Lido is a staking project that aims to make staking on different chains easier. They have accumulated a significant amount of stake, raising concerns about their power over top blockchains. The staking market is estimated to be worth over $50 billion, with room for growth. Lido solves the problem of difficulty and lack of flexibility in staking. They allow users to stake ETH and receive stETH tokens in return, which can be traded or used in DeFi protocols. Lido’s technology is secure and their growth and adoption have been impressive. However, their token, LDO, currently only offers governance rights and does not capture value well. Overall, Lido shows promise but has some red flags in their tokenomics.
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Introduction: Introducing Lido and Evaluating its Token
I just discovered a staking project that’s gonna blow your mind but it’s not what you’re thinking because it’s not some boring old layer one blockchain instead it’s a service that helps you stake on those chains this project has accumulated so much stake that people are starting to worry about the amount Of power they have over the top blockchains but all i’m thinking is dang should i buy their token well to answer that question let’s evaluate them across six different categories and then end with my final verdict so the name of this project is lido and their token Symbol is ldo but before we analyze their token we got to look at its overall market opportunity because a project could be amazing but if its market size is too small then we don’t want to touch it right it could be the best project ever and capture 100 of Their niche but if their niche is only worth like 1 billion dollars then there’s not a lot of room for growth fortunately this is not a problem for lido at all they are in the staking market which is huge if we look at all the proof-of-stake blockchains out there And then add up the amount that people have staked on them then we get a number north of 50 billion dollars and i bet that will continue to grow as more proof-of-stake blockchains launch and as more people decide to stake for passive income ethereum will also single-handedly boost the staking market Once they complete their upgrade to proof-of-stake right now their staking participation rate is only 10 so there’s a lot of room for growth and that 90 unstaked amount represents pure opportunity for projects like lido to be more specific lido solves two main problems when it comes to staking the First problem is that staking by yourself is quite difficult some blockchains require a minimum amount of stake which could be in the tens of thousands of dollars and even if you have that you’d have to run some complicated validator hardware which requires technical skills that most People don’t have if you try running a validator node and mess up you could lose some of your staked coins through a process called slashing which makes the whole thing risky for beginners now the second problem is that you lose liquidity and flexibility when you stake your coins because they’re effectively Locked up and that’s why a lot of people don’t want to deal with staking they want the flexibility to use or trade their coins whenever they want so by addressing both of these issues lido is able to serve the majority of users who are interested in staking that’s why i Rate their market opportunity a 9 out of 10. their opportunity is pretty much as big as the staking market gets but in order to capture their market effectively they gotta have a great solution and great technology so let’s see if they do by first understanding How it all works so you start by sending eth to their staking pool smart contract they stake that eighth for you and they give you their own state eath token or st eth in return this st eth you can trade it or use it in d5 protocols as if It were actual eth but if you hold that token in your wallet you can accumulate eight staking rewards it gets sent to you through a process called re-basing and you don’t have to do anything to get it your st balance is updated once a day to reflect your staking rewards and There’s no transaction needed you also don’t have to pay anything extra to use lido they just deduct a 10 cut from your staking rewards by the way this ste token that you get you will eventually be able to swap it back for each on a one-to-one basis a few months after the Merge upgrade happens okay so that’s how lido works but we’re still missing a key part of their system they’re validators or node operators they are the ones that are actually using the staked eth to do the consensus work for ethereum like they process transactions they store data and they add blocks to the Blockchain but with lido’s approach those validators do not have direct access to our staked funds because lido doesn’t send our coins directly to the validators they delegate to them instead which is much better in terms of security and for their work lido validators get a 5 cut of the staking Rewards overall i think their solution is elegant and solves the problem well that’s why i’m giving them an 8 out of 10 when it comes to technology but just how well has their tech translated into actual growth and adoption well let’s find out but before we get there i want To share another great way to earn passive income besides staking and that’s through crypto trading bots i’ve actually used a lot of bots before for momentum trading grid trading etc and in general i think it’s a good idea to use bots with a slice of your portfolio so You’re not just relying on one type of strategy but today i want to highlight bits gap a trading bots platform that’s also our video sponsor they have a ton of different bots for all sorts of market conditions doesn’t matter if it’s bear market bull market or sideways Market they have bots that can perform for each of those for bigger coins like eath or seoul they’ve seen returns of around 9 a month and for smaller riskier coins it could get up to 70 a month of course there’s no guarantees that you’ll get any profits because that does depend On market conditions and the bots that you select after all but there’s no risk to try them out because you can get a seven day free trial with no credit card required and they have a demo mode where you can try them out without using your actual funds bitscap supports the top 15 Exchanges and they only require api access so they never hold any of your funds if any of that sounds interesting to you then go try them out use my link below all right back to lido’s growth and adoption and i gotta say that i am impressed by how far they’ve come just Look at this graph showing the amount of eighth staked with lido it’s certified rocket ship and if we look at this chart we see that lido is the largest depositor of state eth on the beacon chain more than double of the number two entity coinbase lido also supports more Than just ethereum they have five networks supported in total and collectively there’s around seven billion dollars staked from over 175 000 users perhaps one reason that explains this meteoric growth is that they’ve done a great job at getting their staked eath token integrated everywhere like The curve pool for st eth and eth has the highest total value locked in it that pool even beats out the most popular stablecoin pools like the one for dye usdc and usdt you can also use ste to do lending and borrowing through ave or use it to mint die through maker Dao so we’re starting to see real network effects emerge for st east and guess what that’s gonna get even more people to stake with them because there’s no reason not to if you can use your ste as if it were ethe itself overall lido’s growth speaks for itself And that’s why i’m giving them an 8 out of 10 for this aspect so we got all these 8 out of 10 and 9 out of 10 ratings so that must mean that the token is a buy right well not so fast because i found three red flags when researching Their tokenomics first their token is terrible at capturing value because ldo is only for governance currently so if you hold it you don’t get a share of the generated fees and they aren’t doing token buybacks either that means even if their service gets more and
Token Analysis: Red Flags and Conclusion
more popular your tokens won’t necessarily increase in value second lido’s token distribution is not ideal because they held a seed round with undisclosed terms and those seed investors ended up with more than 10 of the total token supply third and finally there’s a lot of uncertainty around the token’s future utility right now ldo only allows holders to participate in governance but what else can they do with the token we don’t really know yet so given all these red flags i’m actually giving lido’s token a 6 out of 10 for its current state but let’s weigh all the categories that we’ve analyzed so far and come up with a final verdict for lido first the market opportunity is massive a 9 out of 10 then their technology and solution is great another 8 out of 10 next their growth and adoption has been impressive an 8 out of 10 and finally their token has some red flags with a rating of 6 out of 10 overall lido scores a solid 8 out of 10 it has a strong potential for success in the staking market but keep in mind the risks associated with their token before making any investment decisions so that’s my evaluation of lido and its token ldo i hope you found this analysis helpful and informative as always do your own research before making any investment decisions and if you enjoyed this article don’t forget to like share and subscribe thank you for reading.
