Lido Finance is making waves in liquid staking derivatives and posting gains for January 2023. The Lido narrative is picking up steam, and it's worth taking a closer look at what Lido does well and what needs improvement. In this article, we will examine the tokenomics and centralization of Lido, so buckle up and get ready for an in-depth analysis.
The Ethereum price hovering around $1,600 gives us a total addressable market for these liquid staking derivatives. Currently, around 14-15% of all Ethereum is staked. Still, with the upcoming Shanghai upgrade in March, the Beacon Chain withdrawals will be enabled, driving more life into the liquid staking narrative and a higher percentage of staking for the asset. Assuming that half of the total Ethereum will become staked at some point would give the liquid staking derivatives narrative a total market cap of around $80 billion. Currently, the market cap of Lido is roughly $2+ billion, so there's a lot of room for growth in this market.
What sets Lido apart is that it does liquid staking not just for Ethereum but for various other L1 chains, including Solana, Polygon, Kasama, etc. Lido is currently the market leader in this space, with the highest staking rate of 4.6% APR, and some of the best developers back it in crypto, as well as notable VCs and names in the crypto Twitter community. Lido is also highly usable, with its stETH token compatible with many different DeFi applications.
Over the last month, there has been an increase in staking with liquid staking derivatives and a rise in the Ethereum price, which affects the total value locked (TVL). According to the data, Lido is the market leader, with a 66% market share, far ahead of its nearest competitor, Rocket Pool, which has a market share of 3%. The top 10 holders of the Lido token own 52% of all tokens, with the top 100 holding over 90% of the circulating supply.
Centralization is a crucial issue with Lido, as the biggest holders of the token and the VCs who back the project essentially call the shots. There is also a linear unlock of tokens every day, with approximately $500,000 worth of tokens being released into circulation. However, a significant token dump is coming in August 2023, when 8.5 million tokens will vest out in a cliff, leading to 8.5 million Lido tokens being released on the market.
In conclusion, Lido Finance is the market leader in the liquid staking derivatives space, with a high staking rate, top-notch developers and VC backing, and high usability. The addressable market for Lido is vast, and investors are taking notice as token valuations, and market caps are increasing by tens and even hundreds of millions of dollars. However, centralization is a concern, and the major token dump in August 2023 should be monitored closely.
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