Liquid Staking Platform Lido Surpasses 6M Ether Deposits as Shanghai Upgrade Spurs Inflows

Ethereum’s Shanghai upgrade spurred deposit inflows to liquid staking protocols, including to the largest player Lido.

AccessTimeIconMay 4, 2023 at 6:03 p.m. UTC
Updated May 4, 2023 at 6:12 p.m. UTC

Decentralized finance (DeFi) protocol Lido Finance has surpassed six million ether (ETH) deposited on its liquid staking platform amid steady inflows following the Ethereum blockchain’s Shanghai upgrade.

Lido has enjoyed a net inflow of 105,644 ETH through last week, worth some $199 million, pushing deposits to 6,008,480 ETH, according to blockchain data by a Dune Analytics dashboard.

Liquid staking has become a popular way for investors to earn yields on their digital assets, making it one of the largest DeFi sectors with $16 billion of value combined, per data by DefiLlama. Liquid staking platforms, including Lido allow users to keep their locked-up tokens liquid with a derivative token that can be used for lending and borrowing.

The rapid expansion of liquid staking catapulted Lido to the top spot in DeFi, with some $12 billion of assets on the platform.

Ethereum’s Shanghai upgrade, which allowed withdrawals from staking contracts starting April 12, has accelerated the growth of liquid staking for ETH. Blockchain data shows that many crypto investors have withdrawn previously locked-up tokens and decided to reinvest them using liquid staking protocols, CoinDesk reported.

While Lido is still the top liquid staking protocol by far with a 79% market share, according to Nansen, it is facing increased competition from up-and-coming players. Rival platforms Frax Finance and Rocket Pool have enjoyed net inflows of $367 million altogether.

In contrast, centralized exchange giants Binance and Coinbase, which also offer liquid staking with their own derivative tokens, have endured heavy deposit outflows. The two exchanges experienced more than $700 million in withdrawals as of Tuesday.

Lido has not yet activated withdrawals, pending the release of its version (v)2 protocol upgrade expected later in May. Given the nature of liquid staking, users who want to withdraw from the platform can just sell their stETH derivative token on exchanges. As the token’s price tracks closely to ETH’s, Lido likely isn’t facing significant withdrawal pressure, Kunal Goel, an analyst at crypto research firm Messari, wrote in a report Wednesday.

Edited by James Rubin.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.