The LSDFi sector in the Ethereum ecosystem has defied expectations by experiencing an impressive surge in growth this year. According to a recent CoinGecko report, more ETH holders choose to stake their assets instead of selling them off. Remarkably, even after introducing ETH withdrawals in April 2023 as part of the Ethereum Shapella upgrade, the LSDFi sector has expanded exponentially. Since January, it has grown by an astonishing 58.7 times.
By August 2023, LSD protocols had secured 43.7% of the total 26.4 million Ethereum staked, with Lido emerging as the dominant player, capturing nearly one-third of the market share. These statistics unveil an intriguing trend among Ethereum holders who exhibit a preference for restaking their assets to maximize returns rather than opting for immediate liquidation after withdrawal.
CoinGecko’s report also highlights that the LSDFi sector has shown remarkable confidence and participation. According to the report, since the introduction of withdrawals, the exit queue has remained at zero for more than half of the time (55%) and stayed below 10 validators for 77% of the time.
The introduction of LSDs (liquid staking derivatives) marked a significant milestone in Ethereum’s journey. It empowered smaller ETH holders to participate in staking while maintaining access to liquidity. This groundbreaking innovation emerged soon after the launch of the Ethereum Beacon Chain in December 2020.
Ethereum’s LSDFi Sees Astonishing 5,870% TVL Surge, Diva’s Impact on Lido
The expansion of the sector has caught attention due to a significant surge in Total Value Locked (TVL) within the top 10 LSDFi protocols, including Lido. According to a recent analysis by CoinGecko, these protocols have experienced an astonishing 5,870% increase in TVL since January 2023 began. This remarkable surge stands in stark contrast to the overall decentralized finance (DeFi) market, where DefiLlama reported an approximate 8% decline during the same period.
Since early 2022, the LSD operations have maintained an average return of 4.4%. However, it should be noted that this figure may decrease as more ETH is staked. Beaconcha reports that over 27.6 million ETH has been staked, with a total value of approximately $43.4 billion. In recent weeks, Ethereum enthusiasts have been closely monitoring the rise of Diva, a platform within the LSDFi ecosystem.
This emerging player has caught attention due to its enticing incentives that have led to what appears to be a “vampire attack” on Lido. Diva’s attractive rewards entice users and cause them to divert their liquidity away from Lido. Through this strategy, Diva rewards individuals who stake their ETH and Lido-staked ETH with tokens for dives. Impressively, Diva’s Total Value Locked (TVL) saw an astounding 650% increase in the first half of October alone, reaching a staggering 15,386 stETH or approximately $24 million in value according to Divascan.
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