DeFi
Lido proposes an alliance promoting a restaurant ecosystem based on stETH
Lido has suffered several months of capital outflows as liquidity buyback protocols expand.
Lido, the leading Ethereum liquid staking protocol, wants to foster a new restoration architecture built around its stETH token.
On May 13, Steakhouse Financial, a web3 financial advisory firm, released a proposal advocate for the creation of the Lido Alliance to approve “Ethereum-aligned” projects through a “general approval and partnership framework”.
The alliance would focus on rebalancing by fostering the development of infrastructure built around Lido’s liquid staking token (LST), stETH. Steakhouse outlined three types of protocols the alliance seeks to promote, including new projects providing permissionless recovery architecture, the creation of permissionless recovery tokens (LRT), or the development of actively delegated services (AVS).
“Lido Alliance is a framework… allowing the Lido DAO to identify and recognize projects that share the same values and mission, and that have a way to positively contribute to the stETH ecosystem,” the proposal states. “Developing an Ethereum-aligned ecosystem around stETH helps decentralize the network. »
If passed, Lido would create an Alliance working group tasked with evaluating potential members, assisting existing members, and excluding members deemed to violate the principles of the Ethereum Alignment Alliance or stETH.
The operations and membership of the Alliance would be governed by LDO token holders.
Lido experiences capital outflows as LRTs rise
The proposal comes as Lido faces stiff competition from Liquid Restoration Token (LRT) protocols and EigenLayer for market share on staked Ethereum.
Replenishment allows users to earn additional returns on top of Ethereum staking rewards by delegating staked assets to validate third-party AVS deployed on EigenLayer, which is currently positioned as the only major replenishment protocol in Ethereum. ‘Ethereum.
The growing popularity of catering has recently come at the expense of Lido’s market share, with users withdrawing $1.4 billion of Ether from Lido in 30 days as of April 24. For comparison, the LRT EtherFi and Renzo protocols enjoyed inflows of $1.2 billion and $429 million, respectively, over the same period.
The trend of LRT protocols eating Lido’s lunch has continued to persist since, with EtherFi and Renzo posting inflows of $396.4 million and $324.5 million over the past 30 days while 151.7 Millions of dollars worth of Ether have left Lido.
StETH currently represents 28.7% of the staked ETH supply, compared to a peak of 32.5% in September. As such, Lido ranks as the largest DeFi protocol with a total value locked (TVL) of $27.4 billion, followed by EigenLayer with almost $14.5 billion, according to DeFi Llama.
On May 10, Hasu, Lido strategic advisor, also job a governance proposal aimed at formalizing Lido’s position regarding re-flexibility.
The proposal aims to assert that stETH should remain an LST token and not migrate to an LRT, establish stETH as the primary collateral asset used in reinvestment, and support “Ethereum-aligned validation services.”
“The staking market is dominated by network effects, leading to a winner-take-all dynamic,” Hasu said. “The Lido should respond to changing tides.”