Lido Finance, a liquidity staking protocol that leverages Ethereum's Proof-of-Stake (PoS) model, has seen a significant increase in Ethereum (ETH) staking. Despite the rise, Lido's revenue growth remains sluggish compared to the surge in distributed rewards.
According to data from Token Terminal, the staking rewards on Lido jumped from less than $10 million in early 2021 to over $60 million by June 2023. However, the average revenue during this period remained under $5 million. This discrepancy between staking rewards and revenue growth has raised concerns among market participants.
Lido's protocol allows users to stake PoS coins like ETH without lock-up, issuing a derivative token called stETH for each ETH staked. This process enables users to have simultaneous access to their rewards and coins, increasing the attractiveness of the protocol.
The shift of Ethereum to a PoS blockchain and the subsequent Shanghai upgrade in April 2023 have had a positive impact on Lido and similar protocols. The upgrade benefits Ethereum validators by allowing them to withdraw their staked ETH, which has contributed to an increase in staked assets on Lido.
As of Wednesday, Lido reported a total value locked (TVL) of $13.913 billion, primarily in Ethereum assets. This substantial figure underscores the growing popularity of Ethereum staking on Lido's platform.
Despite these benefits, there are persisting concerns about the potential centralization of Ethereum due to Lido's significant role in staking. As Ethereum continues its transition towards a PoS model, these concerns are likely to remain a focal point for stakeholders and market observers alike.
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