DeFi
Lido investors pull $2.5 billion worth of Ether from staking giant as rivals circle – DL News
- Lido’s share of the staking market has fallen to 28%.
- Its decline comes amid the rise of EigenLayer and liquid restoration protocols.
In a sign that new rivals are gobbling up Ether, Lido’s share of the multibillion-dollar Ethereum staking market fell this month to its lowest level in two years as deposits plummeted.
Since March 1, investors have withdrawn approximately 800,000 Ether deposited at Lido, worth approximately $2.5 billion, according to DéfiLlama data. Over the past 30 days, it has lost more Ether than any other staking service.
Lido’s share of the staking market fell from around 32% in November to just under 29%.
A warning
The decline of the Lido will encourage some hard-line supporters of decentralization, who have long argued warned the protocol’s dominance could lead to possible control of Ethereum itself if nothing is done.
Since a major upgrade in September 2022, Ethereum operates on staking instead of the Proof of Work consensus process used by Bitcoin miners. Ethereum now requires users to stake or lock up their Ether in exchange for a modest annual yield.
Compared to Bitcoin mining, it is a low consumption method of confirming and ordering transactions on the blockchain. Some users stake Ether themselves while others entrust their Ether to centralized exchanges like Coinbase, or liquid staking protocols like Lido and Rocket Pool.
Lido is the largest decentralized finance protocol. Investors have deposited over $30 billion in crypto on Lido. Its liquid staking token, stETHis the more used collateral asset in DeFi.
The critics have suggested that the Lido limits itself by capping its share of Ether put into play. But the cooperative which governs the protocol, in its vast majority, rejected a proposal for self-limitation in 2022.
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Today, Lido’s market dominance is weakening anyway.
Marking market changes
Its decline is part of a broader shift in Ethereum staking activity. Liquid staking protocols account for less than a third of all Ethers staked, according to data compiled by pseudonymous data analyst Hildobby. That’s down from nearly 37% for much of last year.
Centralized exchanges have also stumbled. Since November, their share of staking activity has fallen from 30% to 25%.
Meanwhile, protocols offering so-called liquid retaking are booming and now account for over 6% of all staked Ether. These protocols make it easy to deposit Ether or staked Ether into EigenLayer, a year-old protocol that has quickly become one of the most talked about projects on Ethereum.
The share of “unidentified” stakeholders has also increased over the past six months, from around 15% to more than 18%, according to Hildobby.
This group includes players who do not follow liquid staking or trading protocols, centralized exchanges, home amateurs, or institutional staking pools.
Deposits are decreasing
While liquid staking protocols and centralized exchanges have lost market share, the loss has been particularly pronounced in Lido.
After a staking-related upgrade in April 2023, depots at Lido jumped. Between May and February, monthly deposits fluctuated between 200,000 Ether and 1 million Ether.
By March, however, the EigenLayer deposits cratered. Users deposited only 32,600 Ether at Lido last month. Less than 16,000 Ether was deposited at Lido in the first 22 days of April.
Upcoming changes
This crisis comes as Lido makes several long-awaited changes.
This month, the Lido welcomed solitary punters with the aim of increasing its decentralization.
And members of the Lido DAO, the cooperative that governs the Lido, are currently vote on a proposal that would give stETH holders a say in the protocol’s governance and give stakeholders the opportunity to angrily quit.
“Even if the protocol fails, users can still exit without authorization with their funds intact, and there is nothing token holders can do about it,” Lido said in a statement. blog post announcing the vote.
“This is something truly new for financial markets and infrastructure. Something that is only made possible by the non-custodial nature of on-chain DeFi.
Aleks Gilbert is a DeFi correspondent based in New York. Do you have any advice? Send him an email to aleks@dlnews.com.