Ethereum staking narrative picks up as Lido DAO surges

Ethereum staking – the network-validation and passive-yield-earning system that’s core to functionality of the major smart-contracts-enabling blockchain – is having another moment right now. In a good way.

And what do we mean by that convoluted opening sentence?

We mean that stakers of ETH are currently enjoying their highest level of returns since the leading layer 1 blockchain completed its major “Shapella” upgrade in mid April, merging its tech from a “Proof of Work” mining system to Proof of Stake.

And how do we know this?

The “token unlocks schedule and intense tokenomics data” platform Token Unlocks tells us so. Here’s a very nice, very colourful, very clear chart…

Never mind the choppy price of ETH so much. While that’s obviously of importance to holders, it’s the sharp increase in ETH validators (green) and the staking APR (purple) this month that’s of most interest.

That APR has now reached a near-high of 8.73% at the time of writing, which would be a pretty impressive rate of return on staking yields if it were to remain around this level.

Why is this happening?

As mentioned, it’s the Ethereum upgrade, Shapella, innit. It’s allowed the unlocking of billions of dollars’ worth of ETH, which some speculated might be a potentially bearish event for the price of the token.

And while the price of ETH has been ranging below US$2k since a bit beyond that event, what the network upgrade has seemed to have done, however, is breathe new confidence into the crypto project.

“Watching Ethereum take the Shapella update in its stride is a big proof point towards its long-term success,” noted the Kraken exchange in an article for Stockhead the other day.

As Decrypt reports, and according to another data-analtics platform, Nansen, Ethereum’s staking contract had 19.27 million ETH locked in a day before Shapella went live on April 12. “A month after the Shapella upgrade, the staking contract has reclaimed pre-Shapella levels with around 19.3 million ETH staked.”

LIDO DAO and other staking services benefit

The price of liquid staking derivative (LSD) protocols are doing well today. Well, at least, the market leader Lido DAO certainly is.

The LDO token is currently leading the gainers in the top 100 cryptos by market cap, with a 7% 24-hour rise, and about a 16% surge overall across the past seven days.

Its nearest competitor, Rocket Pool (RPL), has also been faring well, with an 8% gain over the past week, while Frax Shares (FXS) is beginning to see a daily surge at the time of writing, too (+3%).

You can learn a bit more about liquid staking in this Apollo’s Alpha article from earlier this year. But part of the reason these protocols are seeing some gains, is at least one advantage they have over the staking of ETH on the blockchain’s mainnet.

And that’s the fact that mainnet staking requires a minimum deposit of 32 ETH, which, at about US$58k, is a very hefty sum indeed for the average investor – and out of range for many.

Lido and other protocols like it, don’t require anything like that as a minimum ETH deposit. In fact, on Lido, you can stake with any amount of ETH, while Rocket Pool is similar, providing its service for a deposit as low as 0.01 ETH.

At the time of writing, per Dune Analytics data, Lido Finance is still the leading LSD protocol, with its amount of staked ETH increasing by 9.87% over the past 30 days.