Since 2020, there has been consistent growth in applications for liquid staking on the Ethereum blockchain. As of the first week of October 2023, a total of 23 platforms offering liquid staking derivatives (LSD) have accumulated 12.4 million ether, valued at over $20 billion. The top three LSD protocols currently dominate the market, holding 11.041 million ETH, which accounts for a significant 89.18% share of the total locked ether.
Just a week ago, the total amount of ethereum (ETH) held in liquid staking derivatives (LSD) protocols surpassed 12 million ETH, with an additional 370,000 ETH added in five days. Liquid staking derivatives are decentralized platforms that allow users to stake ETH in a liquid form, providing both flexibility and liquidity while earning rewards.
The top three protocols, namely Lido, Rocket Pool, and Coinbase's Wrapped ETH platform, collectively control 89.18% of the LSD market. Lido Finance, established in 2020, is the largest holder of ETH among LSD platforms, with 8.79 million ETH in its possession. This represents 70.96% of the total LSD market. In exchange for their ETH, users receive Lido's staked ether, known as STETH, which ranks among the top ten tokens by market capitalization.
STETH is held by 269,080 unique addresses and has recorded approximately 1.15 million transfers. The circulating supply of STETH is currently 8,790,000 tokens, with the top 100 holders collectively owning 69.26% of the supply. An analysis conducted by Coingecko on September 29, 2023, reveals that STETH has an average yield of 4.6%.
Coinbase's Wrapped ETH platform is the second-largest LSD project, holding around 1.3 million ethereum valued at $2.26 billion. There are 1,297,211 CBETH tokens in circulation among 40,653 unique addresses. CBETH has recorded 210,532 transactions since its inception. The distribution of CBETH is more concentrated than that of STETH, with the top 100 holders collectively owning 96.43% of the circulating supply.
Rocket Pool, the third-largest LSD project, holds 951,264 ETH, accounting for 7.68% of the LSD market, while Coinbase's share is 10.48%. When users exchange ETH for Rocket Pool, they receive RETH tokens, with a total supply of 529,872 RETH. RETH is held by 18,784 holders and has recorded 197,928 transactions. The top 100 holders collectively own 67.91% of the RETH supply.
Below Lido, Coinbase, and Rocket Pool, several other LSDs like Binance Staked Ether, Frax Staked Ether, and Stakewise hold significant amounts of ethereum. Liquid staking derivatives continue to gain prominence in decentralized finance (DeFi), allowing users to stake without minimum requirements. Research by Coingecko shows that the top eight LSDs have provided an average yield of 4.4% annual percentage yield (APY) since January 2022.
LSDs have their critics, with concerns about centralization of supply and validators. However, proponents argue that LSDs enhance decentralization and security by diversifying the validator set on Ethereum and other chains.
