Decentralization and staking: prospects for Lido in the crypto market

In the Ethereum ecosystem, after the transition to PoS, the role of staking naturally became one of the main ones. This allowed the stakers to decisively strengthen their position. The largest, Lido Finance, has its own token. But how can LDO interest users?

Popularity of Lido

After Ethereum switched to a new consensus algorithm, staking has become a more interesting topic for investors. Especially after the Shanghai update, which allowed the withdrawal of assets. Against this background, the company Lido Finance has especially risen, capturing the lion's share of staking. She controls almost a third of the market! For example: Lido’s closest competitor is the Coinbase exchange with a share of only 9%. It is also worth noting that Lido is engaged in staking not only ether: the company offers solutions that work on the Solana and Polygon blockchains.

The Threat of Ethereum Decentralization

Among the Ethereum community, Lido Finance's reputation leaves much to be desired.. The company is actively disliked for its dominant position in staking and refusal to voluntarily reduce its stake. It is clear that decentralization is the cornerstone of cryptocurrencies, and a threat to it is read as a threat to the life of all Ethereum.

But it's not that simple. Yes, Lido refuses to reduce its share. This year, stakers proposed an initiative to voluntarily limit the maximum share to 22% of the market. In fact, the initiative is directed only against Lido, since the shares of other players are much smaller. Of course, Lido abstained. But the refusal is motivated, among other things, by the fact that participants in the decentralized organization Lido DAO voted against self-restraint with a majority of 99.81% in June.

That is, the counter-argument could be this: the protocols and decisions of Lido Finance are not the result of decisions of a narrow group of people who have taken the lion's share of the market into their hands, but the will of many Lido DAO participants, holders of a special LDO token, which allows them, among other things, to vote when making decisions. This is how Lido Finance itself explains why Lido is decentralized.

Lido DAO (LDO)

Let's take a closer look at the LDO token itself. Yes, it allows you to vote on issues related to the future Lido DAO. Essentially, this is an ERC-20 token that provides access to voting on liquid staking protocols from Lido DAO. Besides this, of course, LDO has a price and is freely traded on crypto exchanges.

Since the fall of 2023, two pieces of news have been associated with LDO, which can hardly be called pleasant.

First, the team at blockchain security company SlowMist said they have discovered a vulnerability in the LDO contract that could potentially allow attackers to conduct a fake deposit attack.. Despite the fact that Lido stated that there were no threats and assured the public that the problem found is typical for all ERC20 tokens and there is no threat to security. However, users and potential investors may want to pay attention to this.

Secondly, Ethereum co-founder Vitalik Buterin raised the issue of threats to decentralization and mentioned the role of Lido. Moreover, he called centralization within staking natural. Refraining from accusations, he examined in detail the question of what can be done to reduce the level of centralization in staking. And this, perhaps, may be even more worrying news for LDO in the long term. This could mean that as more updates are made to Ethereum at the protocol level, there is a possibility that measures will be taken to limit the stake that one participant can have.. And for Lido, as the largest staker, this is very dangerous. On the other hand, the fact that in December the TVL indicator exceeded the 20-month value adds positivity.

Technical analysis

But with regard to the value of the asset, not everything is so clear. If we talk about September price levels, then since then Lido DAO (LDO) has risen noticeably in price. In mid-December, the asset is trading around $2.28, as can be seen from the chart below. One of the possible nearest support levels will be $2.04, and resistance will be $2.65.



The price of the asset was not greatly affected due to the negative news background and criticism from the community. On the contrary, the LDO token has risen in price, and the TVL indicator continues to grow. At the same time, the token is fundamentally connected with ether, which does not exclude criticism and decisive actions from Ethereum developers. The question of capitalization also remains open if the Lido community in the future agrees to reduce the share in ether staking.

This material and the information contained herein do not constitute individual or other investment advice. The opinion of the editors may not coincide with the opinions of the author, analytical portals and experts.