Lido Finance: Liquid Ethereum Staking & LDO Potential!! 💧

Did you know that a third of all the eth Being staked on ethereum’s beacon chain Is coming from a single protocol This protocol is lido finance and though There have been many concerns about its Massive stake there’s much more to this Crypto project than meets the eye Today i’m going to tell you everything You need to know about lido finance and Why it could have huge implications for Not just ethereum but potentially every Proof-of-stake cryptocurrency On the market [Music] Before we talk about staking there’s a Disclaimer that needs displaying i’m not A financial advisor and no i’m not Playing this video is intended to be Educational and entertaining please Contact a financial advisor if your Portfolio has your heart racing If this is the first time we meet up my Name is guy and i am a crypto buff That’s because i create high quality Crypto content full of facts and not Fluff Coins tokens news reviews you know that Kind of stuff If you find crypto tough subscribing to The channel and pinging that Notification bell will be enough So now that i’ve made sure i won’t get Cuffed let’s see what lido finance is About and why it’s so loved

Lido finance was founded in october 2020 By constantine lamarchuk vasily Shapovalov and jordan fish Constantine holds a doctorate degree in Finance and has worked in crypto since 2015 most notably as the founder of p2p Validator a company that runs validator Nodes on various proof-of-stake Blockchains Constantin bought his first bitcoin in 2014 participated in the ethereum ico Later that year and has apparently never Sold his btc eth nor any of the other Cryptocurrencies he’s purchased since Then As a result of these diamond hands Constantine estimates he is up between 10 000 and 50 000 x on his crypto Portfolio and he says his secret is to Focus on projects with visionary Founders Take note Vasily shapovalov holds a bachelor’s Degree in mathematics and spent nearly a Decade working as a software engineer Before switching to crypto in 2019 In 2020 vaseline became the chief Technology officer of p2p validator and One of his first tasks was to build a Third-party staking solution for Ethereum’s upcoming beacon chain This third-party staking solution Eventually became lido finance and Vassily continues to serve as the

Project’s de facto technical lead Now while the name jordan fish might not Sound all that familiar if you’re into Crypto and active on twitter you Probably follow him without even knowing That’s because jordan is kobe formerly Crypto cobain a popular crypto Influencer podcaster and writer with Close on 700 000 twitter followers and Counting His sub stack is also well worth Checking out too Jordan has been in crypto since 2012 and In a recent four hour long interview he Explained that he invested 500 into Bitcoin at the beginning and basically Hasn’t invested since it’s all been Recycled games Nice Jordan holds a bachelor’s in computer Science and crypto was a side hustle for Most of his career which he spent Working mostly in marketing namely for Monzo bank one of the first online banks Here in the uk Interestingly jordan was briefly the ceo Of p2p validator and he insists that he Was the quote sprinkle on top for lido Finance with konstantin and vasily being The quote brains of the operation Even so jordan is the author of the Medium post announcing lido finance in October 2020 and it seems his role was To attract attention and investors to

The project when it was first getting Started Jordan left lido finance in early 2021 Presumably to focus on the aptly titled Crypto podcast up only which began in February 2021 and which he co-hosts with Brian krosgaard aka ledger again highly Recommended Now according to crunchbase and the Privacy policy on the lido finance Website the protocol itself was built by A software company registered in the Cayman islands called defy limited Though lido finance has since become a Decentralized autonomous organization With no single entity behind it So what exactly is lido finance and how Does it work Well lidar finance is a liquid staking Protocol in plain english it lets you Stake proof-of-stake cryptocurrencies Without having to lock them up meaning You can trade them freely while still Staking the short explanation of how This works is that when you stake your Cryptocurrency through lido finance the Protocol gives you a tradable token that Acts as a sort of receipt for the crypto You staked So in the case of ethereum when you Stake eth on the beacon chain through Lido finance the protocol gives you a Token called staked eth or st eth which Mirrors the price of eth and can be

