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The Lido liquid staking protocol has initiated Ether (ETH) withdrawals. According to reports from Parsec Finance on May 15, within the initial three hours, over 260 Lido Staked Ether (stETH) units were exchanged for their equivalent Ether, amounting to an estimated $500,000.
Lido serves as a liquid staking derivatives (LSD) platform, allowing ETH holders to stake their tokens with selected validators, thereby earning additional ETH rewards. When ETH is staked through Lido, holders are compensated with stETH. As the rewards accumulate from staking, the quantity of stETH grows correspondingly.
Until the Shapella upgrade on April 13, Ethereum's structure did not permit validators to withdraw their staked Ether. Even after the upgrade, Lido users could not extract their ETH due to the absence of a withdrawal feature in Lido's software. This impasse was resolved on May 15 when the Lido decentralized autonomous organization (DAO) greenlit an upgrade to Lido's second version, introducing a withdrawal function.
Parsec's data reveals an hour-long lag before stakers discovered their newfound withdrawal capabilities. The first hour of withdrawals witnessed a modest 4 ETH ($7,306) worth of stETH redemptions. However, the subsequent hour experienced a significant surge, with redemptions amounting to about 227 ETH ($414,947). In the third hour, there was a dip in activity, with redemptions falling to approximately 44 ETH ($80,368). Nevertheless, the total value of ETH withdrawn in the first three hours since enabling the function crossed the $500,000 mark.
Following the Shapella upgrade, liquid staking platforms have gained popularity. As of May 1, staking emerged as the leading decentralized finance category in terms of total value locked, surpassing decentralized exchanges, according to DefiLlama's reports. However, legal uncertainties surrounding liquid staking in the United States persist, particularly since the Securities and Exchange Commission recently expressed the possibility of classifying staking providers as securities issuers.
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