$500K worth of stETH redeemed in 3 hours as Lido enables withdrawals
The Lido liquid staking protocol has enabled Ether withdrawals for the first time, according to May 15 data from Parsec Finance. Over 260 Lido Staked Ether (stETH) was redeemed for its underlying Ether (ETH) in the first three hours, worth about $500,000.
stETH withdrawals dashboard:- individual & aggregate withdrawal requests.- current withdrawal queue.- stETH large balance changes.https://t.co/HxZc2Izfax@parsec_finance @wilburforce_ pic.twitter.com/2ZBZWzcrTZ
— mhonkasalo.lens (@mhonkasalo) May 15, 2023
Lido is a liquid staking derivatives (LSD) protocol that allows ETH holders to stake their coins with participating validators and earn additional ETH as a reward. When users stake their ETH with Lido, they receive stETH in return. As users earn ETH from staking, their stETH increases in quantity to reflect the additional rewards.
However, before the April 13 Shapella upgrade, Ethereum did not allow validators to withdraw their Ether held in the staking contract. Even after Shapella, Lido users couldn’t withdraw their ETH because Lido’s software did not have a withdrawal function. But on May 15, the Lido decentralized autonomous organization voted to upgrade Lido to version two, allowing withdrawals for the first time.
Related: New Cosmos chain will use liquid staking coins for security
Data from Parsec shows that it took about an hour for stakers to realize that they could withdraw. The first hour of withdrawals produced around 4 ETH ($7,308) worth of redemptions of stETH. But the following hour, redemptions swelled to approximately 227 ETH ($414,956). The pace of redemptions fell the following hour to around 44 ETH ($80,388). Over $500,000 worth of ETH was withdrawn in the first three hours of withdrawals being enabled.
Liquid staking solutions have gained in popularity since the Shapella upgrade. On May 1, liquid staking became the top decentralized finance category in terms of total value locked, surpassing even decentralized exchanges, according to DefiLlama. However, there are still some legal questions around liquid staking in the United States, as the Securities and Exchange Commission has recently stated that it may see staking providers as securities issuers.