Lido Finance Surpasses 1 Million Validators, but Can DeFi Truly Challenge TradFi?
By Thomas Musgrave
Updated: April 29, 2024, 14:21 EDT
In a significant milestone, Lido Finance, the top liquid staking protocol on Ethereum, now commands over 28.5% of all staked Ether, raising doubts about DeFi’s potential to disrupt traditional finance (TradFi).
The achievement on April 29 establishes Lido Finance as the largest decentralized finance (DeFi) protocol, with a million Ethereum validators, surpassing major players like Coinbase exchange, which holds 13.6% of staked Ether, according to Dune.
This surge in popularity can be attributed to the unique advantages that liquid staking protocols like Lido offer to users. By staking their Ether with Lido, users receive staked ETH (stETH) in return. If they were to stake their Ether conventionally, their tokens would be locked and unusable for a certain period.
Liquid staking is fueling the rise of DeFi. In the last quarter, the Total Value Locked (TVL) in Decentralized Finance (DeFi) increased by 65.6%, soaring from a low of $436 billion in Q4 of 2023 to $97 billion in Q1 of 2024. Currently, the price of DeFi TVL stands at $92.17 billion, according to DefiLlama.
The growth of Ethereum’s TVL, nearly 71%, played a significant role, primarily driven by asset price increases and the practice of liquid restaking. The total value locked (TVL) in liquid staking protocols has reached an impressive $47.7 billion, with Lido leading the way by securing over $29.9 billion of that amount.
There are concerns about Lido validators and centralization. Crypto founders have recently expressed worries about the growing dominance of Lido. If a single staking token, such as Lido’s stETH, becomes dominant under the DAO model, it creates a centralized point of control that is potentially vulnerable to attacks and governs a substantial portion of all Ethereum Lido validators.
Vitalik Buterin, Ethereum Co-Founder, has previously highlighted the potential risks of centralization with Lido. “With the DAO approach, if a single such staking token dominates, that leads to a single, potentially attackable governance gadget controlling a very large portion of all Ethereum validators,” he stated.
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