The topics in the article include
1) Ethereum 2.0 staking issues that are happening right now
2) What is Lido?
3) Tokenomics Analysis of “LDO” Highlights Lido Key and Its Risks
4) How to Optimize Yield with “stETH”
For those of you who already know the working principle of Lido, you can read Sections 3 and 4 that analyze LDO tokenomics and how to optimize the yield with stETH.
1) Ethereum 2.0 staking issues that are happening right now
Over the past year, Ethereum has given users the ability to stake our ETH in the Beacon Chain, a chain built to support the future transformation of the Ethereum network into Ethereum 2.0. In June of this year, Beacon Chain (Proof of Stake) and Ethereum Mainnet (Proof of Work) will be merged in a process known as “The Merge” to make the Ethereum network more secure. Transaction fees are reduced. More transactions are supported.
Many centralized exchanges such as Coinbase or Binance are now offering their clients the ability to stake their ETH to earn additional rewards, but the downside is that ETH is locked until the process. Merge will be completed. This is an opportunity cost for those who want to stake ETH on the exchange will have to face it. And if The Merge process is completed later than planned, their ETH cannot be withdrawn.
The Beacon Chain network is not the same. Infrastructure Other Proof of Stake systems like Fantom, Tezos that allow users to directly select stakes with the Validator Node and can choose how many stakes they want with a very low minimum. But if we want to stake ETH without going through a centralized exchange, we need a minimum amount of ETH 32 ETH (or about 2 million baht) in order to open a validator node by ourselves. It’s not worth spending money on this. Plus, stake with the Validator Node when we want to withdraw money. May have to wait up to 21-28 days for the money to enter the wallet as well.
Lido is the platform that was born to solve all the problems here.
2) What is Lido?
Lido is a Liquid Staking Platform that allows users to staking their ETH without locking them in. And there is no minimum deposit required. Lido not only supports Ethereum chain, it also supports staking from Solana, Kusama and Polygon side. TVL) ranked 4th out of the total, or about 8,410 million US dollars.
After we deposit ETH into Lido, we will receive stETH, a 1:1 Yield-Bearing Token that will increase in value daily based on the Yield Rewards earned, minus the slashing cost if the Validator Node led by Lido. To be deposited with the performance that is not good enough.
3) Tokenomics Analysis of “LDO” Highlights Lido Key and Its Risks
LDO is a Lido Governance Token that is not distributed as an Incentive like most DEX platforms in the beginning. On December 28th, Lido airdrops 4,000,000 LDO coins to early users, those who deposit LP stETH : ETH pairs on Uniswap and those who deposit yvstETH in Yearn Finance’s Vaults amounting to 4,000,000. LDO for the right to vote on the future direction of the platform.
Lido charges 10% of the rewards we earn for stakes, of which 5% goes to the Validator Node that Lido stakes and the other 5% goes to the DAO Treasury. The implied is 5% of the total revenue the platform earns. will be reflected directly to the value of the LDO.
Today, Lido has a past year of cumulative stake earnings of $204 million (according to the website TokenTerminal) and if you try to look at the graph, you will see that The platform’s revenue is constantly increasing. This indicates a huge increase in demand for stake ETH and other coins. At the time of writing, there are $9.8 billion in Etherum in Lido, or roughly 2,904,137 ETH.
In the future, after Ethereum was converted to Proof of Stake, analysts predicted that the rewards for staking from the original part had to be shared between miners and those staking only around 4 – 5%. Only, it will be bounced to 10-15%, since all the people who stake earn Rewards are not allocated to the Miners, thus the more revenue from the Lido platform increases. The more it reflects on the price of LDO.
Let’s look at the allocation ratio of LDO first. LDO has a Total Supply of 1,000,000 LDO and its distribution is as follows: 36.32% to DAO Treasury, 22.18% to Investors, 20% to early Lido developers. , 15% to owners and employees, and 6% to the Validator Node, where Lido is also staked. Currently, the only DEX with LDO distribution to people who deposit liquidity is Curve Finance ( stETH/ETH pools) means that LDO’s Sell Pressure is very low compared to other DApps Governance Tokens distributed across all pools on that platform.
And the DAO Treasury is for other Incentive Liquidity Mining Programs that are coming up in the future. Including as a collateral for slashing. As described above, we can see that Lido holds 5% of the revenue Stakers will earn into the DAO Treasury. It’s like buying back LDO directly into the wallet of the platform. Including the income of the platform that is increasing today. This further decreases the amount of LDO available in the market, making the LDO price more likely to go up in the future.
But another risk to be aware of is that the Investor and Team allocation ratio is considered too high, the Investor and Team LDO ratio is locked for one year. And there will be a linear release for another year starting on December 17 last year.
This implies that Investor and Team will have a partial sell-off after the token has been unlocked. The sell-off ratio is as high as almost 60% (22.18% to Investors, 20% to early Lido developers, 15% to owners and employees), but in reality the chances are slim. Very much that the team will have a heavy sales. There may be only a lot of Take Profit out there.
4) Optimize Yield with “stETH”
As mentioned above, the stETH we get after depositing ETH with Lido, we can use stETH to play tricks to double our returns. The example below is only applicable to the Ethereum ecosystem.
stETH : ETH in Curve Finance, Balancer gains average APY about 5.5 – 6%.
stETH pledged as collateral in Aave V2
wstETH put in MakerDAO Vaults to recover DAI (must exchange stETH for wstETH first)
Or for Solana, you can also deposit stSOL with LP stSOL/SOL in Raydium, thus increasing your chances of getting more returns. It can also control the risk of liquidation in case of depositing money in the Lending platform as well.
Lido’s current market cap is $358,147,641 or about 12,177,019,794 baht, ranked 107 (according to the website Coinmarketcap) has a circulating supply of 312,951,153 LDOs out of a total of 1,000,000,000 LDOs, a 24-hour high of $1.22 and a 24-hour low of $1.14. LDO can be traded on leading exchanges such as Binance, Gate.io, Gemini, Bybit.
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