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Lido Finance, the preeminent liquid staking protocol on Ethereum, has officially surpassed one million Ethereum validators. This milestone, announced in an Apr. 29 post by Lido Finance, serves as a strong indication of the protocol’s significant influence in the DeFi landscape.
Making Ethereum Staking Accessible
Lido Finance is particularly noted for making Ethereum staking accessible to retail users who might otherwise be deterred by the substantial capital requirement of 32 ETH (approximately $3,174 per ETH as of the latest pricing) necessary to run their own validator nodes.
According to the latest data from Dune Analytics, Lido Finance is responsible for staking 28.5% of all Ethereum, which represents the majority share compared to other platforms, such as Coinbase, which stakes 13.6%. Presently, over 27% of the total Ethereum supply is staked across various platforms.
1 million validators pic.twitter.com/fELATWQPIu — Lido (@LidoFinance) April 29, 2024
One of the key advantages of liquid staking protocols like Lido is that they offer liquidity benefits. Participants receive Lido’s Staked ETH (stETH) tokens in return for their staked Ethereum, which can then be used within other DeFi protocols. This contrasts sharply with traditional staking methods where staked assets remain locked and inactive throughout the staking period.
The broader DeFi sector has witnessed a remarkable surge, with the total value locked (TVL) in decentralized finance (DeFi) protocols escalating from $36 billion in the fourth quarter of 2023 to a peak of $97 billion in the first quarter of 2024. The current TVL stands robustly at $92.32 billion, according to DefiLlama.
Messari, an on-chain intelligence provider, attributed the 65.6% quarter-on-quarter growth in DeFi TVL largely to liquid staking protocols like Lido, which have seen an Ethereum TVL growth of nearly 71%.
The Dominance and Concerns of Lido Finance
Liquid staking protocols have cumulatively amassed over $47.7 billion in TVL, with Lido commanding a significant $29.9 billion of that total. Rocket Pool follows distantly with $3.86 billion in TVL. The category of liquid staking remains the largest in DeFi, accounting for $47.6 billion across 164 protocols, with lending and cross-chain bridges following behind.
The dominance of Lido has not been without scrutiny. Ethereum co-founder Vitalik Buterin has expressed concerns about potential centralization risks associated with Lido’s growing influence. In a September 2023 blog post, Buterin cautioned that the dominance of a single staking token could lead to centralized governance risks, despite the safeguards implemented by protocols like Lido.
As Lido Finance continues to expand its reach, the DeFi ecosystem watches closely, balancing the benefits of increased accessibility and liquidity against the risks of centralization and governance control.
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