Liquid staking looks like a mature product today. It didn't in 2020. Understanding how it changed since the Ethereum Merge — the mid-2022 upgrade that switched Ethereum to proof-of-stake — helps explain why current protocols look and behave the way they do, and where the next wave of change is likely to come from.
This is a compressed timeline of what actually shifted, and what it means for people using liquid staking now.
Before the Merge: workaround mode
Between the Beacon Chain launch (December 2020) and the Merge (September 2022), you could stake ETH but you could not withdraw it. Rewards were locked. The network itself hadn't switched fully to proof-of-stake yet. Lido, Rocket Pool, and early competitors filled the gap: deposit ETH, get a token you could actually use, and be able to "exit" by selling that token on the secondary market instead of waiting for an unknown withdrawal date.
This was the era of stETH's biggest depeg. In mid-2022 stETH traded around 0.94 ETH — not because Lido was broken, but because the only exit was market selling and forced sellers overwhelmed the order book. See staking risks for how depegs work.
The Merge changed the base, not the tokens
The Merge itself, in September 2022, was a big deal for Ethereum overall but a smaller deal for LSTs specifically. Staking rewards continued at similar rates. Withdrawals were still closed. What changed most was the elimination of miner rewards — validators now captured both issuance and transaction fees, which nudged base yield up a bit.
The bigger LST event was still coming.
Shapella in 2023 opened the exit
The Shapella upgrade in April 2023 finally allowed staked ETH withdrawals. Two things happened right away:
- The stETH discount closed and hasn't seriously reopened since. LSTs finally had a redemption route that didn't depend on the secondary market.
- Confidence in liquid staking grew. Total staked ETH climbed from around 15% of supply pre-Shapella to closer to 25-30% today.
The fear that opening withdrawals would trigger a stampede of unstaking never really happened. Most stakers stayed. The withdrawal queue occasionally lengthens during volatile periods but hasn't broken anything so far. Our page on staking vs liquid staking reflects the current picture, not the pre-Shapella one.
Competition grew considerably
In 2022 Lido controlled a very large share of liquid staking. That share is still large but the competitive picture is broader now. Approximate market shares that have been reported recently:
| Protocol / channel | Approximate share of LST market |
|---|---|
| Lido (stETH) | ~50-60% |
| Coinbase (cbETH) | ~10-15% |
| Rocket Pool (rETH) | ~5-10% |
| Frax, Binance, Stader, Swell, others | Smaller shares each |
Rocket Pool matured its permissionless operator model. Frax launched frxETH with its two-token structure. Coinbase brought cbETH to institutional users. Liquid restaking added an entire new category (eETH, ezETH, weETH) sitting alongside the traditional LST market.
Restaking added a second layer
EigenLayer's mainnet launch in 2023 and the wave of liquid restaking protocols that followed created a second tier of yield built on top of the first. That's a genuine change: for the first time, staked ETH could earn from more than one source at once. It also introduced fresh risks — extra slashing conditions, more smart-contract layers, and a wave of point-based rewards whose eventual value is hard to price. See the liquid staking overview for how the two layers fit together.
How liquid staking has changed since the Merge
Take a step back and the arc is pretty clear. In 2022, liquid staking was a workaround for a chain that hadn't finished its upgrade path — necessary, useful, and structurally exposed to depegs. In 2026, it's a mature market with real withdrawals, broader competition, better operator diversity, and a new restaking layer for people willing to accept extra risk. The core risks (slashing, smart-contract failure, market panic) haven't gone away, but the biggest structural weakness — no exit — has. That single fix reshaped the whole category. What comes next likely revolves around distributed validator technology, restaking evolution, and how regulators eventually treat LSTs across jurisdictions. Whatever happens, the base rules of how staking rewards work stay the same: pay attention to the source, size positions carefully, and don't confuse a headline rate with a paycheck.