Ethereum\u2019s upcoming Shanghai upgrade will allow users to withdraw staked Ether (ETH<\/a>), increasing the network\u2019s liquidity and competitiveness while also boosting its staking ratio closer to its competitors.<\/p>\n The Shanghai upgrade<\/a> is a hard fork of Ethereum tentatively scheduled to occur in March. It implements five Ethereum Improvement Proposals, the headliner being EIP-4895, which allows users to withdraw their locked-up tokens representing staked Ether from the Beacon Chain.<\/p>\n The ability to withdraw staked Ether could increase market liquidity and make it easier for users to access their funds. Ethereum liquid staking platforms<\/a>, which largely emerged to alleviate the blockchain\u2019s prohibitive lock-up and staking requirements, could also benefit from the upgrade.<\/p>\n Since the Ethereum network moved to proof-of-stake (PoS) in September 2022, increasing the percentage of staked Ether has become important to help secure the protocol. But many have hesitated to stake their ETH due to the unavailability of withdrawals. Consequently, only around 15% of ETH is currently staked<\/a>, while\u00a0all other major layer-1 networks have a staking ratio above 40%. <\/p>\n According to The DeFi Investor, many investors will opt for a liquid staking option following the Shanghai upgrade, as they can utilize liquid staking derivatives on other decentralized finance networks without forfeiting their staking yield.<\/p>\n Why?<\/p>\n Because liquid staking derivatives can be used across DeFi without giving up the staking yield.<\/p>\n After withdrawing staked $ETH<\/a> becomes available, the revenue of liquid staking providers will likely take off.<\/p>\n revenue goes up -> their tokens benefit as well<\/p>\n \u2014 The DeFi Investor (@TheDeFinvestor) January 4, 2023<\/a><\/p><\/blockquote>\n The DeFi Investor went on to say that once staked ETH becomes available for withdrawal, the revenue of liquid staking providers will likely significantly increase, which may positively impact their token prices. <\/p>\n Furthermore, the increased competition between these platforms will likely benefit their users through lower fees and additional perks in exchange for their loyalty.<\/p>\n Lido is the largest liquid-staked ETH provider and is a market leader in its segment. Other notable liquid staking providers include Rocket Pool, Ankr, Coinbase and Frax Finance, all of which are anticipated to enjoy an increase in usage<\/a> post-Shanghai. <\/p>\n Ethereum Beacon Chain deposits across all staking providers have been on the uptrend since the chain officially opened for deposits in late 2020, indicating a strong, sustained interest in staking ETH following the Shanghai upgrade. While Lido captures the lion\u2019s share of liquid staking on Ethereum, the competition is heating up, with various providers unveiling product improvements, potentially reducing the risk of any single staking provider being a point of centralization for the Ethereum network.<\/p>\n It is possible to liquid-stake the tokens of other layer-1 networks as well. For example, Polkadot\u2019s DOT (DOT<\/a>) can be liquid-staked via Ankr, Cosmos\u2019s ATOM (ATOM<\/a>)\u00a0through StaFi, and Solana\u2019s SOL (SOL<\/a>) on Lido and Marinade Finance.<\/p>\n While competing networks have budding liquid-staking solutions of their own, Ethereum maintains the lead, with over 7 million ETH liquid-staked across all sources. By comparison, at least 3.6 million SOL is liquid-staked \u2014 1.21 million SOL via Marinade Finance and 2.39 million SOL through Lido.<\/p>\n Liquid staking and staking pools provide Ethereum a leg-up on competitors by improving interoperability for decentralized applications in the ecosystem. This increased participation strengthens the security and utility of all protocols using Ethereum\u2019s PoS consensus mechanism. <\/p>\n Providers like Lido and Rocket Pool remove the barrier to entry for ETH holders to stake without committing to 32 ETH or running a validator node. <\/p>\n That brings Ethereum closer to networks like Solana, which has a lower barrier to entry for staking.<\/p>\n While the concentration of ETH staked through third parties raises concerns over decentralization at Lido and Coinbase in particular, there has been a roughly 9% increase in total validator nodes in the network in the past 30 days, raising the total number of Ethereum nodes to 11,786 at the time of writing. That means centralization issues are simultaneously growing and decreasing.<\/p>\n Total Ethereum nodes from Feb. 6 to March 8, 2023. Source: Etherscan\/Ethereum Node Tracker<\/em><\/p>\n With the Shanghai upgrade derisking staking through improved liquidity and reduced lock-up requirements, institutions may also view Ethereum staking and ETH as an asset in a more positive light.<\/p>\n Shanghai makes it pretty attractive for big institutions to play long-term bets on $ETH<\/a>.<\/p>\n \u25bb Liquidity is improved Now big institutions are looking at ETH staking as a possible risk-free, decentralized yield.<\/p>\n \u2014 Stader Ethereum (@staderlabs_eth) February 16, 2023<\/a><\/p><\/blockquote>\n However, the United States Securities and Exchange Commission has recently been cracking down on staking protocols\u00a0it sees as investment products. While providers like Lido are working toward greater decentralization, it is still to be determined whether they will be classified as securities by the SEC and how an unfavorable verdict could affect the shuffling of ETH staking providers.<\/p>\n A turbulent macro outlook also looms over crypto in 2023, which may lead to more ETH holders un-staking and selling onto the open market after the Shanghai upgrade \u2014 though\u00a0the Ethereum Foundation limits how much ETH can exit daily. <\/p>\n![\"\"](\"https:\/\/s3.cointelegraph.com\/uploads\/2023-03\/da76c532-c09c-42e6-a415-37fd7804b03e.png\" "\\"\\"")
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Ethereum leads in liquid staking activity<\/h2>\n
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\u25bb Uncertain lock-up requirements go away
\u25bb Withdrawals are enabled<\/p>\n