According to data from Parsec Finance on May 15, the Lido liquid staking protocol has successfully enabled Ether withdrawals for the first time. Within the initial three hours, more than 260 Lido Staked Ether (stETH) were redeemed, equivalent to approximately $500,000.
Lido operates as a liquid staking derivatives (LSD) protocol, allowing ETH holders to stake their coins with participating validators and earn additional ETH rewards. When users stake their ETH with Lido, they receive stETH in return, which increases in quantity as they accumulate more ETH rewards from staking.
Previously, the Ethereum network did not permit validators to withdraw their Ether held in staking contracts until the Shapella upgrade on April 13. However, even after the upgrade, Lido users were unable to withdraw their ETH due to the absence of a withdrawal function in Lido’s software. Nevertheless, on May 15, the Lido decentralized autonomous organization voted in favor of upgrading Lido to version two, thereby enabling withdrawals for the first time.
Data from Parsec indicates that it took approximately an hour for stakers to realize they could initiate withdrawals. During the first hour, around 4 ETH ($7,308) worth of stETH redemptions were made. The subsequent hour witnessed a surge in redemptions, totaling roughly 227 ETH ($414,956). In the following hour, the pace of redemptions slowed down, resulting in approximately 44 ETH ($80,388) being withdrawn. In total, over $500,000 worth of ETH was redeemed within the first three hours of enabling withdrawals.
Since the Shapella upgrade, liquid staking solutions have gained significant popularity. On May 1, liquid staking surpassed decentralized exchanges as the leading decentralized finance category in terms of total value locked, according to DefiLlama. However, legal uncertainties surrounding liquid staking persist in the United States, as the Securities and Exchange Commission has recently indicated that it may consider staking providers as securities issuers.