Freely traded Now st eth maintains its price peg in Three ways the first is through Arbitrage wherein rational traders buy St eth when it drops below the price of Eth since it can be redeemed for actual Eath in the future The second way st eth maintains its peg Is through liquidity mining wherein the Lido dow provides additional rewards to Anyone providing liquidity for trading Pairs between eth and st The third way st eth maintains its peg Is through the organic demand for st eth Since st eath earns staking rewards in Real time it’s the ideal collateral for Borrowing protocols like arve and make a Dao However the fact that st eth earns Staking rewards in real time means its Value changes and this makes it Incompatible with certain d5 protocols Namely decentralized exchanges like Uniswap This is why there’s a second st eth Token called wrapped st eth or wst eth Which essentially makes it possible for Your st eth to continue increasing in Value while maintaining a fixed price For dex trading Besides ethereum’s beacon chain lido Finance currently supports solana kusama And polygon it’s also in the process of Adding support for polka dot

Now as i mentioned in the introduction Lido finance is staking around a third Of all the eth on ethereum’s beacon Chain an amount that’s worth well over Eight billion dollars This is for a few reasons First becoming a validator on ethereum’s Beacon chain requires 32 eth which most People can’t afford and delegation is Technically not possible Second becoming a validator on Ethereum’s beacon chain requires Technical knowledge as well as 24 7 Monitoring because validators risk Losing some of their eth if they go Offline or fail to upgrade on time And third becoming a validator on Ethereum’s beacon chain requires locking Up the aforementioned eth until ethereum Completes its transition from proof of Work to proof of stake Even then withdrawals of staked eth may Not be allowed right away and in a Recent interview ethereum enthusiast Anthony sasano revealed validators may Be stuck waiting for six months It should come as no surprise then that So much eath is being staked in a liquid Way and why the demand for liquid Staking is much higher for ethereum Compared to other proof-of-stake cryptos If you’re wondering why everyone is Flocking to lido finance for liquid Staking as opposed to say centralized

Exchanges it all has to do with Convenience and security For starters liquid staking on lido Finance doesn’t require kyc and the Protocol is therefore accessible to Anyone with an internet connection save For a few exceptions more about that Later When you stake eth through lido finance A set of audited smart contracts Automatically distributes this eth to a Set of 22 validators on ethereum’s Beacon chain that were vetted by the Lydo dao Now it’s important to note that the Leido community is actively onboarding New beacon chain validators This is why lido finance having a third Of all the eth staked isn’t necessarily A cause for concern As a reward for sharing their staking Infrastructure these beacon chain Validators earn five percent of the Staking rewards from all the eth that’s Being delegated to them by lido finance Another five percent of the staking Rewards go to the lido dow treasury Which can be used for grants for new Lido finance deployments or even Protocol insurance if a lido finance Affiliated validator is slashed The remaining 90 goes to st holders Hence why staking rewards for eth on Lido finance are four percent versus the

4.4 percent that you get if you stake Directly on the beacon chain On that note you can find out what the Top staking cryptocurrencies for 2022 Are by using the link in the description I digress Lido finance officially launched after The establishment of ethereum’s beacon Chain in december 2020 and the following January the ldo token was officially Introduced Ldo is an erc20 token on the ethereum Blockchain with a maximum supply of 1 Billion the entirety of which was minted At genesis Ldo’s use cases are currently limited to Voting in the leido dow Now as per the blog post announcing the Ldo token around 36 of its supply went To the lydo diode treasury around 22 Percent went to investors 6.5 percent Went to early validators and signature Holders more about them later 20 went to the early developers of lido Finance and 15 went to the founders and Future employees As per an article about the ldo token on Lido finance’s website quote initial Contributors to lido have a one year Lock followed by a one year vesting Period The one year lock ends in december 2021 Logically this means ldo tokens will Finish vesting in december this year

Save for those belonging to the lido dow Treasury as their remission schedule is Determined by community vote In terms of investors lido finance has Seen three funding rounds so far According to masari the first funding Round was in december 2020 and it raised Two million dollars from various crypto Vcs as well as prolific crypto Personalities such as the founders of Arve and synthetics The second funding round for lydo Finance took place in march this year And it raised 70 million dollars all of Which apparently came from crypto vc and Recent horowitz The third funding round for lido finance Took place earlier this month and it Raised around 73 million dollars from Various crypto vcs 50 million of which Came from paradigm This third funding round involved crypto Vcs buying ldo tokens directly from the Lydo dow treasury in exchange for around 21 000 eth a purchase proposal that was Approved via governance by the lido Community As per the proposal all ldo tokens sold To vcs in the third funding round come With a one-year lock-up followed by a One-year vesting cliff just like the Original distribution albeit on a later Schedule It’s not clear whether andreessen

