Ethereum’s LSDFi (Liquid Staking Derivatives Finance) Ecosystem Is Exploding

This year, the Ethereum Liquid Staking Derivatives Finance (LSDFi) ecosystem has grown a lot because people who own Ethereum (ETH) have chosen to stake their tokens instead of selling them.

With the Ethereum Shapella update in April 2023, it became possible to withdraw ETH. However, a recent report from crypto data aggregator CoinGecko showed that the LSDFi sector has grown by an amazing 58.7 times since January.

As of August 2023, 43.7% of the 26.4 million ETH that had been staked were in LSDFi protocols.

Lido was the clear winner among these protocols, taking home almost a third of the total staked market.

These growth numbers show that people who own ETH are re-staking their assets to take advantage of better yield opportunities instead of selling them after withdrawing their funds.

CoinGecko pointed out that even though withdrawals were possible, the exit queue stayed at zero more than half of the time (55%), and it stayed below 10 validators 77% of the time.

The preference for staking in the LSDFi ecosystem is shown by this trend.

Liquid Staking Derivatives (LSDs) were created so that smaller holders of Ethereum could stake their coins and access liquidity after the Ethereum Beacon Chain goes live in December 2020.

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The report says that in the first few months of this year, the Total Value Locked (TVL) across the top 10 LSDFi protocols, excluding Lido, rose to over $900 million.

It’s amazing how much TVL has grown since January 2023—5,870%!

DefiLlama, on the other hand, said that the total TVL in decentralized finance (DeFi) shrank by about 8% during the same time period.

Since January 2022, the average yield for LSD protocols has been 4.4%. However, this is likely to go down as more ETH is staked.

Beaconcha.in says that there are currently about 27.6 million ETH staked, which is worth about $43.4 billion.

Lately, people who like Ethereum have been happy about the rise of the LSDFi platform Diva, which is seen as a “vampire attack” on Lido.

By offering better incentives, Diva has been able to steal users and cash from Lido.

Divascan says that Diva’s TVL has increased by an amazing 650% since the beginning of October, reaching 15,386 stETH and a value of approximately $24 million.

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