DeFi
Lido Finance Reaches 1 Million Validators, Fueling DeFi Growth
Lido Finance has reached one million validators as Ethereum’s largest decentralized finance (DeFi) protocol.
Lido Finance, the largest liquid staking protocol on Ethereumannounced this important step in an article on April 29.
Source: Lido Finance
Liquid staking protocols like Lido Finance make staking more accessible to retail users with limited capital, who would otherwise need 32 Ether (3,181 ETH) to run their own validator nodes on Ethereum.
Lido Finance represents the majority (28.5%) of the Ether staked, while 13.6% is staked via the Coinbase exchange, according to Dune data. Over 27% of all Ether supply is currently staked.
Liquid Staking Dashboard. Source: Dune
Liquid staking protocols like Lido have seen rapid growth due to supply liquidity benefits for users. Users who stake their Ether with Lido receive the protocol’s Lido Staked ETH (stETH) in return, which can be deployed in other DeFi protocols.
With regular staking, staked Ether tokens would remain locked and unusable during the staking period.
Liquid staking fuels the rise of DeFi
Total value locked (TVL) in DeFi protocols increased from a low of $36 billion in Q4 2023 to a high of $97 billion in Q1 2024. Total DeFi TVL currently stands at 92, 32 billion dollars, according to DefiLlama.
The growth of DeFi TVL, which increased 65.6% quarter-over-quarter, was largely attributed to liquid staking protocols like Lido, according to on-chain intelligence provider Messari:
This increase is mainly due to asset price appreciation and liquidity restocking, led by Ethereum’s TVL growth of almost 71%.
Liquid staking protocols have amassed over $47.7 billion in cumulative TVL, with Lido accounting for over $29.9 billion, followed by Rocket Pool in second place, with $3.86 billion in TVL, according to DefiLlama.
Liquid staking protocols remain the largest protocol category in DeFi, with $47.6 billion in combined TVL across 164 protocols. Lending is in second place, with $30.7 billion in TVL, followed by cross-chain bridges which hold $21.8 billion in TVL combined.
Notable crypto founders have already expressed concerns about Lido’s growing dominance. Ethereum co-founder Vitalik Buterin previously highlighted the potential risks of centralization with Lido, in a September 2023 blog post.
Buterin wrote:
With the DAO approach, if just one of these staking tokens dominates, this leads to a single potentially attackable governance gadget controlling a very large portion of all Ethereum validators. Admittedly, protocols like Lido have safeguards in place against this, but a single layer of defense may not be enough.