Cryptocurrency protocol Lido Finance has seen its total value locked (TVL) rise by over 20% since January, and now stands at over 6 million ether (ETH) - equivalent to more than $12 billion. Liquid staking is a popular method facilitated by Lido and other protocols to allow users to receive a derivative token as proof of their deposit from Ethereum. This derivative token can in turn be used as collateral within the DeFi ecosystem, enabling them to earn additional yields beyond what Ethereum staking alone provides.

Last week, the Shapella upgrade was enabled allowing for proof-of-stake withdraws on the Ethereum network, a development which has been thought to benefit liquid staking more than other staking methods. Charmyn Ho, Head of Crypto Insights at Bybit, commented that liquid staked tokens offer a form of capital efficiency and flexibility that other staked tokens do not, as users can both earn staking rewards while maintaining the ability to move their funds.

The costs and complexity associated with running a validator node which requires a minimum stake of 32 ETH ($64,000) mean that an increasing number of users are choosing to use staking providers instead. Robert Ellison of Allnodes believes that some users could be enticed to switch to liquid staking protocols as they offer entry requirements below the minimum of 32 ETH.

At present, Lido commands approximately 30% of the market share when it comes to liquid staking derivatives, according to data from Dragonfly Capital. With more access to this form of staking now available since the Shapella upgrade, its market share could be seen to increase further.



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