•Lido Finance’s liquid staking protocol has the highest total value locked (TVL) of any DeFi protocol, with $5.9 billion in TVL.
•Since Ethereum’s shift to proof-of-stake in September, staking solutions have been in high demand.
•Lido Finance’s fee revenue has been directly proportional to Ethereum PoS earnings since it sends received Ether to the staking protocol.
At the start of 2021, the decentralized finance (DeFi) space has seen a huge influx of new users and platforms, leading to an increase in the total value locked (TVL). Of the various platforms, the liquid staking protocol Lido Finance appears to have benefited most from the Ethereum merge in September, with its TVL now sitting at the top position among DeFi protocols.
According to data from DefiLlama, Lido’s liquid staking protocol now commands $5.9 billion in TVL, compared to MakerDAO’s $5.89 billion and AAVE’s $3.7 billion. This makes Lido the current DeFi protocol with the highest TVL. As of Jan. 2nd, Lido had $5.8 billion Ether (ETH) staked, with additional staking in Solana (SOL) ($23.2 million), Polygon (MATIC) ($43.9 million), Polkadot (DOT) ($11 million) and Kusama (KSM) ($2.2 million). Lido’s model allows users access to liquid Ether staking without committing to the traditional 32 ETH minimum.
The influx of users to the DeFi space has been in part attributed to the transition of Ethereum’s consensus algorithm to proof-of-stake (PoS). Blockchain data analytics from Nansen in December noted that staking solutions such as these had been in high demand since the Merge. The report highlighted the impact of the Merge in introducing staked ETH as a cryptocurrency-native yield-bearing instrument that has quickly outstripped other collateralized yield-bearing services.
Lido appears to have taken advantage of this, as its fee revenue has been directly proportional to Ethereum PoS earnings since Lido sends received Ether to the staking protocol. In November 2022, Lido said it had recorded a total of $1.6 billion in Ether staked since its launch in June, and that its platform was seeing an average of $450 million ETH staked per month.
The success of Lido Finance has been due to a combination of factors. The platform’s unique liquid staking model has enabled users to access Ether staking without having to commit to the traditional 32 ETH minimum. Additionally, Lido has built strong relationships with other protocols, such as Polkadot, which has helped to increase its TVL.
It remains to be seen if Lido can maintain its position at the top of the DeFi space or if other protocols will overtake it. However, it appears that Lido Finance has secured its place as one of the leading protocols in the space.