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“Shanghai” upgrade lets DeFi tokens withdraw

3 min read

Governance tokens from DeFi projects in the area of ​​liquid staking for Ethereum are currently recording strong price increases. Lido Finance’s LDO is up over 40 percent in the past seven days to hit a fresh two-month high at $1.37. SWISE tokens Liquid staking provider StakeWise even surged over 70 percent in a week, while Rocket Pool’s RPL token rose 16.43 percent and FXS by Frax Protocol, the recently also offers liquid staking for ETH, was able to gain almost 14 percent.

What is Ethereum Liquid Staking?

Liquid staking platforms like Lido (LDO) or Rocket Pool (RPL) allow users to stake Ethereum without having to worry about the necessary hardware, staking lock-up periods, 32 ETH or maintaining their staking nodes themselves. Investors only have to deposit their ethers on the DeFi platforms, which stake on their behalf, withhold a small portion of the rewards and provide a so-called liquid staking token in return. This staking token offers you a 1:1 claim on your staked tokens and automatically generates staking rewards.

The big advantage for investors with Liquid Staking Token: You do not need 32 Ether and can stake any amount of ETH. Your liquid staking ETH automatically generates staking rewards and can be sold at any time on some centralized crypto exchanges or decentralized exchanges.

They can also be used for DeFi applications to earn further interest and, once staked ether withdrawals are unlocked, exchanged for the underlying ethers. The latter in particular is a big plus for many investors. Many want the flexibility to sell their staked ETH at any time.

That’s why Lido, Rocket Pool and Co.

The reason for the double-digit price growth in liquid staking projects is likely to be the anticipation of the first major Ethereum upgrade since the merge. With the upgrade that as Shanghai is known, the withdrawal of ether will be enabled.

According to the staking analysis platform Staking Rewards Ether has a 14 percent staking rate, which is the lowest among any major smart contract platform.

Ethereum staking market cap
Top cryptocurrencies by staking market cap. Source: Staking Rewards

DeFi experts therefore assume that this percentage will increase as a result of the Shanghai upgrade and that liquid staking protocols in particular will benefit from it.

Liquid staking revenues should continue to rise

Twitter user “The DeFi Investor” suspects that the upgrade will result in more investors staking ETH as they no longer have to remain locked in the ETH staking contract indefinitely.

In his estimation, more people could use liquid staking ETH as a result of the upgrade to use their staked ETH to maximize returns in DeFi space. As more ETH staked on protocols like Lido or StakeWise will result in those protocols’ revenues increasing as well, he believes those protocols’ tokens will benefit directly from the upgrade.

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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