ether, including the protocols providing liquid alternatives.

The ability to withdraw may make liquid staking even more popular thanks to growing confidence in the Ethereum blockchain, Alluvial co-founder and Chief Operating Officer Mike Taormina previously told Blockworks.

“The Shanghai upgrade will finally enable withdrawals and remove uncertainty…we think that more people will end up participating [in liquid staking],” Taormina said.

Many centralized entities also offer staking products to their customers, removing the need to interact with DeFi directly.

There are currently 17.5 million ether staked via centralized exchanges such as Coinbase, Kraken and Binance, which are some of the largest staking providers in the space. Making up 11.85%, 7.08% and 5.92% of the total ETH staking market share respectively.

The US Securities and Exchange Commission crackdown on centralized staking provider Kraken, which reached an agreement with to end its on-chain staking services in the country, has energized interest in decentralized alternatives.

Governance tokens for popular LSD providers are mostly outpacing bitcoin since the Kraken settlement

Update March 8, 2023 at 8:32 am ET: A previous version of this article stated that Index Coop didn’t offer dsETH to US citizens. That has since changed, and they now offer dsETH to US customers.

Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Newsletter

Blockworks Daily

Upcoming Events

Digital Asset Summit 2025

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

learn more

recent research

Research

Analyst Takes: Post-Election Insights

With the recent election, it’s clear that there will be a meaningful shift in crypto regulations and legislation. Trump is likely as pro-crypto as a president can be. He launched (multiple) of his own NFT collections and is launching an Aave wrapper called World Liberty Fi. He has also spoken out and mentioned that he wants to make the United States "the crypto capital of the planet" and transform it into the "Bitcoin superpower of the world". He proposed creating a strategic national Bitcoin stockpile alongside support from Senator Cynthia Lummis, promising to retain 100% of all Bitcoin held by the U.S. government. More importantly, we’re likely to see deregulation across the board in a lot of industries, with crypto being one of them - as Trump has committed to keeping the crypto market largely unregulated. Crypto, DeFi in particular, has historically been knee-capped by overreaching and hostile governmental agencies and regulation by enforcement, as evidenced by the plethora of Wells notices and lawsuits over the past few years. With Donald Trump winning the presidency, Republicans taking control of the Senate, and being on the verge of securing the House, we think it’s likely that crypto realizes positive regulatory clarity. Below, you can find our analysts’ takes:

by Boccaccio