cbETH vs. stETH: Lido's Dominance in Liquid Staking

Coinbase's cbETH and Lido's stETH are two popular liquid staking tokens, but they have different reward structures. After a recent divergence of 4.2% APR, the fee difference between them became even more apparent. Lido uses a rebasing mechanism, where token balances increase daily to reflect rewards, while Coinbase uses a cToken model, where the redemption value of cbETH grows over time.

Lido charges a 10% fee on staking rewards, which is significantly lower than Coinbase's 25% commission. This makes Lido a more attractive option for users looking to maximize their yields. In contrast, cbETH remains largely trapped within the Coinbase exchange ecosystem due to its thin on-chain presence.

Lido dominates the liquid staking sector with a 62% market share and controls 32.1% of all ETH staked on the Ethereum Beacon chain. The concentration of stETH in DeFi makes it a reliable collateral choice, with Aave holding 1.4 million stETH worth approximately $2.7 billion.

While cbETH has some trading volume on centralized exchanges like OKX and Bybit, its liquidity is heavily concentrated in specific pools. Lido's massive scale drives its popularity, and users can bypass the queue by swapping stETH on secondary markets like CowSwap.