Since 2020, Ethereum's liquid staking ecosystem has experienced steady expansion. By the first week of October 2023, a total of 23 liquid staking derivative (LSD) platforms held 12.4 million ether, valued at over $20 billion. The top three protocols—Lido, Coinbase's Wrapped ETH platform, and Rocket Pool—control 11.041 million ETH, representing a commanding 89.18% share of all locked ether.
Dominance of the Top Three LSDs
Lido Finance, established in 2020, is the largest holder with 8.79 million ETH ($14.55 billion), capturing 70.96% of the entire LSD market. Users receive stETH in exchange for staked ETH. stETH currently has a circulating supply of 8.79 million spread across 269,080 unique addresses, with 1.15 million transfers recorded. According to a CoinGecko study from September 29, 2023, stETH yields an average APY of 4.6%.
Coinbase's cbETH ranks second, holding about 1.3 million ETH valued at $2.26 billion. The circulating supply is 1,297,211 cbETH held by 40,653 addresses. The top 100 holders collectively own 96.43% of cbETH, indicating a highly concentrated distribution. cbETH's average yield remained above 3% in August 2023 and has occasionally exceeded 4% over the past year.
Rocket Pool is the third-largest LSD, with 951,264 ETH (7.68% market share). Its rETH token has a total supply of 529,872, with 18,784 holders and 197,928 transactions to date. The top 100 addresses hold 67.91% of rETH supply.
Market Dynamics and Debate
Smaller protocols like Binance Staked Ether, Frax Staked Ether, and Stakewise also hold significant positions. LSDs continue to carve their niche in decentralized finance (DeFi), allowing users to stake without minimum requirements. The top eight LSDs have delivered an average yield of 4.4% APY since January 2022, per CoinGecko.
Despite their growth, LSDs face criticism. Detractors argue they foster centralization of supply and validators, contradicting Ethereum's ethos. Proponents counter that LSDs enhance network decentralization by increasing validator diversity and security. This debate remains active within the crypto community, with both sides presenting valid points.