Who are the people who want to share a piece of the cake called liquid staking?
Liquid Staking is used to describe protocols that allow the creation of synthetic assets from staked assets. This helps users to both receive yield from staked assets and optimize the capital efficiency of the generated synthetic assets.
For example, Lido Finance allows users to stake ETH and get stETH in return. In addition to receiving staking rewards from staked ETH, users can also use stETH for activities in other protocols on EVM chains, such as lending on Aave, participating in liquidty mining or providing liquidity accounts on AMMs.
The above advantages make liquid staking projects a great advantage to attract assets and serve as a foundation for developing related application layers.
Although the concept of liquid staking can be implemented on many platforms, at the moment the game is mainly played on Ethereum . Most of the market share of the liquid staking segment belongs to Ethereum's ETH. With its position as the leading smart contract platform on Ethereum, it has a profound influence on the related branches behind including liquid staking.
The most prominent name among liquid staking projects is Lido. The value of assets deposited into Lido currently reaches more than 8.5 billion USD and is far behind competitors, of which 98% is ETH.
A frequently asked question is “Lido has over 8 times the asset value of a behind competitor like Rocketpool with a diluted capitalization (FDV) of only 3 times, is Lido undervalued or Rocketpool is undervalued? too tall?"
Actually not so, the mismatch between value and price is because users have to wait until the unlock time to withdraw the previously staked assets (expected to take place in the Shanghai update at the end of the month. 3). That is, at the present time, the value of deposited assets of liquid staking projects has only increased.
Lido has the advantage of being the first and has accumulated a large market share before. When ETH is unlocked, it is highly likely that we will see a change in the market share of the liquid staking segment. Behind-the-scenes players such as Rocketpool have a highly diluted capitalization expressing expectations from the market that the project will take away a piece of Lido's pie.
Another factor to compare liquid staking projects is looking at the transaction volume of the aggregated asset from the project. For example, with assets aggregated from staking ETH, stETH's trading volume is at the top. This shows that the adoption and use of stETH is happening more widely.
From now until the unlocking of ETH withdrawal, the number of assets deposited into liquid staking projects will only increase. When the unlocking takes place, depending on many factors such as the macro situation, market sentiment and expected profits, etc., we can see strong fluctuations in the value of both liquid staking in general and market share of each project in particular.
Lido - Towards Decentralization
Lido is the most prominent project in the liquid staking field at the moment with all parameters far behind the competitors. However, the biggest limitation of Lido is its centralization when there are only 21 validators in charge of staking ETH while the project's market share accounts for nearly 30% of the entire network. This has made the community concerned about the possibility of bad actors or the risk of local attacks.
Lido is well aware of this and has repeatedly discussed methods to increase decentralization. Recently, the project announced the launch of Lido V2, the main improvement of this version will target a new design that makes anyone eligible to become validators.
Rocketpool, Frax, StakeWise,... - The Cultural Beneficiaries of Ethereum
Although Ethereum has had many limitations since its inception, thanks to its community-centric culture, the network has maintained a positive effect. The community has created solutions that help Ethereum overcome limitations and become the second largest crypto network.
For that reason, projects with too much power such as Lido or Binance, Coinbase Staking often do not receive much support from the community. Besides, for the liquid staking segment, having a project with such a large market share as Lido will create many risks. All of this creates conditions for the following liquid staking projects to receive more attention.
SSV Network, Eigen Layer, Obol,... - The pieces that help develop the liquid staking array
The development of liquid staking solutions also comes with new limitations, projects that help solve these problems have also attracted a lot of attention from the community over the past time.
Representative:
SSV Network and Obol: The project helps to increase the decentralization of liquid staking solutions. SSV Network has announced a partnership with Lido, Obol Labs announced a successful fundraising of 12.5 million USD.
Eigen Layer: Simply put, this is a solution, allowing users to retake stake tokens. This design is expected to further improve network security and optimize capital efficiency.
However, it should be noted that the above projects are still in the development stage and are expected to take many more months to be put into practice.
Ethereum's PoW to PoS consensus shift has facilitated the development of the liquid staking arm. With the advantage of increasing security and optimizing capital efficiency, liquid staking projects have a great advantage to attract assets and are the foundation for developing related application layers.