(Bloomberg) -- An anticipated shift in market share among providers of crypto staking services since Ethereum underwent a major software upgrade last week has begun, with decentralized-finance applications appearing to be the major beneficiaries. 

The Shanghai update, also referred to at times as Shapella, enabled investors to queue up to withdraw Ether tokens they had pledged to help operate the blockchain network in return for rewards, a process called staking. So-called liquid-staking providers such as Lido, Rocket Pool and Frax Ether also let holders use Ether-based derivatives in a slew of DeFi trading, lending and borrowing apps. 

Lido, Rocket Pool and Frax have seen inflows, with Frax Ether seeing the biggest jump. In the last week, total value locked in the Frax Ether protocol jumped by more than 20%, while Rocket Pool saw a nearly 17% increase, and Lido experienced a 13% jump, according to data tracker DeFi Llama.

“It would be people rotating out of centralized exchanges into more decentralized solutions,” said Henry Elder, head of decentralized finance at Wave Digital Assets.

Kraken, which shuttered its US staking service as part of a settlement with the Securities and Exchange Commission, led initial Ether withdrawals. Coinbase Global Inc., the biggest US crypto exchange, has seen $28 million more sell orders than buy orders for Ether, according to researcher Kaiko. Coinbase’s Wrapped Staked Ether product has seen an increase in total value locked during the same period. 

“We can’t comment on or verify third-party data,” a Coinbase spokesperson said. “With that being said, we firmly believe in the utility of liquid-staked tokens following the Shapella upgrade as they allow for deeper integration with the DeFi ecosystem.”

Rival centralized crypto exchange Binance will open withdrawals of staked Ether on April 19, and already is one of the largest entities awaiting for Ether withdrawals, according to data tracker Nansen.

Lido, which is expected to enabled withdrawals in May, may yet see pressure in the coming weeks. As the largest holder of staked Ether, it’s raising centralization concerns that may drive some stakers to alternative liquid-staking services, like Rocket Pool, Elder said.

Read more: Gensler Takes on Crypto DeFi Exchanges With Refreshed Rules 

Still, Lido’s LDO token is up 2.63% in the past week, while Rocket Pool’s RPL has risen 28%. Ether is up almost 10% during the same period.

Some people switching to liquid-staking services from centralized exchanges “are a little less sophisticated, so they are drawn to strongest name brands, which is going be Lido,” Elder said. “However I do still think once Lido turns on its withdrawals, people who’ve started using Lido first, those are more sophisticated users, they’ll probably rotate out of Lido.”

While withdrawals far exceeded new deposits of staked Ether in the initial days after the Ethereum software upgrade, they have since moderated, according tor Nansen. In the last 24 hours, 3,865 more Ether tokens were withdrawn than deposited, the researcher said.

--With assistance from David Pan.

©2023 Bloomberg L.P.