Data from Glassnode shows the demand for Lido Staked Ethereum (stETH) has observed a sharp 142% growth since May 2022.

Since the arrival of proof-of-stake (PoS) on the Ethereum blockchain, liquid staking projects have cropped up, which let users stake their ETH through them, and in return, they receive tokens called liquid staking derivatives.

With these derivatives, users can continue to earn staking rewards while still having mobility over their ETH, meaning they can participate in other DeFi activities with them. This makes the prospect of staking this way more lucrative for many investors.

The largest platform in the sector is Lido, which provides its users with stETH as a representation of the coins they have staked with the platform. In its latest weekly report, the on-chain analytics firm Glassnode has looked into the impact this derivative token may have on Ethereum.

From the above chart, it’s visible that a total of 23% of the Ethereum supply is locked inside the staking contract. Of this staked ETH, 32% is through the Lido platform, equivalent to 7% of the total circulating supply.

As staking through Lido means locking ETH in exchange for stETH, the latter has essentially replaced 7% of the former’s supply. And as the graph shows, the asset’s share has only been growing further recently.

This sharp growth is natural because stETH, being a yield-bearing version of the asset, makes it quite attractive to investors. “There are beliefs circulating that stETH could replace ETH as Ethereum’s reserve currency,” notes Glassnode.

The analytics firm has compared how the adoption of the two has been occurring to see whether stETH is tapping into the demand for Ethereum. For gauging the adoption, the “new addresses” metric is used, which keeps track of the total number of addresses being created daily.

The chart below shows the trend in the 30-day simple moving average (SMA) of the indicator for the two types of Ethereum.

As displayed in the graph, the 30-day SMA of the new Ethereum addresses has declined about 5% since the LUNA collapse back in May 2022, meaning that demand for the cryptocurrency has slowed down a bit.

Lido’s sETH, on the other hand, has seen its new addresses rise about 142% during the same period, which suggests that the derivative token has seen accelerating adoption.

Ethereum has seen a significant pullback during the past few days as the cryptocurrency’s price has now dropped towards the $1,600 level.

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