Lido Finance Surpasses 1 Million Validators, Prompting Debate on DeFi’s Potential to Overcome TradFi
In a significant achievement, Lido Finance, the leading liquid staking protocol on the Ethereum network, now commands more than 28.5% of all staked Ether. This milestone has raised questions about the ability of decentralized finance (DeFi) to challenge traditional finance (TradFi).
As of April 29, Lido Finance has established itself as the largest DeFi protocol, with one million Ethereum validators. This surpasses major players like the Coinbase exchange, which holds 13.6% of staked Ether, according to data from Dune.
The surge in popularity can be attributed to the unique advantages offered by liquid staking protocols such as Lido. Users who stake their Ether with Lido receive staked ETH (stETH) in return. Unlike traditional staking methods, where tokens are locked and unusable for a specific period, liquid staking allows for greater flexibility and usability.
The rise of DeFi has been fueled by the practice of liquid staking, contributing to a 65.6% increase in Total Value Locked (TVL) in the last quarter. TVL in DeFi has risen from a low of $436 billion in Q4 of 2023 to $97 billion in Q1 of 2024. Currently, the price of DeFi TVL stands at $92.17 billion, according to DefiLlama.
The growth of Ethereum’s TVL by nearly 71% has played a significant role in this increase. This growth has been primarily driven by asset price increases and the adoption of liquid staking. The TVL in liquid staking protocols has reached an impressive $47.7 billion, with Lido leading the way by securing over $29.9 billion of that amount.
However, concerns have been raised regarding the dominance of Lido validators and the potential for centralization. Crypto founders have voiced their worries about the concentration of power in a single staking token, such as Lido’s stETH, under the DAO model. This centralization creates a vulnerable point of control and governs a substantial portion of all Ethereum Lido validators. Ethereum Co-Founder Vitalik Buterin has previously highlighted the risks of centralization with Lido, stating that it could lead to a single governance gadget controlling a large portion of Ethereum validators, making them susceptible to attacks.
As Lido Finance continues to grow, it remains to be seen whether DeFi can truly challenge and overcome the dominance of traditional finance.
