Ethereum's impending Shanghai upgrade, which will reduce the risk of staking, has galvanized investor interest in liquid staking solutions, reports godbole17.
The total value of crypto assets deposited in liquid staking protocols was $14.1 billion as of European hours on Monday, making it the second-largest crypto market sector, according to data source. The total value locked in the DeFi lending and borrowing protocols was $13.7 billion, the third largest, while decentralized exchanges, with deposits of $19.4 billion, held the top spot.
"It [the upgrade] will innovate the current space by allowing for healthy competition between liquid staking solutions, will strengthen ETH's position by providing yield from staking/unstaking, and will give users the security of maintaining sovereignty over their assets," Messari CEO Ryan Selkis said in a newsletter published Friday.
Users of liquid staking protocols like Lido receive derivative tokens such as staked ether on a 1:1 basis. These derivative tokens represent user's stake and can be used to generate additional yield across Defi protocols. Lido's governance token LDO has rallied 220% this year, outperforming industry leaders bitcoin and ether by a huge margin.
Liquid staking is expected to grow further, as the ETH staking ratio, which measures the percentage of the cryptocurrency's supply staked, is significantly lower than other layer 1 cryptocurrencies.
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