The ETH staking landscape witnessed the rise of liquidity staking derivatives, enabling smaller validators to stake their ETH and generate profits. Anticipations surrounding the Shapella upgrade in April 2023 suggested a substantial outflow; however, contrary to expectations, there was a significant net inflow of ~ 179.5K ETH within just four days, signaling heightened activity around the network’s changes and potential investor movement. Post-update, the ability to withdraw ETH from the network was introduced.
Key Statistics
- Total Value Locked
The TVL across LSD protocols increased steadily in 2023 as a result of the Ethereum update and surged to an all-time high of $24 billion. With $17.5 billion locked in, Lido led the TVL space commanding a ~ 77% market share. Next up was RocketPool, with a ~ 9% market share amounting to ~ $2.05 billion in TVL.
- ETH Staked and Validators
The total amount of staked ETH witnessed a remarkable surge from ~15.86 million to a staggering 28.6 million. While the number of validators also increased from ~ 495k to 895k in 2023, showcasing a monumental leap in Ethereum’s validation ecosystem
Key Projects
Lido: Lido is the current leader within the Liquidity Staking Derivatives sector. Lido’s goal is to provide a seamless and secure participation in DeFi and there is no minimum staking requirement. With a ~ 77% share in TVL, Lido has emerged as a leader in the LSD segment and has positioned itself as a pivotal platform for ETH holders seeking staking opportunities.
RocketPool: Rocket Pool enables low-entry staking with 0.01 ETH for rETH tokens and 16 ETH for node operation, leveraging a flat 15% commission rate for rewards. Its decentralized network rewards rETH holders as the network grows, attracting both individual users and institutions. Its network of global node operators and users have staked more than ~ 850K Ethereum.
Frax Ether: Frax Ether is a liquid ETH staking derivative designed to uniquely leverage the Frax Finance ecosystem to maximize staking yield and smoothen the Ethereum staking process. Utilizing a dual-token system, frxETH acts as a loosely pegged stablecoin to ETH. Users deposit ETH to obtain frxETH, exchangeable for sfrxETH, earning staking rewards and redeemable back to frxETH or ETH. This innovative mechanism aims to streamline user participation, although it may initially present additional intricacies for new investors.
Future outlook
The growth of ETH staking is boosting Liquid Staking Derivatives (LSDs), and it is likely to surpass traditional staking methods in market share due to higher returns. Hashkey Capital predicts staked ETH could quadruple, potentially representing 45% of the circulating supply, equating to hundreds of billions of dollars.
Looking into 2024, the focus will be on developing secure yield aggregators and LSDFi reinvestment services, enhancing safety, efficiency, and value for stakeholders. Implementing rigorous security measures will be critical to mitigate risks and maintain market stability.
To mitigate malicious activities and systemic risks, implementing stringent security
measures such as validator deposits, liquidity constraints, and self-guarantees will be
crucial. These measures will bolster user confidence, ensuring market stability and
reliability.
Crypto Outlook 2024
2023 was a roller-coaster ride for the crypto sphere, marked by dynamic shifts, innovative advancements, and transformative trends that reshaped the industry’s landscape. Our Crypto Outlook Report for 2024 reflects on the highs, lows, and pivotal moments that defined the past year, while also peering into the horizon to forecast the exciting potential and emerging patterns set to influence the year ahead, with insights from industry leaders at Stepn, Enjin, Hacken, SuperScrypt, and more.
Click here to read the full report!
