- Liquid staking tokens (LSTs) are gaining momentum in the lead-up to Ethereum’s highly anticipated Cancun-Deneb upgrade.
- Staking providers, notably Lido, are seeing a surge in user interest due to the enhanced liquidity and flexibility offered in staking activities.
Liquid Staking Tokens (LSTs) are riding a wave of increased interest as Ethereum’s imminent upgrade, Cancun-Deneb, comes closer. This update, scheduled for the fourth quarter of this year, will introduce a feature called “blob-carrying transactions.”
Liquid Staking Ascends as Ethereum’s Cancun-Deneb Looms
Blockchain analytics firm, Glassnode, reports significant growth for liquid staking providers, notably Lido, as users display a clear preference for staking activities that offer greater liquidity and flexibility. As a result, protocols and assets linked with staked ETH are outperforming other major digital assets in the market.
To illustrate, as of 5 am ET, Lido DAO’s (LDO) governance token has seen approximately 11% and 24% leaps on 1-week and 2-week timeframes respectively. Similarly, Frax Share (FXS) — the governance token for the Frax ecosystem managing frxETH — and the staking pool Rocket Pool (RPL) have risen by 11% and 2.4% over the past week.
Current figures show that LST platforms and protocols have accumulated $20 billion in total value locked, representing around 10.3 million ETH, according to data from DeFiLlama. Lido leads the pack, holding about 7.5 million ETH staked on its platform, which is roughly 77% of the total market.
In comparison, Bitcoin (BTC) and Ether (ETH) have seen a marginal growth of approximately 1.9% and 3.9% over seven days, despite renewed investor interest following Blackrock’s spot ETF application last month.
Cancun-Deneb: Ethereum’s Game-Changer
Ethereum’s next update will focus on EIP-4844, known as proto-dank sharding, enabling larger “blobs” of data to be sent to Ethereum nodes temporarily instead of hosting data permanently on the layer-1 chain.
The data is stored long enough for nodes to ensure that provers from layer-2 rollups, responsible for verifying the correctness of transactions from the L2 chain, have performed their duties. Delphi analyst Joo Kian notes,
“With the upcoming Cancun upgrade, L2 sequencers can expect considerably higher profit margins as L1 data costs are set to decrease substantially.”
This efficiency will significantly transform Ethereum’s staking landscape, an effect already observed following the Shanghai hard fork which introduced the ability to withdraw staked ETH, resulting in a surge in staking deposits while demand for withdrawals has remained minimal. Glassnode reports that the volume of ETH staked is either equal to or surpasses exchange inflows following the upgrade.
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