Lido (LDO): an overview of a DeFi staking project
Lido is a DeFi project for secure staking of cryptocurrencies with the Proof-of-Stake consensus algorithm, including Ethereum.
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The platform is unique in that when users stake assets on Lido, they receive a tokenized version of the asset (a wrapped token). This coin can then be used for operations in other DeFi projects while profiting from the original token.
Creation history
Blockchain developers Jordan Fish and Kasper Rasmussen are the project's founders. Rasmussen was the head of marketing at the Bitfinex cryptocurrency exchange and had previously worked in marketing at the Ethfinex project.
The project was launched on the basis of Ethereum smart contracts in 2020. Staking is currently supported by Lido for Ethereum (ETH), Solana (SOL), Polkadot (DOT), Kusama (KSM), and Polygon (MATIC).
Founders of Lido (Crunchbase)
Funding rounds
Lido successfully raised $167 million in four investment rounds. The project's initial funding was provided by a number of important funders, including Three Arrows Capital, Andreessen Horowitz, Coinbase Ventures, Paradigm, Dragonfly Capital, and Alameda Research.
The most recent venture round was completed five months ago. Dragonfly Capital then invested an additional $24 million in the project on September 14, 2022.
Lido's funding history (Crunchbase)
Platform mechanism
The Ethereum staking process involves a lot of complexity:
●The minimum deposit amount to delegate to validators is 32 ETH ($50,000), which is quite a lot for some investors;
●After depositing your coins, they cannot be disposed of;
●The majority of invested coins are distributed among a small number of validators, posing a threat to centralization.
The Lido liquid staking protocol offers several solutions to these problems.
First, Lido has its own smart contract for moving PoS coins to staking. There is no need for users to search for the right validator or staking wallet. Lido allocates funds to node operators and calculates the commission for accruing rewards.
LIDO's ETH staking feature
Second, users can start staking Lido for 1 ETH ($1600) or less. This significantly lowers the entry barrier for retail investors. Naturally, Lido divides the invested coins into 32-ETH blocks in order to distribute them among multiple validators. This ensures the long-term viability of staking and eliminates the risk of centralization.
The third and most useful function of the platform consists in the distribution of tokenized stETH assets to contributors at a 1:1 ratio to the invested ETH. stETH coins can be used for liquidity farming, stablecoin lending, and other DeFi protocol transactions. Thus, users are simultaneously engaged in staking their coins and can freely dispose of them in the cryptocurrency world.
stETH tokens are backed by staked coins. You must return the stETHs you were given in order to withdraw your ETHs.
The LDO token
The LDO token is supported by the Ethereum blockchain as well as the Polygon, Optimism, and Arbitrum EVM networks. The total supply of the asset is one billion coins, with 83% already in circulation.
The current price of one token is $2.28. The asset's price has increased by 230% since the beginning of 2023.
LDO price dynamics (CoinMarketCap)
LDO can be purchased on WhiteBIT, OKX, Kraken, and many other exchanges listed in the “Markets” section of the CoinGecko and CoinMarketCap websites.
The market capitalization of the stETH token, which users receive for staking ETH, is about $8 billion.
The Lido platform's distinctiveness
Lido is different from traditional DeFi projects that generate their wrapped tokens using bridges. Instead, ETH is staked by official validators, eliminating the possibility of a system hack. A tokenized stETH asset has a value that is exactly equal to the amount of ETH that is locked up, minimizing the risk of depreciation.
The LDO token is used exclusively to manage the platform as part of the DAO. Users vote on changes, adding new networks, appropriate validators, node operators, and so on. The coin has no other use, but despite this, LDO is ranked 36th among all cryptocurrencies with a capitalization of $1.9 billion.
Lido established a solid course for the growth of the entire DeFi industry by demonstrating that it is entirely feasible to develop a user-friendly product without compromising security.
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