Lido deposits surpass $12 billion as Ethereum Shapella upgrade boosts liquid staking

Liquid staking protocol Lido Finance has seen its total value locked (TVL) surpass 6 million ether (ETH), equivalent to more than $12 billion, days after the Shapella upgrade on Ethereum.

Since January, Lido's TVL has risen by over 20% from 5 million ETH, according to DeFiLama — a trend expected to persist beyond the Shapella upgrade. A total 141,000 users have deposited their ETH into Lido Finance, Nansen data shows.

Liquid staking, offered by Lido and other protocols, is a popular method that streamlines user deposits and stakes on Ethereum. Users receive a derivative token as proof of their deposit, which can be used as collateral within the DeFi ecosystem, enabling them to earn additional yields beyond what Ethereum staking alone provides.

The Shapella upgrade, enabled last week, allows for proof-of-stake withdrawals on the Ethereum network.

"Liquid staking is poised to benefit the most from the Ethereum Shapella upgrade. Liquid staked tokens offer greater capital efficiency and flexibility compared to staked tokens, as traders can earn staking rewards while retaining the ability to move their funds freely," said Charmyn Ho, Head of Crypto Insights at crypto exchange Bybit.

Shapella can boost liquid staking access on Ethereum

As the staking landscape evolves, an increasing number of users prefer staking providers over operating their own validator nodes.

This is due to the complexity and costs associated with running a validator node, which requires a minimum stake of 32 ETH ($64,000).

"It's likely that some people will transition to liquid staking in which they control they ETH, as it also facilitates lower requirements below the minimum of 32 ether," said Robert Ellison, chief growth officer at Allnodes, a node hosting and staking platform. "This [Shapella] update opens the door to new markets that have been hesitant to get involved, which supports the network and liquid staking."

Lido commands a significant position in the liquid staking derivative market, holding approximately 30% of the market share, according to data aggregated by Hildebert Moulie, a data scientist at Dragonfly Capital.