Introduction

Lido is a decentralized autonomous organization that provides a liquid staking protocol for Ethereum 2.0. It allows users to stake their ETH into the ETH2 contract and receive the liquid token in the form of stETH. The stETH token is pegged to ETH in a 1:1 ratio. stETH holders can utilize these tokens in DeFi ecosystems such as Yearn, Curve, Maker, etc. while gaining ETH2 rewards from staking. This nullifies the downsides of directly staking into the ETH2 contract such as illiquidity, immovability, and inaccessibility. The fact that Lido allows its users to use their staked ETH tokens (in the form of stETH) is one of the major advantages of this protocol over others which encourages people to stake their ETH on their platform.

Methodology

The volume of staked ETH with Lido has been calculated using the data on the ez_eth_transfers table of the ethereum.core schema. The contract address and the total amount of staked Ethereum were selected from the information mentioned in the Stake Ether page of Lido's website.

> Address: 0xae7ab96520de3a18e5e111b5eaab095312d7fe84

Analysis

Since the launch of Lido and its Ethereum staking protocol, a total of 4.14 million ETH tokens have been staked within the platform accounting for more than a $12B valuation. Considering the current price of ETH, the wallet addresses that staked ETH have nearly lost 50% of their holdings in terms of their USD value.

The daily volume of staked ETH within Lido has demonstrated an obvious decrease of the volume in the past 3 months. The whole crypto market has been in a massive downtrend since the beginning of April, and although there were spikes of staked ETH during this month, with the crash of Terra in mid-May, the volume of staking has immensely dropped to even levels below $1M.

Conclusion

Overall, it can be seen that the interest in the decentralized finance protocols has been hugely dropped since the Terra crash. Both the venture capital and the retail investors become more cautious before putting their capital into these protocols. Although Lido has slightly above 3% of the total circulating supply of ETH with more than 4M staked ETH within its platform, its continuation is heavily reliant on the 1:1 peg of stETH to ETH. If for a reason, the pair starts to deppeg, the Lido will face a situation of insolvency which might result in the liquidation of people's assets and ultimately, a major drop in the price of Ethereum. Besides, there are external factors such as geopolitical unrest in Europe and high inflation rates over the globe that resulted in the measures that further slow down the economy. The risk tolerance of people in bear markets is completely different and with the delayed Ethereum 2.0 merge, the confidence in the network will decrease as well over time.