Demand for liquid Ethereum staking options continues to grow post-Merge

Blockchain data analytics carried out by Nansen highlights the ever-growing amount of Ether (ETH) being staked across various staking solutions in the months following Ethereum’s shift to proof-of-stake (PoS) consensus.

The highly anticipated Merge has been a boon for decentralized finance (DeFi) in general, and staking solutions have been in high demand since Ethereum’s shift to PoS. This is according to blockchain data from a variety of staking solutions across the Ethereum ecosystem.

Nansen’s report highlights the impact of the Merge in introducing staked ETH as an out-and-out cryptocurrency-native yield-bearing instrument that has quickly outstripped other collateralized yield-bearing services.

The likes of Uniswap and other automated-market makers and liquidity providers remain popular but pale in comparison to the total value locked in staked ETH solutions. Over 15.4 million ETH is locked in Ethereum’s staking contract, which values the total staked ETH in the top six cryptocurrencies by market capitalization alone:

“Staked ETH is thus the first yield-bearing instrument to reach significant scale in DeFi, and has the potential to both significantly grow and radically transform the ecosystem in the coming years.”

Nansen provides some interesting insights from liquid-staked derivatives data. When Ethereum shifted to PoS, miners were replaced by validators who had to deposit or stake 32 ETH in order to propose new blocks and earn protocol rewards. Users that are unable or unwilling to stake 32 ETH can participate in pooled staking, also known as liquid staking. This also allows users to withdraw staked ETH at any time.

Nansen’s metrics reveal that liquid staking holdings are weighted toward long-term holders, while recently launched protocols are attracting new deposits faster than established services. 5.7 million of the total 14.5 million ETH is staked in staking pools like Lido and Rocket Pool, accounting for over 40% of the total staked ETH in the ecosystem.

Lido’s staked ETH (stETH) pool dominates the space with a 79% share of the total market supply of staked ETH. 52% of the stETH tokens are found in Aave, Curve and Lido’s wrapped stETH contract indicating interest and utility for investors and DeFi applications. stETH has also seen a 127% increase in average daily trading volume since the Ethereum Merge.

Meanwhile, staking pools belonging to Rocket Pool (rETH) and Coinbase (cbETH) have seen the most growth over the past three months, at 52.5% and 43.3%, respectively. Coinbase’s cbETH has surpassed all other assets besides stETH in supply despite having only launched in August 2022.

The growth of Coinbase’s ETH staking option also suggests that everyday users still trust centralized entities and are content earning yield from staked ETH as opposed to more complex, on-chain, yield-bearing strategies.