The New Kings of DeFi

Much of crypto is reeling.

NFTs are at their lowest point ever… most tokens are down significantly from their ATH… and when was the last time you heard the word “metaverse” used in a sentence that wasn’t a joke?

But, with all that, one area of the crypto market is doing quite well: liquid staking.

According to DefiLlama, the total value locked (TVL) for liquid staking protocols has grown more than 290% over the past year to $21 billion. The last time the TVL was anywhere close to this high was in June 2021 right before the TerraUSD blowup.

(For a recap of what exactly liquid staking is and why it is important, you can refer back to our article explaining it here)

This growth has led liquid staking to become the largest DeFi segment, surpassing lending and DEXs.

The result? The largest liquid staking protocol, Lido’s, native token is up more than 30% this year.

What’s Driving the Growth?

As much of the crypto ecosystem is shell-shocked from the major blowups leading to an extended bear market, receiving a solid yield has become more and more interesting.

Right now, Lido and Rocketpool are paying ~3.7% APR on staked ETH. Now sure, that’s lower than the ~5% yield you can get on Treasury’s right now, but let’s be honest, inflation is going to eat away any major benefit from fiat anyway.

This Success is Causing Potential Negative Side Effects

While this may be getting into the technical weeds a bit, the success of liquid staking and Lido in particular also comes with some risks.

You see, for Ethereum to be “credibly neutral” it can’t have one protocol controlling everything. That control happens when a protocol has more than 33% of overall staked ETH. We won’t go into all the details, but if you are interested in learning more you can read this and this.

As of today, Lido has more than 32% of staked ETH marketshare according to Dune. The battle is on.