Reaching a significant milestone, Lido Finance, the premier liquid staking protocol on Ethereum, now commands more than 28.5% of all staked Ether, sparking discussions about DeFi’s potential to rival traditional finance (TradFi).
This accomplishment on April 29 solidifies Lido Finance’s position as the foremost decentralized finance (DeFi) protocol, boasting a staggering one million Ethereum validators and surpassing established entities like Coinbase exchange, which holds a 13.6% stake in staked Ether, as reported by Dune.
The surge in popularity can be credited to the distinct advantages that liquid staking protocols such as Lido offer to users.
By staking their Ether with Lido, users receive staked ETH (stETH) in return. This contrasts with conventional staking methods where tokens are locked and inaccessible for a specific period.
Liquid Staking is Fueling the Rise of DeFi
In the previous quarter, Total Value Locked (TVL) in Decentralized Finance (DeFi) surged by 65.6%, jumping from a low of $436 billion in Q4 of 2023 to $97 billion in Q1 of 2024.
Presently, the DeFi TVL price stands at $92.17 billion, as reported by DefiLlama.
Ethereum witnessed a TVL growth of nearly 71%, primarily driven by asset price increases and the adoption of liquid restaking practices.
The TVL in liquid staking protocols has hit an impressive $47.7 billion mark, with Lido emerging as the leader by securing over $29.9 billion of that total.
Concerns Regarding Lido Validators and Centralization
Crypto founders have recently expressed concerns regarding Lido’s increasing dominance.
Under the DAO model, if a single staking token, such as Lido’s stETH, gains dominance, it establishes a centralized point of control that could be susceptible to attacks and oversees a significant portion of all Ethereum Lido validators.
Ethereum Co-Founder Vitalik Buterin has previously highlighted the potential centralization risks associated with Lido.
“With the DAO approach, if a single staking token dominates, that results in a single, potentially vulnerable governance mechanism controlling a substantial portion of all Ethereum validators,” he stated.
