What benefits will the development of LSD bring to the entire market? First of all, it is certain that the booming development of LSD has brought new opportunities to the broader DeFi ecosystem. As more and more users participate in staking, liquidity will flow to LSD, creating greater liquidity in DeFi protocols that utilize LSD. This increased liquidity will provide more opportunities for liquidity staking, liquidity provision, and other DeFi strategies, making the entire crypto ecosystem more robust and efficient. For the impact of LSD and the future competitive landscape, please read this article "One article explains Ethereum LSD: It has become the second largest crypto market sector and will usher in a highlight moment in March".

Ethereum has successfully completed the Shapella upgrade at 6:30 am Beijing time on April 13. According to Token Unlock's real-time data, after the upgrade, as of the time of posting, the net withdrawal of Ethereum is 50,000. In the next 11 hours, the expected withdrawal amount is 107,000 Ethereum, and there are still 525,000 Ethereum waiting to be withdrawn. Currently, the total staked amount on Ethereum has dropped to 17.64 million, and the annualized rate of return on staked is 5.06%.

Ethereum's transition to PoS has brought a new DeFi track into the spotlight - LSD (Liquid Staking Derivates), which has become one of the hottest narratives in the industry since the first half of 2023. The completion of the Shanghai upgrade has made the staked Ethereum redeemable, making the LSD track more complete.

01  The Birth of LSD

The earliest block production of Ethereum is similar to Bitcoin, mainly in PoW mode, where miners use graphics cards to produce blocks and receive ETH rewards. On December 1, 2020, Ethereum officially entered the 2.0 era, starting the transition from POW to POS. However, this is still the initial stage of ETH2.0, and POS has not yet been truly realized. The real POS will not be realized until The Merge upgrade in the second half of 2022, when Ethereum officially enters the 2.0 era.

A significant change brought about by Ethereum 2.0 is that ETH 2.0 validators/verification nodes only need to mortgage 32 ETH to participate in the consensus mechanism of the 2.0 ecological network to obtain rewards, which changes the traditional method of obtaining rewards through the graphics card computing power production range. The way.

Starting from December 1, 2020, users can stake ETH on Ethereum's beacon chain, which also marks the opening of the liquidity staking track LSD.

So what exactly is Ethereum 2.0 staking? How to participate in ETH2.0 staking and maximize your returns? For details, please refer to this article: "Can Ethereum's entry into the 2.0 era bring new wealth effects? Start by understanding ETH2.0 staking first."

02  Thriving amidst ups and downs

By December 2021, Ethereum 2.0 staking has been running for nearly a year. According to official data from ethereum.org, as of December 24, 2021, the number of ETH participating in Ethereum 2.0 staking has exceeded 8.75 million, and the staking volume accounts for more than 14.28% of the total circulation of Ethereum, including a total of 273,600 validators. A series of Ethereum 2.0 staking services have also emerged in the market. What are the specific service types of these ETH staking? For details, please refer to this article: "More than 1 million Ethereums burned after the London upgrade, and the Ethereum 2.0 staking track is gradually becoming clear?". However, the Luna unpegging incident that began on May 8, 2022 dealt a heavy blow to the entire industry, and the price of ETH also suffered a heavy blow. The subsequent stETH unpegging inevitably brought panic, but will stETH drag down ETH like the stablecoin unpegging? Looking back now, it is obviously negative. However, this article at the time, "stETH caused a panic, will Ethereum follow in Luna's footsteps? "One article tells you the things you should worry about most", which contains an in-depth analysis of whether stETH will bring about a death spiral for Ethereum. Since the successful transition of Ethereum to PoS in September 2022, the pace of Ethereum upgrades has accelerated a lot, and ETH staking has continued to develop in a positive direction, which has also brought a lot of vitality to the long and dull bear market. In addition, the Ethereum Shanghai upgrade, which was announced to be carried out this year, will open the redemption function for staked ETH, which means that staked users can start to withdraw ETH. Faced with the huge staking of 18 million ETH, once the redemption function is opened, will it bring about selling pressure on ETH, causing the price to plummet? And what has the current popular LSD track developed into? This article gives us the answer "Ethereum has ushered in another important upgrade. Will 16 million ETH be unlocked and dumped? This track is getting hot..."

03 Will sudden regulation lead to a new situation?

Since the Merge of Ethereum, the LSD track has been advancing rapidly and has become the biggest new narrative in the crypto industry in 2023. On February 9, the U.S. Securities and Exchange Commission (SEC) suddenly changed its regulatory policy, "hoping to cancel the crypto asset pledge service for retail customers in the United States." As soon as the news came out, Kraken, which ranks second only to Coinbase in terms of ETH pledge volume, announced the termination of its crypto asset pledge service for U.S. users.

However, this sudden regulation did not cause too much impact on the Ethereum staking track. Even if affected by the SEC's supervision, the pledged ETH in some centralized institutions will accelerate the outflow to decentralized LSD service platforms such as Lido Finance. For details, please see this article "Termination of service! The US SEC has launched an attack on the leading platform, and the pattern of the Ethereum LSD track has changed?"

According to defillama data, as of now, the total value of crypto assets deposited in the Liquid Staking Protocol is US$16.2 billion, making it the second largest crypto sector.

04 Summary

On September 15, 2022, Ethereum finally completed the merger, marking the official transition of the mainnet from proof of work (PoW) to proof of stake (PoS). However, after the merger, the redemption function of ETH staked on the beacon chain was not enabled until the "Shanghai Upgrade" officially launched this morning.

With the arrival of the Shanghai upgrade, Ethereum did not bring a large amount of ETH redemption as some people expected, and the market price did not plummet. Of course, in addition to Ethereum's gradual unlocking mechanism, the market's expectations of Ethereum's value are also the reason for this situation. After all, the current Ethereum has become synonymous with green environmental protection after the POW to POS, saving more than 99.9% of energy. Moreover, Ethereum has officially entered the era of deflation. Coupled with the vigorous development of its ecology, in the long run, Ethereum is indeed worth looking forward to.