Ethereum, the world’s most used blockchain, is switching to a new verification system called Proof of Stake (PoS) this summer. PoS is preferred over its predecessor for its relative energy efficiency, allowing users to verify transactions on the network by temporarily depositing or betting a certain amount of tokens in exchange for rewards.
However, according to StakingRewards, ETH holders are hesitant to bet on coins, betting only 8% of the eligible tokens in the Ethereum ecosystem. Still, Ethereum needs to encourage staking so that it can complete the transition to PoS on a sufficiently secure network.
This incentive gap offers liquid staking providers, including Lido, announced today that they have received a $ 70 million investment from Andreessen Horowitz.
Recent estimates indicate that Lido is the market leader in Ethereum liquid staking and holds more than 80% of the market share in the field. The assets bet on Lido are worth more than US $ 10 billion at today’s price and are split into 76,000 individual crypto wallets, Lido co-founder Konstantin Lomashuk told TechCrunch in an interview.
According to Lomashuk, to understand why Lido’s assets increased by 15,000% in 2021, it is important to first understand why some crypto holders do not choose to bet coins.
First, staking is considered less risky than investing in some decentralized finance (DeFi) products and therefore less profitable in terms of returns. In addition, the bet ETH has been effectively “locked up” and is currently irrevocable. As such, a more profitable DeFi strategy looks even more appealing to those seeking higher yields.
Second, if a user wants to bet ETH today, offer at least 32 ETH (valued over US $ 93,000 in today’s terminology) or rely on decentralized exchanges such as Coinbase and Binance for other coins. User. And we know that crypto users, especially early adopters, are much better off using distributed networks than relying on intermediaries to execute transactions.
Lido aims to solve both of these problems through a decentralized staking platform that allows users to bet coins with minimal investment, Lomashuk said.
Lido users can participate in the DeFi protocol with the bet ETH as collateral. This means you don’t have to choose between betting ETH or getting attractive DeFi returns. The platform does this by issuing Ethereum-specific derivative financial products. This is what Romashuk compared to a “new type of bond.”
The platform also supports liquid staking on the Solana, Kusama and Terra blockchains, and will be available in polygons later this month, Romashuk said. Betting on each of these chains has its own complexity, he added, requiring you to write entirely new code each time Lido introduces a new protocol.
Decentralized Autonomous Organization (DAO) governs Lido. Lido is a structure that allows a group to remove individual staking minimums for a user by pooling their assets. DAO had 90 voting members last year, and all owners of Lido’s Governance Token collectively act as Lido’s decision-making entity.
“At DAO, there are many small decisions, big decisions, such as onboarding a new validator or betting more assets on that validator. [also go through the DAO]For example, we redistribute Lido tokens and add incentives to tokens, “says Lomashuk.
According to Lomashuk, DAO structure was essential for Lido to achieve product and market fit, as it was the only way the group could build trust among the community. He added that the company’s executives formally report to DAO itself, not to any particular corporate manager or leader.
According to Romashuk, the project has a total of nearly 100 contributors, including part-timers, but about 60 work full-time in Lido.
Andreessen Horowitz partially used ETH to invest in Lido and purchased some of Lido’s governance tokens from other holders, Romashuk said. According to the company, in connection with supporting Lido, venture companies have bet some of their cryptocurrencies on the Lido platform.
