Lido outperforms the competition – Following the transition from Proof of Work to Proof of Stake, more and more users want to participate in block validation on Ethereum. For its part, the liquid staking protocol, lido, seems to be the big winner of this transition.
Liquid Staking – the easy solution
Last September, the Ethereum protocol has finalized its transition from Proof of Work to Proof of Stake. Following this event, many users wanted to take part in the block validation process.
Unfortunately, operating a validator node isn’t easy. Indeed, the technicality related to the creation and maintenance of a node reduces accessibility to inexperienced users.
To overcome this problem, several protocols have introduced a new concept, that of Liquid staking.
Basically, these protocols offer users to deposit their ETH so that it is pooled and used for activate the validator nodes. For its part, the protocol will issue and distribute a tokenized version of deposited ETH to users, allowing them to recoup their deposits if they wish by exchanging the tokens on DEXs.
In parallel, protocol-verified validators manage nodes whose assurance is provided by community repositories.
Simply put, this service offers a decentralized alternative staking services offered by centralized exchanges.
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Lido becomes the largest DeFi protocol
Lido is a DeFi protocol that offers the Liquid Staking service presented above. Launched in December 2020, the protocol has undergone a significant evolution. So good, what time is it most important DeFi protocol in terms of TVL.
So Lido currently counts $5.98 billion deposited in its pools. A figure that has allowed it to surpass the MakerDAO protocol and its 5.92 billion dollars.
Not surprisingly, Ethereum it’s the protocol most requested at the Lido, with $5.9 billion staked. However, the protocol offers Liquid Staking for other blockchains such as Solana, Polygon, Polkadot or Kusama. However, the latter represent only 83 million dollars.
Opening of withdrawals: bad news for the Lido?
In addition to the fact that Lido facilitates access for validating nodes, the protocol also allows users to do so replace blocking of withdrawals. At the moment, in fact, it is not possible to withdraw the ETH deposited on the beacon chain.
Therefore, with its deposit tokenization system, Lido allows its users to bypass withdrawal blocking. Indeed, I am able to do it resell their stETH on exchanges, in order to recover their ETH.
However, withdrawals should be possible from March, with the distribution of the Shanghai hard fork. L’opening of withdrawals could lead to a loss of users for Lido, which will no longer have any interest in using stETH.
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