Since the inception of Ethereum (ETH) staking in December 2020, investors have been able to lock up their holdings and earn passive income, lured by the surging crypto market and ETH’s record-breaking highs. Fast forward to 2023, and ETH has experienced a significant 60% tumble from its peaks due to the 2022 crypto winter. Despite these challenges, the demand for staking has only grown.
According to data from Token Terminal, the total amount of ETH staked through liquid staking platforms has been steadily increasing since the start of 2023. One major factor contributing to this upward trend is the much-anticipated Shapella upgrade, which has kept users engaged in staking. With the addition of the withdrawal feature, staking has become more reliable and attractive.
Liquid staking protocols have gained dominance after the Shapella upgrade and have outperformed other staking options like centralized exchanges (CEX) and staking pools. Previously non-existent in December 2020, liquid staking now holds a significant 36% of the total staking market share, as reported by Dune data.
Liquid staking has also outpaced decentralized exchanges (DEXs) and lending protocols to become the largest sub-sector in the DeFi landscape in 2023, as per DeFiLlama. The total value locked (TVL) in liquid staking protocols surged by an impressive 144% to $21.6 billion at the time of reporting.
Leading the charge in liquid staking is Lido Finance (LDO), which holds the title of the largest DeFi protocol with a staggering TVL of $14.76 billion. This figure is more than twice as high as the TVL of the next-ranked Aave (AAVE), highlighting Lido Finance’s superiority in space.
As liquid staking gains prominence, it is also positively impacting the value of their native tokens. LDO, for instance, has witnessed a 7.45% increase in value over the last 30 days, currently trading at $2.03. Traders have taken notice of the rising token value, leading to a 6% growth in the total number of LDO holders in the past month, as reported by Santiment data.
Despite the market’s volatility and the challenges faced by ETH, the thriving liquid staking platforms are proving to be a reliable option for investors seeking to earn passive income and engage in the DeFi landscape. As the DeFi sector continues to evolve, liquid staking is likely to maintain its upward trajectory, offering a lucrative opportunity for those willing to participate.