The Ethereum Liquid Staking Derivatives Finance (LSDFi) ecosystem has experienced remarkable growth in the current year as Ethereum (ETH) holders have opted to stake their tokens rather than liquidate them.
Even though ETH withdrawals were made possible with the Ethereum Shapella upgrade in April 2023, a recent report from CoinGecko, a crypto data aggregator, revealed that the LSDFi sector has expanded by an astounding 58.7 times since January.
As of August 2023, LSDFi protocols accounted for a substantial 43.7% of the total 26.4 million ETH staked.
Among these protocols, Lido emerged as the dominant player, securing nearly a third of the total staked market.
These growth statistics indicate that ETH holders are choosing to re-stake their assets to capitalize on better yield opportunities, rather than liquidating them after withdrawing.
Notably, CoinGecko highlighted that despite the availability of withdrawals, the exit queue remained at zero for more than half of the time (55%) and stayed below 10 validators for 77% of the time.
This trend demonstrates the preference for staking within the LSDFi ecosystem.
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Liquid Staking Derivatives (LSDs) were introduced to enable smaller ETH holders to participate in staking and unlock liquidity following the launch of the Ethereum Beacon Chain in December 2020.
In the first months of this year, the Total Value Locked (TVL) across the top 10 LSDFi protocols, excluding Lido, surged to over $900 million, according to the report.
This represents a remarkable 5,870% increase in TVL since January 2023.
In contrast, the total TVL in decentralized finance (DeFi) contracted by around 8% over the same period, as reported by DefiLlama.
The average yield for LSD protocols since January 2022 has been 4.4%, though it is expected to decline as more ETH is staked.
Presently, there are approximately 27.6 million ETH staked, valued at around $43.4 billion, according to Beaconcha.in.
Recent weeks have seen Ethereum enthusiasts celebrating the rise of the LSDFi platform Diva, which is perceived to be conducting a “vampire attack” on Lido.
Diva has been enticing users and liquidity away from Lido by offering more attractive incentives.
Since the start of October, Diva’s TVL has surged by an astonishing 650% to 15,386 stETH, with a total value of around $24 million, according to Divascan.
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