Over the past few months, the Liquid Staking sector has captured significant interest, witnessing the emergence of numerous protocols and business models that demand our attention.
In this article, we’ll dive into Lido Finance, the leading liquid staking protocol within DeFi, boasting the highest Total Value Locked (TVL) and among the top by Market Capitalization as well.
What is Liquid Staking?
Liquid Staking represents an innovative model that gained momentum following the Ethereum upgrade, which transformed the network into a proof-of-stake blockchain.
This novel concept was created to address a crucial challenge: while staking tokens secure the network, they often tie up the liquidity, restricting their use elsewhere. Liquid Staking platforms provide a solution by enabling users to stake their tokens, like ETH, while simultaneously retaining their liquidity within the blockchain ecosystem. Here's how it works:
Traditionally, staking ETH would lock it up, making it unavailable for other purposes. With liquid staking, individuals can deposit their ETH into a protocol, the deposited ETH is then utilized to secure the network, and in return, the depositor receives a derivative token, such as Lido’s stETH. This derivative token maintains its value pegged to ETH.
This unique setup allows users to continue receiving staking rewards and also grants them the freedom to utilize the stETH for various purposes, including transactions or participation in other DeFi protocols.
In the Liquid Staking sector, there are primarily two types of tokens:
Rebasing Tokens: These tokens reward stakers with additional tokens over time, leading to an increase in their supply. For instance, stETH operates on a rebasing mechanism.
Reward-Bearing Tokens: This type of token operates in a more straightforward manner. Staking rewards are utilized to boost the token's price, ensuring that it maintains a higher value than the underlying token. Notable examples of this category are rETH and wstETH.
By adopting Liquid Staking, users can strike a balance between securing the network and maintaining the flexibility to use their assets effectively within the decentralized finance ecosystem.
What is Lido Finance?
Lido Finance is the leading platform for Liquid Staking at the moment (Jul 2023), and it's also the top protocol in the DeFi sector when it comes to Total Value Locked (TVL).
Through Lido, users can deposit their tokens and receive a derivative version representing the staking process that can be used across other DeFi protocols and services. By doing that, users still receive the staking yield but pay a fee of 10% on the rewards which is distributed to Lido’s DAO Treasury and Node operators.
The main product on Lido is the stETH, but you can also stake tokens from other blockchains like MATIC (Polygon), SOL (Solana), DOT (Polkadot), and KSM (Kusama).
The LDO Token
The LDO token is a crucial element in fulfilling Lido’s DAO mission of establishing a trustworthy staking service focused on community growth and sustainability. Holding the LDO governance token grants members the authority to vote and actively participate in the decision-making process within the Lido DAO.
LDO Token holders can decide on various important subjects, including:
- Fees Mechanisms and Distribution
- Node Operators Management
- DAO Treasury Management
The distribution of LDO was planned to be the following
- According to Crunchbase, Lido Finance raised a total of $167 million in four funding rounds.
In conclusion, Lido Finance stands as a prominent leader in the rapidly growing Liquid Staking narrative within the crypto industry.
Notably, the LDO token is among our Whitelisted tokens on Kassandra Finance, giving you the opportunity to invest in it through the one of our managed tokenized crypto portfolios like DeFi Blue Chips, Abritrum LSDfi or by exploring other available pools on the platform!
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