Lido’s liquidity leads despite Rocket Pool’s Saturn improvements

Lido maintains dominance through stVaults

Lido holds a $34B TVL, which dwarfs the $4B TVL held by Rocket Pool. stETH provides the deep liquidity necessary for institutions to move millions of dollars through protocols like Curve and MakerDAO without facing massive slippage. Lido V3 introduced stVaults to allow teams like Linea to create isolated, non-custodial staking environments. These stVaults enable custom validator configurations and allow for the minting of stETH within specific parameters. Although the modular staking router deployment involves complex technical processes, stETH remains the primary collateral in lending markets. Lido’s stETH is a rebasing token, while wstETH is non-rebasing. The Community Staking Module limits stake allocation to 1% of the total share. This module takes a 6% fee for rewards and sends 4% to the treasury. The module allows a maximum of 30 deposits per block with a minimum distance of 25 blocks between deposits. The priority exit share threshold for the module is 1.25%, a value designed to account for a 20% drop in TVL. You should watch how these stVaults and different Layer 2 implementations affect stETH liquidity across various bridges.

Saturn 1 improves Rocket Pool economics

Rocket Pool Saturn 1 changed how node operators manage capital. The upgrade introduced megapools to allow a single contract to handle multiple validators. This change reduced the required node operator bond from 8 ETH to 4 ETH. This reduction improves capital efficiency because the same amount of bonded ETH supports a higher volume of rETH. Saturn 1 also introduced a Universal Adjustable Revenue Split. This system allocates 5% to base commissions and 9% to RPL staker voter rewards. The remaining revenue goes to rETH holders. Node operators with RPL staked on their megapools earn an ETH share proportional to their stake. For a 4 ETH megapool, the commission per ETH bonded is 35%. This 35% rate provides a 2.3x improvement over the legacy 8 ETH minipool setup. The protocol distributes the 9% voter share to all node operators based on their share of total megapool RPL staked. This structure allows the protocol to remain competitive as market conditions change. rETH holders can also stake in an insurance pool to earn a 15% yield in RPL.

The decentralization and liquidity verdict

The Ethereum Foundation staked 69,500 ETH to bolster network security. The foundation follows a strict management formula of 15% annual spending and 2.5 years of reserves. Recently, the foundation sold 1,000 ETH for approximately $4.5 million via CoW Swap to fund network priorities. The foundation has awarded over $21 million in total grants to Ethereum projects to date. This massive commitment supports the growth of solo staking and decentralized alternatives. As the Ethereum Foundation approaches its 70,000 ETH staking goal, Lido’s stETH provides the deep liquidity necessary for institutions to move millions of dollars through protocols like Curve and MakerDAO without facing massive slippage. Rocket Pool’s Saturn 1 makes the protocol more competitive by lowering the entry barrier for node operators. However, Lido wins on liquidity, while Rocket Pool wins on decentralization. Lido’s dominance in DeFi remains difficult to challenge. Which protocol captures the next wave of institutional ETH?