After Ethereum’s Shapella upgrade unlocked staking withdrawals on April 12, 2025, the dynamics of liquid staking began to shift. What was once a critical workaround for illiquid staked ETH has now evolved into a more balanced, mature market. The Curve Finance stETH-ETH liquidity pool, a cornerstone of Ethereum’s decentralized finance (DeFi) ecosystem, has seen significant changes—both in volume and composition. While total liquidity has dropped, the pool has reached a new equilibrium, signaling continued confidence in liquid staking protocols like Lido.
The Rise and Evolution of Liquid Staking
Since Ethereum transitioned to proof-of-stake in December 2020, validators have been required to lock up 32 ETH to participate in consensus. This lock-up period, originally indefinite, created a major barrier: capital inefficiency. Enter liquid staking—a DeFi innovation that allows users to stake ETH while retaining liquidity through tokenized representations like stETH.
Platforms such as Lido, Rocket Pool, and Ankr emerged as leaders, offering users staked ETH derivatives that could be freely traded or used across DeFi applications. Among them, Lido quickly became the dominant player, capturing over 31% of Ethereum’s staking market share and securing more than $12 billion in total value locked (TVL).
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Curve’s Role in the stETH Ecosystem
Curve Finance, known for its low-slippage stablecoin and pegged-asset swaps, hosts the largest liquidity pool for stETH-ETH exchanges. This pool enables seamless conversion between staked and native ETH, serving as a critical liquidity layer for traders, yield farmers, and stakers alike.
However, following the Shapella upgrade—which finally allowed withdrawals of staked ETH—the demand for liquid staking tokens was expected to decline. With direct access to staked funds now possible, many anticipated a mass exit from stETH and similar derivatives.
The data reflects this shift:
- stETH reserves in the Curve pool dropped from 468,859 to 331,891—a 29.21% decrease representing $249.3 million in outflows.
- ETH reserves fell from 429,984 to 333,483 ETH, a 22.4% decline worth $175.6 million.
In total, the pool shed approximately $424.9 million in liquidity post-upgrade.
A New Equilibrium Emerges
Despite the outflows, a more telling trend has emerged: the stETH-ETH ratio is now nearly balanced. Historically, the pool skewed heavily toward stETH, especially during periods of high demand for liquid staking. But since early 2025, the balance between stETH and ETH has stabilized.
This equilibrium suggests that while some users have withdrawn and sold their stETH, many others continue to see value in holding it. Why?
- Ongoing Staking Rewards: Lido continues to distribute rewards via its governance token, LDO, incentivizing participation.
- DeFi Utility: stETH remains widely accepted across lending protocols (e.g., Aave, MakerDAO), enabling leveraged yield strategies.
- Convenience: Not all users want to manage validator operations or deal with withdrawal queues.
The sustained balance indicates that liquid staking hasn’t become obsolete—it’s simply transitioning into a more sustainable phase.
Ethereum’s Broader Staking Landscape
The Shapella upgrade didn’t just unlock staked ETH—it alleviated fears of a “liquidity death spiral.” Many analysts had predicted that once withdrawals were enabled, a flood of selling would crash ETH prices and destabilize DeFi markets.
Instead, the opposite occurred.
After an initial wave of withdrawals in April 2025, new deposits surpassed outflows. As of mid-2025, over 20.8 million ETH—worth roughly $37.9 billion—is locked in the Ethereum beacon chain, exceeding pre-upgrade levels.
This net inflow underscores strong long-term confidence in Ethereum’s fundamentals. Additionally, ETH has become deflationary, with net issuance turning negative since the Merge in September 2022. Coupled with rising demand from institutional players and DeFi growth, Ethereum’s economic model appears increasingly resilient.
Challenges Ahead: Scalability and User Experience
Despite progress, challenges remain. Network congestion and high gas fees during peak activity—such as NFT mints or meme coin surges—continue to hinder user experience. While upcoming upgrades like Ethereum Surge, focused on data sharding and scalability, aim to address these issues, they are still in development.
For Ethereum to serve as the foundation for global DeFi adoption, transaction costs must remain low and predictable. Until then, layer-2 solutions and rollups will play a crucial role in offloading activity from the mainnet.
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Frequently Asked Questions (FAQ)
Q: What is liquid staking?
A: Liquid staking allows users to stake their ETH while receiving a token (like stETH) that represents their stake and can be used in DeFi applications for lending, trading, or yield farming.
Q: Why did Curve’s stETH-ETH pool lose liquidity after Shapella?
A: After Shapella enabled direct withdrawals of staked ETH, some users redeemed their stETH for native ETH and exited the pool. This reduced overall liquidity but didn’t eliminate demand for stETH.
Q: Is stETH still pegged to ETH?
A: Yes, stETH maintains a floating 1:1 peg with ETH based on accrued staking rewards. It is not a stablecoin but is designed to appreciate slightly over time due to yield accumulation.
Q: Can I still earn rewards with stETH?
A: Yes. Holding stETH entitles you to ongoing staking rewards distributed by Lido. These are reflected in the token’s increasing exchange rate relative to ETH.
Q: What role does LDO play in Lido?
A: LDO is Lido’s governance token. It allows holders to vote on protocol upgrades and parameters. Additionally, LDO is used to incentivize node operators and liquidity providers.
Q: Will liquid staking grow in the future?
A: While direct staking is now possible, liquid staking offers convenience and composability in DeFi. As long as these benefits outweigh the risks, adoption will likely persist or grow.
The Future of Liquid Staking
Liquid staking is no longer a temporary workaround—it's becoming a core component of Ethereum’s financial infrastructure. Protocols like Lido and Curve are evolving beyond early adoption phases into mature financial layers that support complex yield strategies and risk management tools.
As Ethereum continues to scale and refine its economic model, liquid staking derivatives will likely remain essential for maximizing capital efficiency. Even with native withdrawals available, the ability to compound rewards across DeFi platforms gives tokens like stETH enduring utility.
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Final Thoughts
The rebalancing of Curve’s stETH-ETH pool reflects a maturing ecosystem. Initial fears of collapse gave way to resilience and adaptation. Users are no longer forced into liquid staking—they choose it. And that choice speaks volumes about its long-term viability.
As Ethereum evolves into a deflationary, yield-generating asset layer, tools that enhance liquidity without sacrificing returns will remain in demand. Whether through Lido, Rocket Pool, or emerging alternatives, liquid staking is here to stay—not as a stopgap solution, but as a foundational pillar of decentralized finance.
Core Keywords: liquid staking, stETH, Curve Finance, Ethereum Shapella upgrade, Lido, DeFi liquidity, LDO token