Dynamics of Ethereum’s Largest Staking Pool: Lido

Asset Spotlight: 

Lido is an Ethereum staking protocol that allows users to stake ETH in exchange for a transferable utility token: stETH. Lido eliminates the 32 ETH requirement, pools the user’s liquidity, delegates ETH to validators in batches, and distributes the staking reward proportionately. Lido is now the largest DeFi protocol, and it is managed by Lido DAO, which takes care of the liquid staking parameters and votes using the LDO governance token. 

Market Performance: 

The LDO token currently trades at $1.2, 83% down from its all-time high of $7.3, achieved in August 2021. It is down 56% for the year. The total supply of LDO is 1 billion, out of which 894 million are in circulation. The project's current market capitalization is $1 billion, and the last 24-hour trading volume is $74 million.   

Onchain Metrics: 

Lido today has a Total Value Locked (TVL) of $27.3 billion; the all-time high for TVL was $40 billion in March 2024. The protocol processes about 25,200 transactions daily and has generated fees of more than $2 million every day since the end of last year. The all-time high for daily transactions was close to 41,800 in August 2023, and the highest single-day fees were $6.6 million earlier this month.

Lido generates revenue through a fee structure applied to staking rewards earned by users who stake their assets through the platform. Lido applies a 10% fee on staking rewards, and it is then split between node operators and Lido DAO treasury. Lido revenue increases with the growth in the number of assets staked on the platform, directly correlating with the Ethereum network’s staking reward due to its leading position in Ethereum staking. Currently, the platform is making about $222,600 in revenue each day. The all-time high for single-day revenue was $664,100 earlier this month.  

Sector Overview: 

Lido is the leading liquid staking platform, with a TVL of about $27 billion. It is followed by Rocket Pool, with a TVL of $3.3 billion, Binance Staked ETH, at $3 billion, and Jito on the Solana blockchain, with a TVL of $2 billion. As per CoinGecko, the market capitalization of all liquid staking protocols is close to $35 billion, spread across 97 protocols.  

The sector is expected to grow significantly, driven by the increasing adoption of proof-of-stake (PoS) consensus mechanisms for blockchains and the demand for liquidity in staking. There is enough room for growth on the existing layer 1 platforms as the total percentage of assets staked on these networks is low. With the growing maturity of the DeFi sector, the need for liquid staking has become a fundamental component, and it has the potential to drive adoption by making staking more accessible and profitable for retail investors.  

Outlook: 

Lido has established itself as a leader in liquid staking solutions. The growing TVL numbers indicate strong user interest and capital inflow. Further integration with broader DeFi protocols opens opportunities for innovation and growth. By removing the barriers of high ETH holdings, Lido has contributed to the sector's growth and attracted both retail and institutional investors looking to generate yield.