Lido Token Jumps 24% as Staked Ethereum Slowly Repegs

Lido’s native token LDO has skyrocketed by more than 24% in the last 24 hours, hitting a weekly-high of $0.66 cents. 

Meanwhile, Lido’s Staked Ethereum token, called stETH, appears to have grown in value with Ethereum. Both rose a little over 5% overnight with the staked version trading at $1,091 and Ethereum trading at $1,127. 

The current gap between Ethereum and stETH does, however, still represent a discrepancy of roughly 3% for Lido’s staked token. 

While this is significant, at the height of its de-peg last month, stETH fell 6% short of the mark, according to a report by blockchain analytics company Nansen.

Nansen Analysis Examines How Terra Collapse Affected Celsius and Three Arrows Capital

Terra’s collapse ultimately contributed to highly publicized insolvency troubles at both Celsius and Three Arrows Capital, according to research from the blockchain analytics platform Nansen. Nansen, which released its findings on Wednesday, took a closer look at on-chain flows of stETH, which represent Ethererum (ETH) that’s been staked with the platform Lido to accrue daily rewards. “Looking at the Curve stETH/ETH pool imbalance on Curve, it is evident that the situation dates back to the UST/...

Lido’s surging LDO token is for protocol governance, enabling holders to help manage fees and token distribution, approve and remove Lido node operators and vote on governance proposals in the Lido DAO. 

Lido: an Ethereum staking solution

Anyone can become an Ethereum 2.0 validator, provided they have 32 Ethereum to lock up to activate the software and earn rewards for storing data, processing transactions, and adding blocks to Ethereum. 

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For those lacking those funds, though, Lido offers another option. 

Lido is a staking pool that allows people to stake any amount of their ETH through smart contractssmart contracts–automated self-executing financial contracts. Users earn yields in stETH, which currently cannot be redeemed 1:1 for Ethereum, though after the merge it will be. It can also be lent, staked and traded for other tokens. 

Staked Ethereum is issued by Lido to represent Ethereum that has been locked up in Ethereum’s Beacon Chain–a network that in August will be merged with Ethereum’s mainnet in an upgrade that will transition the entire network to a proof-of-stake consensus mechanism and, reportedly, render the network 99.95% more energy-efficient. 

Lido was at the center of controversy last month after crypto lender Celsius froze withdrawals to stop a bank run that could have further depleted the price of stETH. It came to light that Celsius had staked customer funds on Lido and currently holds at least $449 million worth of stETH in a public wallet, according to Nansen.

Lido currently ranks as Ethereum’s fourth-largest DeFi protocol with a total value locked (TVL) of $4.79 billion. The platform also accounts for the lion’s share of depositors (31.6%) on the Beacon Chain.

Despite centralization concerns, 99.8% of Lido’s DAO voted to keep the protocol’s Ethereum staking capacity uncapped. 

Lido’s view is not a popular one, with many, including Ethereum’s founder Vitalik Buterin, Beacon Chain community manager Superphiz, and Ethereum Foundation researcher Danny Ryan all publicly tweeting that staking dominance would lead to centralization. 

In response, Lido insists its staking is not contrary to the ethos of Ethereum, stating that it was formed “to prevent centralized exchanges from gaining the lion's share of staked Ethereum” and “to keep Ethereum decentralized.”