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How Ethereum Liquid Staking Platforms Could Benefit From Shanghai Upgrade

2 mins
Updated by Kyle Baird
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In Brief

  • Shanghai will enable stakers to withdraw assets.
  • Not all ETH will be released at once.
  • Liquid staking will likely grow in popularity once the Shanghai upgrade is released.
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Ethereum is about to undergo a major upgrade to release staked ETH from the Beacon Chain. This could be good news for liquid staking platforms such as Lido.

Ethereum staking has been hugely popular despite the crypto bear market. Furthermore, the amount of the asset staked continues to climb regardless of falling prices. This is a testament to many ETH investors’ long-term confidence in the asset.

Developers have slated March for the next major network upgrade — Shanghai. This will introduce Ethereum Improvement Proposal (EIP) 4895, which releases staked ETH for withdrawals.

According to DeFi experts, the upgrade and liberation of all that ETH could benefit liquid staking platforms.

Liquid Ethereum Staking Benefits

Liquid staking or “soft staking” is the process of locking up funds to earn rewards while still having access to those funds. Unlike staking directly on the Beacon Chain, liquid-staked funds can still be withdrawn at any time. Furthermore, direct staking requires a large investment of 32 ETH (around $40,000), whereas liquid staking can be any amount.

There is almost 16 million ETH staked at the moment. However, staking could become much more attractive when people can withdraw it when they like.

Investors looking to stake ETH after the Shanghai upgrade will most likely select a liquid staking option, according to ‘The DeFi Investor.’

“After withdrawing staked ETH becomes available, the revenue of liquid staking providers will likely take off.”

Liquid staking derivatives can also be used across DeFi without giving up the staking yield. Lido is a prime example with its stETH staking and LDO token, both yield-bearing. However, Lido does take a 10% cut of the staking rewards, which is sent to its DAO.

Rocket Pool is another leading staking provider that prioritizes decentralization and offers better returns. Others include Stakewise and Frax Finance, both of which have experienced rapid growth.

Stader Labs are also planning to launch an Ethereum liquid staking derivative in the first quarter, and others may follow.

Major Growth Expected

With the benefits of liquid staking clear, platforms such as these (and their associated tokens) are likely to grow this year. The Lido DAO (LDO) token has recently been one of the better-performing crypto assets, having gained 43% over the past week.

Furthermore, not all of the staked ETH will be available at once. Current specifications allow a maximum of 57,600 partial withdrawals per day, according to CoinMetrics. It added that large staking operators such as exchanges might also pool rewards to increase validators.

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Martin Young
Martin Young is a seasoned cryptocurrency journalist and editor with over 7 years of experience covering the latest news and trends in the digital asset space. He is passionate about making complex blockchain, fintech, and macroeconomics concepts understandable for mainstream audiences.   Martin has been featured in top finance, technology, and crypto publications including BeInCrypto, CoinTelegraph, NewsBTC, FX Empire, and Asia Times. His articles provide an in-depth analysis of...