Horowitz acquired any ldo as part of its Investment nor whether there’s a vesting Schedule involved A quick trip to etherscan reveals that The current distribution of ldo is Fairly concentrated in the largest Wallets though most of these are smart Contracts presumably the vesting Contracts for lido finance’s more recent Investors What’s concerning is that there are only Around 15 000 ldo holders on ethereum Though i imagine there are many more Holding their ldo on centralized Exchanges The distribution of st eth and wste is Likewise concentrated in the largest Wallets though almost all of them are Smart contracts related to d5 protocols What’s awesome is that there are over 75 000 st holders on ethereum and this Number seems to be increasing This is despite the lack of support for St eth on centralized exchanges though Perhaps it’s a consequence of this fact Best of all both st eth and wste have Done a pretty good job of maintaining Their pegs though the former seems to be Trading slightly below the price of eth And the latter is trading a bit above The price of eth So this brings me to the moment you’ve All been waiting for and that’s my Analysis of ldo’s price action as you

Can see ldo’s price action has been Pretty dismal not only that but the Trading volume has been limited and ldo Even seems to have had a few speculative Pumps and dumps The first speculative pump took place Last spring and it happened because lido Finance announced it would be adding Support for solana The rest of the crypto market was also Rallying at the time The second speculative pump took place Last summer and it happened because lido Finance released a referral program Offering to share a portion of the eath Stake of whoever you refer to the Protocol Lido finance also added support for Tera’s anchor protocol partnered with The ledger hardware wallet to make it Possible to do liquid staking using a Cold wallet and officially added support For the solana blockchain The third speculative pump took place Last winter and it seems to have been Caused by the news that make a dao had Opened its doors to using st eth as Collateral to mint its decentralized Stable coin dye Now ldo’s most recent speculative pump Was caused by the announcement that ave Would likewise be opening its doors to Using st eth as collateral Lido finance also added support for the

Polygon side chain and of course there Was lots of hype around that 70 million Dollar raise Today ldo is trading almost 50 percent Below its opening price and appears to Be in a long-term downtrend This might have something to do with the Fact that ldo’s circulating supply has Increased from around 10 million to over 310 million over the last year and a bit Assuming an average price of a dollar Which is being generous there’s been up To 300 million dollars of cell pressure Since the ldo token began trading On the demand side the only real demand Driver seems to be speculation and that Has all but dried up with the advent of The crypto bear market This means that ldo could continue to Fall if the crypto bear market continues And you can find out when it could end Using the link in the description As always ldo’s long-term potential Depends on the upcoming milestones for Lido finance and there seems to be no Shortage of those First there’s the lido finance roadmap Which was detailed in a blog post in July last year As the title suggests lido finance’s Long-term goal is to make liquid staking Completely trustless meaning there’s no Centralized entity involved with Depositing staking or withdrawing

Cryptocurrencies on the protocol Leider finance is also obsessed with Making sure ethereum stays as Decentralized as possible and that means Opening its doors to as many beacon Chain validators as possible While simultaneously making its protocol More attractive than other Liquid-staking alternatives found on Centralized exchanges There are only two factors that don’t Make lido finance fully trustless and The first is that all withdrawals from Validators are controlled by a multi-sig Wallet with 11 signatories six of whom Must sign each withdrawal transaction Obviously that’s not very trustless nor Practical for the long term The second factor is the process of Onboarding new validators for lido Finance which you’ll recall are vetted By the lido dao Although this ensures that lido finance Validators are legit it also serves as a Point of trust and simultaneously deters More decentralization The authors note that the first factor Will eventually be solved through smart Contracts the same way it was with Protocol deposits but the second factor Will be much more difficult to address And a series of solutions such as On-chain and off-chain reputations were Proposed

