Ethereum's LSDFi sector has surged nearly 60x post-Shapella since January

The Ethereum-based Liquid Staking Derivatives Finance (LSDFi) sector is witnessing a meteoric rise, growing nearly 60-fold since January, in the aftermath of the Shapella upgrade, according to data from crypto analytics firm CoinGecko.

Despite the Shapella upgrade in April 2023 enabling ETH withdrawals, Ether holders are increasingly opting to stake their assets rather than selling. CoinGecko’s report, published on October 16, highlights a staggering 58.7x growth in the LSDFi sector since the start of the year.

By August 2023, LSDFi protocols represented a significant 43.7% of the 26.4 million total staked ETH, with Lido dominating the space, accounting for nearly one-third of the overall staked market.

This booming sector underscores a preference among ETH holders to re-stake their assets in pursuit of higher yields instead of liquidating. Remarkably, since enabling withdrawals, the exit queue has remained empty 55% of the time and below ten validators for 77% of the time, emphasizing the strong commitment to staking.

LSDFi’s emergence aimed to allow smaller ETH holders to stake and access liquidity following Ethereum’s Beacon Chain initiation in December 2020. The total value locked (TVL) in the top ten LSDFi protocols, excluding Lido, has skyrocketed, exceeding $900 million this year.

The Diva vampire attack on Lido is picking up steam 🚂

Over 11k Steth deposited into making number go down https://t.co/L6uITU3Bdq pic.twitter.com/vtzVXdKypD
— Evan Van Ness 🧉 (@evan_van_ness) October 13, 2023

The sector has seen a 5,870% increase in TVL since January 2023, whereas, in contrast, the overall decentralized finance (DeFi) TVL has shrunk by approximately 8% during the same timeframe, as per data from DefiLlama.

LSDFi protocols have offered an average yield of 4.4% since January 2022, though expectations are set for this to decrease with the growing volume of staked ETH. Currently, the staked ETH stands at 27.6 million, approximated at a whopping $43.4 billion, as per Beaconcha.in.

The recent weeks have seen the Ethereum community excitedly tracking the ascent of LSDFi platform Diva, purportedly initiating a “vampire attack” on Lido by offering enhanced incentives and thereby drawing users and liquidity. Diva’s approach provides token rewards for stakers who commit their ETH and Lido’s staked ETH (stETH) for Diva’s divETH. Impressively, Diva’s TVL has experienced a 650% upsurge since early October, reaching 15,386 stETH, equivalent to about $24 million.

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