
Since Ethereum began its transition to proof-of-stake in December 2020, investors have been able to invest in Ether, the blockchain's native currency, on the network.
In April, Ethereum's Shapella upgrade caused the network to lose its security solely from users staking Ether. Staking also benefits those who do it with new-minted Ether, as well as helping secure Ethereum's security.
But there's a crucial drawback, i.e., there's a crucial drawback. Staked Ether is locked for the duration it's staked and cannot be normally used anywhere in DeFi. To address this potential market inefficiency, DeFi protocols have emerged, offering a wave of DeFi protocols offering so-called liquid staking.
In return, such liquid staking protocols stake depositors exchange the Ether for them and give out placeholder tokens called liquid staking tokens. However, they are sometimes called liquid staking derivatives, though some note that the term 'derivatives' comes with regulatory baggage.
These liquid tokens instantly accrue staking rewards and can be used elsewhere in DeFi. Liquid staking tokens have a broad range of applications, such as providing liquidity on decentralised exchanges or as a source of collateral for DeFi loans.
The other side of the equation is liquid staking protocols, which take a small slice of the rewards earned on users' Ether deposits for the convenience they provide.
Liquid staking has become a common way to earn yields in DeFi. Lido, the world's biggest liquid staking protocol, has released a whopping $14.5 billion worth of stETH, its native liquid staking token.
This makes Lido not only the biggest liquid staking protocol, but also the biggest protocol in all DeFi.
With over $18.4 billion of DeFi's $38 billion TVL posted in liquid staking protocols, tracking them is essential to understand both the Ether staking and the DeFi market as a whole.
DefiLlama's dashboard tracks the liquid staking market. Its structure is made up of two main components: a graphical interface and a graphical interface.
The dashboard also contains a tab that generates a bar graph of inflows and outflows from each liquid staking protocol.
Note: The massive outflows happened on May 18, 2023. The day Ethereum completed its Shapella upgrade, which allowed stakers to withdraw Ether from the network's staking contract for the first time.
At the time, some analysts worried that theactivating withdrawals would result in a mass exodus from Ether staking. While outflows did happen, the inflows in the following months have dwarfed them in size.
The dashboard also contains TVL's top liquid staking protocol, or total value locked.
•• LSD market share: Shows the percentage of the liquid staking market the protocol occupies.
LSD APR: shows how much yield a given liquid staking token earns annually. This metric can be changed based on the fees the various liquid staking protocols charge, or how good their validators are at capturing profits from MEV.