Before Shanghai: Everything you need to know
Ethereum’s Shanghai upgrade will be next in their roadmap, resulting in Staked ETH withdrawals being unlocked on the Beacon chain. This will be a critical juncture for the future of DeFi.
Overview:
- ETH Market Shift
- The Current LSD landscape
- So what’s next?
- Life after Shanghai?
ETH Market Shift
We anticipate some volatility in ETH’s value during the first few weeks following the Shanghai upgrade, as 17.9 million ETH (worth $34 billion) becomes unlocked for trading in the open market. However, given ETH’s popularity and utility, we expect a steady upward trend to emerge shortly after the initial volatile fluctuations.
The current LSD landscape
Currently, there are three major LSD (Liquid staking derivatives). Coinbase ETH, Rocket Pool, and Lido, amassing over $14 billion’s worth of staked Ether. It’s safe to say that there will be a significant market reaction when all this ETH is unlocked and can be withdrawn.
Lido V2
Lido has reacted to the Shanghai upgrade by announcing Lido V2. This protocol update will see the unlocking of stETH withdrawals and the introduction of their new staking router architecture that enables anyone to develop on-ramps for new Node Operators. See full announcement
This update will significantly enhance Ethereum staking accessibility for developers and DeFi protocols. By utilizing Lido as an outstanding tool, they can stake ETH with base incentives and employ the staked ETH in more liquid strategies, thereby streamlining the process.
So what’s next?
As ETH staking becomes unlocked, many DeFi protocols are likely to capitalize on the increased liquidity of staked Ether in various strategies. Potential developments include:
- An increase in staked ETH liquidity pools.
- DAO treasuries partially staking their ETH.
- The emergence of more complex LSD pools.
- Adaptations and innovations in the DeFi landscape following Shanghai.
DAO Treasuries Staking ETH
We could see an increase in DAO treasuries depositing their ETH to LSDs for additional rewards.
Market Antics
As over 17.9 billion staked Ethereum withdrawals are unlocked, there will likely be a unique shift in ETH price over the coming months. This shift will be influenced by staked Ether being sold, swapped, or deployed in various strategies. However, we can anticipate a steady increase in staked ETH participation due to the reduced risk associated with staking ETH. This increase should help stabilize ETH’s price movements in the long run.
Life after Shanghai
We can expect significant market movement and users leveraging LSDs, which will contribute to exciting developments in the DeFi space. While it remains to be seen how DeFi will respond to Shanghai, it’s likely to be memorable as more complex yet rewarding strategies emerge from various protocols capitalizing on the opportunities provided by Shanghai.
