- Despite the heightened interest in Liquid Staking Derivatives (LSD), a new report finds a huge problem in between. In fact, this problem is so big that it might end up destroying the Ethereum blockchain.
- HashKey Capital released a new report about Ethereum liquid staking growth and the potential effects. Apparently, no one can deny the growth of liquid staking within a short period.
- HashKey Capital report says there’s a $22 billion growth in liquid staking. And even better, the report says the industry will see more growth.
HashKey Capital released its annual report on the DeFi Liquid Staking Derivatives (LSD) market. Note that HashKey Capital is the largest and biggest crypto fund in the Asian market. The new report gives insights on certain things crypto enthusiasts should look for in the market. Apparently, some aspects of the report acknowledge the growth in Ethereum staking. However, it warns of the potential harms of Liquid Staking Derivatives (LSD) if not curtailed.
What is Liquid Staking Derivatives (LSD)?
It is tricky to explain the meaning of liquid staking to the average crypto user. But that’s why you have us to explain. You know, when you stake your Ethereum normally, you need to leave it for some months or years before you can access it. After the agreed time elapses, you get your rewards and token. So liquid staking adopts another approach to staking.
When you engage in liquid staking, you get a liquid staking token (LST) programmatically minted. With this liquid staking token, you can use your assets for other purposes even though the staking period is not over. In other words, liquid staking derivatives do not adhere to the original staking rules. Because of these benefits, many ETH users prefer liquid staking to the normal one.
This is what HashKey Capital wants crypto users to know about. Therefore, they released their new report to provide more details on the dangers of liquid staking on the Ethereum blockchain.
HashKey Capital Liquid Staking Report: Growth and Concerns
The new report from HashKey Capital contains both the growth and potential dangers of liquid staking to the Ethereum network. In fact, the rate the LSD market is growing is quite frightening. Their report says the LSD market’s total value locked is more than $22 billion this year. For the market cap, it is now more than $18 billion.
However, HashKey Capital expresses concerns about liquid staking on the Ethereum network. According to the crypto fund, the LSD market can potentially destroy Ethereum’s goal as a decentralized network.
“Centralized stakers can collude to carry out actions that go against the decentralization ethos and against the users, such as malevolent MEV extraction and frontrunning,” the report said.
Conclusion
There’s no doubt about the improvements Ethereum shows in the staking sector. After the Shanghai upgrade, staking continues to touch new levels. In fact, a new report from HashKey Capital contains the growth of liquid staking within a short period. However, there are concerns about the impact of liquid staking on the Ethereum network.
