Lido: a protocol with a systemic role
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In the ever-changing world of digital assets, Lido stands out as an innovative staking solution, offering investors increased flexibility and efficiency. Lido is a liquid staking platform that allows holders of various cryptocurrencies, including Ethereum, to participate in staking while maintaining liquidity of their assets. "To date, this is the simplest and preferred solution for seeking returns on Ethereum," says Stanislas Barthélémi, crypto expert for KPMG.
Lido's proposal is based on the principle that traditional staking has a major drawback: this mechanism immobilises assets, making them inaccessible for trading or other investments for a given period. Lido addresses this problem by introducing the concept of "liquid staking".
On Lido, when users stake their cryptocurrencies, they receive stETH tokens (for Ethereum staking) in exchange, which represent their staked stake plus accumulated rewards. These stETH tokens can be traded, sold or used in various decentralised finance (DeFi) applications, offering users immediate liquidity for their staked assets.
Benefits and risks
One of the main benefits of Lido is that it democratises access to staking. Users do not need to own a large amount of cryptocurrencies to participate, which lowers the entry threshold for small investors. Traditional staking involves tying up 32 ethers, or €70,000 at the current rate.
However, like any innovation in the crypto space, Lido is not without its risks. The main challenge relates to its weight in overall Ethereum staking: the protocol currently attracts just under 33% of staked ethers. And of all the players in Ethereum liquid staking, Lido accounts for 74% of the market. "This is a typical case of a protocol taking over an entire market," points out Laszlo Szabo, CEO of Kiln, which has been selected as Lido's staking provider. For Stanislas Barthélémi, crypto expert at KPMG, "this is the consequence of the design chosen by Ethereum", he believes. "Given that it's much simpler to use Lido than to run your own validation node, it's not surprising that this project is attracting so much capital," he points out. "But I'm not worried as long as its operation remains distributed (35 staking providers around the world work with Lido) and it doesn't hinder the development of competitors," notes Stanislas Barthélémi.
"The solution is not to block projects like Lido," asserts Laszlo Szabo. "I think it's much healthier to favour solid alternatives that have different visions: we may consider that Lido is the most suitable standard for individuals, but Rocket Pool or others may be more effective in ensuring decentralisation," he points out. "For me, decentralisation is not just about the decentralisation of a single protocol, but about the multitude of solid technologies that are being developed by serious teams. It may seem counter-intuitive, but the fact that big exchanges like Coinbase or Cryptocom also offer liquid staking also contributes enormously to decentralisation," adds Laszlo Szabo.