This Staking Protocol’s TVL Has Shot Past Curve, Maker, and Anchor

    • Lido Finance’s TVL rises past Curve, Maker, Anchor, and Aave.
    • Staking as a service is expected to increase in value as the market turns bearish.

    Every year there’s a different theme in crypto. In 2020, it was decentralized finance (DeFi) apps. In 2021, it was non-fungible tokens. In 2022, it looks like the theme will be staking protocols. With the market going south, yield generating decentralized applications (DApps) bring all the more value.

    At the center of this yield-hungry crypto world is Ethereum and the one protocol that gives fractionalized staking reward – Lido Finance. Looking at the data, Lido Finance is making big waves in the crypto market, and it’s now the biggest DApp around.

    Lido Topples Maker

    Data from crypto data aggregator Delphi Digital states that Lido Finance overtook Curve in terms of total value locked (TVL). Lido’s TVL shot past $19 billion, while Curve’s TVL slipped below the same as prices tumbled.

    Source: Delphi Digital

    The other top protocols on the list are – Ethereum’s lending protocol MakerDAO, Aave, the lending protocol on Ethereum, Polygon, and Avalanche, and Terra’s yield generation behemoth Anchor Protocol. Each of these DApps boasts a TVL of over $10 billion, even as prices fell.

    In bearish times, the theme has always been safer protocols that receive more attention from DeFi users. Earlier, the trend was to switch volatile cryptocurrencies for safer stablecoins. This was why yield generating protocols like Maker survived, and even thrived in bear markets, while other hot and risky farming protocols saw their TVL dry up. In recent times, Anchor also filled this gap with an almost 20% yield, which soon dropped to 18% last week.

    Staking – The New Passive King

    Lido is dominating in two categories. First, the category of passive crypto income sources. Lido is an aggregator of cryptocurrencies, primarily ETH, but also other proof-of-stake blockchains like – Terra, Solana, Kusama, and Polygon. Hence, the protocol provides passive income in these blockchains’ native currencies. Second, is the category of other passive crypto income sources.

    Ethereum is, unsurprisingly the highest contributor to Lido’s TVL. Data from DeFiLlama states that 65% of Lido Finance’s TVL comes from staking ETH, 33% from LUNA, and the rest from SOL, MATIC, and KSM. The TVL on the protocol increased nearly 3X between February to April despite almost no positive net price action.

    The main reason for this massive increase in TVL on Lido was because of the optimistic expectations of Ethereum’s Merge, scheduled for mid-2022. Lido Finance allowed users to fractionally bet on the merge even if they didn’t have the required 32 ETH to run a validator node. In return, Lido gave holders stETH, a Lido staking derivative to verify their staked balance. This allowed users to stake a marginal amount of ETH, hold derivative ETH, and earn more ETH in return.

    Now, as the market trends downwards, holders see the importance of ETH. Lido’s passive strategy allows investors to bet on ETH without holding the price risk. However, all this depends on the timing of the Merge. Another delay could prevent Lido’s DApp dominance.

    Aakash Athawasya
    Aakash is a market analyst at Vauld. He looks at on-chain data of Bitcoin, ETH, and the macroeconomic effect of crypto on the equity and commodity markets.

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