Liquid Staking Derivatives Surpass Lending TVL

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

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Source: Shutterstock / WindAwake, modified by Blockworks

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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.

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.


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