Liquid staking has grown in popularity over the past year thanks in part to the launch of the Ethereum Beacon Chain and the inability of ETH stakers to withdraw their tokens until the full launch of the consensus layer.
As a result, Lido (LDO) has established itself as a leader in the liquid staking industry. Lido is one of the leading staking protocols for various popular tokens and It allows holders to earn extra returns by putting their staked assets to work in the decentralized finance (DeFi) market.
Data of Cointelegraph Markets Pro Y TradingView show that the price of LDO was trending up throughout the month of March and then entered a period of consolidation in early April. Currently, the market in general is in a strong downward trend, but the growth of the staking sector and the upcoming Ethereum “merger” could still lead to bullish results for LDO.
Expansion of liquid staking options
The price of LDO reversed its trend towards the end of February and this was due in part to the addition of Polygon Liquid Staking (MATIC) to the Lido protocol, which was co-developed with Shard Labs.
Lido for Polygon is here ️https://t.co/FCv36KDQj4
Stake your MATIC with Lido for an effortless staking experience.
Get started on https://t.co/usVwJcgv4Q. pic.twitter.com/ueBk2iSYeE
— Lido (@LidoFinance) March 2, 2022
At press time, there is over $14.5 million worth of MATIC tokens staked on Lido and it is earning a return of 8.7%. The protocol currently allows MATIC ERC-20 tokens to be staked and stakers receive stMATIC in return, which can be used in DeFi protocols on the Ethereum and Polygon networks.
The addition of new assets, as well as the increase in the amount of Ether staked on Lido, saw the total value locked in the protocol reach a record high of $20.83 billion on April 5, and Currently this figure amounts to USD 18.3 billion, according to data from Defi Llama.
Investments from institutions and integrations with other protocols also paint a bullish picture for LDO. The project recently received a $70 million investment from Andreessen Horowitz’s a16z firm.
We are pleased to welcome a16z to the Lido family.
— Lido (@LidoFinance) March 3, 2022
We are pleased to welcome a16z to the Lido family.
Together with the investment of USD 70 million, a16z also revealed that it would stake a portion of its Ether holdings on the platform as a way to help reduce some of the operational complexities for institutional investors.
Lido also benefited from multiple integrations throughout March and April, including the addition of Staked Ether (stETH) to loan pools on AAVE. Staked Solana (stSOL) was also integrated into multiple platforms in the Solana ecosystem, including Raydium, Friktion Finance, and multiple protocols that added support for Staked Terra (stLUNA).
Improved decentralization could attract investors
Another factor that could help boost LDO’s future prospects is the developers’ focus on improving the decentralization of the protocol.
One step in this process is the adoption of Distributed Validator Technology (DVT), which groups validators into independent committees that jointly propose and attest blocks as a way to help reduce the risk of an individual validator having a underperforming or misbehaving.
This helps simplify and speed up the process of onboarding new node operators (NOs), as new operators can be paired with a majority-trusted pool of NOs to help mitigate potential risks.
A second enhancement includes the ability to bet based on a Node Operator Score that is derived from various metrics. and this helps provide an incentive for operators to maintain optimal performance.
One last improvement is the creation of new mechanics, such as longer block times and granting veto rights to a quorum of stETH holders, as a way to mitigate the risk of governance capture to prevent unplanned changes to Lido.
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