Liquid staking provider Lido’s staked ETH has grown year-to-date in absolute terms, but its share of the liquid staking market has gradually decreased as more players enter the scene.
Total ETH staked in Lido’s smart contracts has grown by about 500,000, worth nearly $1.4 billion at current prices, since the beginning of 2024. But Lido’s share of the staked ETH has decreased from 31.7% on Jan. 1 to about 28.55% at the time of writing, a nearly 10% reduction in market share, according to a Dune Analytics dashboard created by pseudonymous data researcher Hildobby.
Lido’s market share has dropped below 28.6% twice before: in May 2024 and in April 2022. The decline in market share comes as the total staking market has reached a record high of about 34.2 million staked ETH, a 17% increase since January 1.
“We’ve seen higher interest in stake/restaked ETH products this year, with trading volumes through 0x APIs including at least one of the top staked or restaked ETH products increasing in Q1 by 25% and Q2 by 47%,” according to Scott Guenther, head of finance for exchange infrastructure provider 0x.
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However, new players in the liquid staking ecosystem have eaten into Lido’s market share. That includes EtherFi and Renzo, both of which had barely any market share at the beginning of 2024. EtherFi’s market share is now 4.8%, with over 1.6 million ETH staked. Renzo has 681,440 ETh staked, representing 2% of the total market.
Restaking protocols EtherFi and Renzo allow ETH stakers to secure additional networks beyond Ethereum’s base layer. Restaking as a category, popularized by EigenLayer, has gained substantial traction in 2024 as the clear winner year-to-date in attracting staked ETH. While restaking accounted for just 0.7% of the staked ETH market at the beginning of January, it now holds an 8% share, per Hildobby’s Dune dashboard.
0x’s Gauenther argues that Lido’s decreased market share in part comes from restaking airdrop opportunities and ETH staking yields. Not only have ETH’s native staking yields decreased, but “the emergence of re-staking opportunities and promise of future airdrops has [also] wooed users chasing higher yields in the choppy market we’ve seen over the last few months.”
Good or Bad?
Prominent white-hat hacker and founder of blockchain network Glue Ogle told Unchained that “I can think of exactly zero reasons for [Lido’s reduction in market share] to be bad, and lots for it to be good.”
One benefit is that the existence of more competing players in decentralized staking is good for the ecosystem because it “limits that issue of one group being able to control Ethereum overall potentially.”
In Nov. 2023, Lido’s market share was above 32%. “So the big worry people had with Lido having a high market share of Ethereum staking is that they worried that at a certain point it could ‘control’ Ethereum itself,” Ogle added
Per the Ethereum Foundation’s developer documents, “33% of the staked ether is a benchmark for an attacker, because with anything greater than this amount they have the ability to prevent the chain from finalizing without having to finely control the actions of other validators.”
Ogle also said Lido’s market share decreasing “should be a lesson for those who get into power positions in crypto then don’t choose to self-govern,” pointing to a Lido 2022 governance proposal under which Lido DAO members voted against self-limiting its inbound stake flow. “They could’ve come up with ways to assuage the concerns of the overall community, but they didn’t. They’re still winning vs. everybody else right now, but the rapid rise has stopped,” Ogle added.
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“Others entered the market… and rather than being brand loyal, people move or stop inflowing like they used to. This has to be at least partially because of how that vote went,” Ogle argued.
Lido Still Dominates Onchain Usage
According to Carlos Mercado, a data scientist at blockchain analytics firm Flipside Crypto, entirely focusing on changes in the staked ETH market share misses the larger picture of what is happening onchain. A more important metric may be how restaking tokens are used – or not used.
Mercado, in a dashboard he created, showed that Lido’s wrapped stETH still dominates trading volume on decentralized exchanges, outpacing some of the largest liquid staking providers by total value locked: Rocket Pool’s rETH, Binance’s BETH, and Coinbase’s cbETH.
Mercado’s dashboard shows that in the last three weeks, of the four liquid staking tokens measured, Lido’s wrapped stETH has generated more than 80% of the LST trading volume on decentralized exchanges.
It’s easier to grow the supply of staked ETH than the usage of a liquid staking token, Mercado told Unchained.
“I don’t look at supply, I don’t look at prices. I really only look at usage,” Mercado said. Even though the revenue of the node operators depends on the amount of staked ETH a liquid staking provider possesses, the usage of liquid staking tokens such as Lido’s stETH and wstETH on different crypto protocols – such as lending and borrowing on Aave or swapping and providing liquidity on Uniswap – is more important than supply dynamics.
“People jump quickly to total value locked and supply differences, and I think there’s more signal for us” in looking at the usage of liquid staking tokens in various DeFi products, Mercado said.
With a total value locked of about $26 billion, Lido is the largest decentralized finance protocol, responsible for 9.7 million of roughly 34.1 million staked ETH, per Hildobby’s dashboard.