In a follow-up blog post from april this Year lido finance detailed the Characteristics of a good validator set And proposed two concrete solutions for How additional validators can be Onboarded The first solution is decentralized Validator technology or dvt wherein Validators can work together to sign a Single block This allows new validators to be Onboarded as part of an existing Validator group which makes it possible For the protocol to accommodate Manipulation or failure from new Validators The second solution is node operator Scores or nos’s which will create a Reputation for each validator based on a Series of metrics potentially including Ldo stakes which could be slashed The authors specify that dvt will be Rolled out first and noses will follow No timelines were provided but i suspect Any timelines will be up to the lydo dao They also note that they will make it Possible for st eath holders to veto any Decisions made by the leido dao as an Additional layer of protection The snapshot page for the lydo dow Reveals that there are only three active Proposals the first of which just seems To be a test question The second one proposes reducing the

Referral fees for ethereum staking and The third proposes increasing the cost Of making proposals Both proposals are currently passing so Expect to see those implemented soon On the lydodaof forum there seems to be Quite a bit of discussion about adding Support for avalanche and near protocol I couldn’t help but notice that our Friend kobe aka lido finance co-founder Jordan fish is actively participating in The discussions along with well-known Ethereum developer tim baco I also noticed that the lido finance Github has a few code repositories Related to cosmos which could be Foreshadowing support for a third Proof-of-stake cryptocurrency Now if you’re unfamiliar with avalanche Near protocol or cosmos you can find out About all three projects using the links In the description Now i’d be remiss if i didn’t mention The potential concerns i have about lido Finance my first is potential bugs Lurking in the protocol and that’s Mainly because serious bugs in lidar Finances code have been discovered on Two occasions the first bug was Discovered in october last year and it Put over 20 000 eth at risk luckily the Bug was caught and fixed before an Exploit occurred The second bug was discovered in march

This year and it pertained to many front Ends for the lido finance protocol the Bug was once again caught and fixed Before any exploits occurred Now i’m pretty sure that more bugs will Continue to be discovered and that’s Because adjustments to the protocol will Continue as ethereum’s transition to Proof of stake continues This is something that’s been mentioned By the leido finance team and no matter How competent they are or how many Audits are done there will always be Room for error This ties into my second concern and That’s the potential issues that could Arise at the other layers of lido Finance specifically the other Blockchains that its liquid state assets Are being bridged to And its governance process As some of you will know st eth was one Of the assets being used as collateral In terra’s anchor protocol and when Terror collapsed in mid-may it caused st Eth to lose its peg as traders started To wonder whether it could be possible To retrieve all the st stuck on the Terra blockchain The possibility that people could start To panic sell st eth for whatever reason Is something that’s been mentioned by The leido finance team as well and in my Mind the risk of that happening will

Increase as the protocol continues to Grow along with the balances of st eth On other blockchains As for the governance vector if lido Finance continues to grow at the rate That it has it’s quite possible that it Could become the de facto governance Layer of ethereum itself once it Completes its transition to proof of Stake That’s because if one hundred percent of The eath being staked on the beacon Chain was being done through lido Finance then the lido dow would have an Unbelievable amount of influence over Ethereum itself Now the lido finance team actually Believes this is inevitable due to the Demand for liquid staking Consider that current estimates see the Protocol holding 50 of all staked eth in Just the coming months I suppose that explains why vcs are so Hungry for ldo despite its poor price Action This relates to my third concern and That’s regulation it’s clear that Regulators aren’t fans of any crypto Projects that provide a yield of any Kind particularly d5 protocols With the staking rewards on ethereum Expected to double after the merge this Could put lido finance and other Liquid-staking protocols on their radar

And it seems lido is already preparing For this upcoming regulatory storm That’s because an article on the lido Finance website notes that the protocol Is unavailable in some countries due to Quote regulatory uncertainty and though This list seems to be limited to Countries sanctioned by the united States and its allies it’s a list that Could grow really quickly for other Reasons It’s also hard to have decentralization And trustlessness as a goal while Simultaneously restricting users from Certain regions In lido finance’s defense these Restrictions are probably occurring at The infrastructure layer of ethereum Itself The infrastructure layer is just one of The many layers in a cryptocurrency’s Decentralization and you can learn all About those using the link in the Description And that’s all for today’s video about Lido finance if you found it interesting Give that like button a ping if you plan On coming back subscribe to the channel And give that notification bell a ring If you’re looking for more from me you Can head on over to coin bureau clips For exactly that Better yet tune in to the coin bureau Podcast for crypto discussions that will

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