What made Lido a top ETH staking platform?

Pool is a platform built on the Beacon Chain of Ethereum 2.0. Users are rewarded for staking without locking ETH and receive 1:1 in the stETH token, which they can use or mine further.

In just 3 months, Lido reached a record TVL of $13.98 billion and surpassed AAV and Convex finance to rank #3 among DeFi protocols.

Let’s see if Lido, with its rapidly growing TVL, is a platform worth using.

Lido supports multiple blockchains and has innovative Tokenomics

Lido activity is a staking pool service for PoS blockchains, currently supporting Ethereum 2.0, Earth, solana, and Kusama. According to Footprint Analytics, as of March 1, Lido’s TVL hit an all-time high of $13.98 billion, with Terra accounting for the largest share (56%), followed by Ethereum (41%).

By supporting these 4 blockchains, Lido can integrate many header protocols and issue token derivatives of the corresponding blockchains to provide liquidity to shareholder assets. Users can stake ETH, SOL, LUNA and KSM to get the same percentage of Token stETH, stSOL, stLUNA and stKSM, while also receiving an APR of 4.5% to 18%.

Lido is also issuing the native LDO Token, which is priced at $2.08 as of March 1, a lower price compared to the four tokens mentioned above. LDO is primarily used for voting and governance, and is not on a larger decentralized exchange, so the overall price trend is not proportional to Lido’s TVL.

This differentiates Lido from protocols such as MakerDAO and Liquity. For example, MakerDAO rewards DAI for depositing ETH, while Lido requires staking tokens such as ETH, SOL, and Luna to receive a derivative token at the same price, which enjoys a decent annualized return and is not affected by the native’s LDO price. token.

The multiple investment options of Lido

If you want to participate in Ethereum 2.0 independently, you have to stake 32 integer multiples of ETH, which is very unfriendly for retail investors. Lido is more user-friendly in terms of staking count, as users can stake any amount of ETH to participate in Ethereum 2.0.

As of March 1, the total number of ETH staked was 1.98 million. Let’s take the example of the promise of ETH and analyze how to earn more on Lido.

• Users who stake any amount of ETH get 1:1 in stETH and can earn 4.5% APY. By comparison on AAVE, depositing ETH generates 0.2% APR.
• Users can transform otherwise interest-bearing stETH asset certificates into cash and earn more by participating in other DeFi protocols such as Curve, AAVE, and Convex Finance.
  • Users can earn around 3% APY by investing stETH in Curve.

• Proceeds earned on Curve can also be placed on Convex Finance to earn again. After depositing stETH into Curve to get LP, users can deposit it into Convex Finance’s steth pool to earn around 5.1% APR.

In summary, users can stake any amount of ETH on the Lido platform for use on other DeFi platforms to earn 12% to 14% APR, which is a significant amount of revenue for the users. Curve and Convex Finance are the top 5 protocols in the network, which are not only risk controlled but also liquidation risk free and are fully single coin staking models.

Strengths and weaknesses of Lido

Strengths:

• User-friendly
• Flexible for staking external contract for higher APY
• Single Currency Staking Model

Weaknesses:

Lido is a platform built on Ethereum 2.0 Beacon Chain, where tokens staked by users are collected and then stored on the Beacon Chain. It has a reward and penalty mechanism. When a rebase occurs, the supply of the token is increased or decreased algorithmically, based on staking rewards (or staking penalties) in the Ethereum chain. Rebase happens when oracles report tag statistics.

The stETH balance is updated every day at 24:00 UTC, and if the stETH balance increases, a certain amount of reward will be given, and if the stETH balance decreases, a certain amount of stETH Token will be lost. Both are calculated separately.

• Gas fees on Ethereum are also a cost consideration for small users

Date and author: February 12, 2022, Vincy

The data source: Footprint analysis – Lido Dashboard

This piece is a contribution from Footprint analysis community.

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