In cryptocurrency and blockchain technology, new projects and ideas are constantly emerging that can dramatically change certain aspects of our lives. One such exciting and promising project is Lido DAO.
In this article, we will look at what Lido DAO is, what its tokenomics are based on, and its prospects and significant drawbacks.
For those new to cryptocurrencies and blockchain technology, this article will help to understand the basics and nuances of Lido DAO and its place in the world of the crypto industry. Additionally, we recommend studying our previous articles on decentralized autonomous organizations.
General information on the Lido project
|LIdo native token
|Official social networks
|Twitter, Discord, Telegram
|Where LDO tokens traded
|Uniswap, PancakeSwap, Curve, Raydium, SushiSwap
What is Lido?
Lido is a decentralized autonomous organization created to manage the Lido stacking protocol.
This protocol allows crypto-enthusiasts to participate in Ethereum 2.0 cryptocurrency stacking without having to have 32 ETH, which is required to participate in ETH 2.0 validators stacking program.
Instead, users can put any amount of ETH into Lido and receive stETH tokens in return, representing their staked share of the overall stacking pool.
History of the creation of the Lido DAO
The idea for Lido DAO originated from observing the development process of Ethereum’s next-generation blockchain, Ethereum 2.0. Its main goal is to increase the network’s efficiency, security, and scalability by implementing another consensus model called Proof-of-Stake (Ethereum previously worked with Proof-of-Work).
Under this model, users freeze their shares in ether (ETH), getting to participate in the process of transaction validation and rewards for this activity.
The main problem was that you had at least 32 ETH to participate in Ethereum 2.0 stacking, significantly limiting what most crypto-enthusiasts could do.
Lido DAO acted (and continues to act) as an answer to the challenges and limitations of traditional Ethereum 2.0 steaking. The project provides the ability to participate in steaking regardless of the amount of ETH the crypto-enthusiast has, making the steaking process accessible to the masses.
Image source: Messari
Lido DAO also promotes flexibility and diversification of the staking experience by providing stETH tokens that can be used within the decentralized finance (DeFi) ecosystem.
In 2020, when the main trend was the development of the DeFi ecosystem and the emergence of new exciting projects in this area, the Lido DAO team officially announced the launch of its platform. The decentralized organization owes its creation to a group of cryptocurrency experts and enthusiasts who envisioned making a new standard for ETH stacking a reality.
In a short period, the Lido DAO team developed a full-fledged, efficient steaming protocol that offers users a simple and intuitive interaction with the platform. Not only ETH, but also MATIC, DOT, SOL, and KSM can be stacked.
In addition, Lido provides double protection for users’ portfolios by applying separate storage of funds and automated protection against loss of control of funds in long-term stacking on Ethereum 2.0.
Lido project’s main features
The Lido protocol has several key features that make it attractive to users of Ethereum and other cryptocurrencies.
These features include:
- No minimum capital thresholds. Unlike staking in Ethereum 2.0, where users are required to have at least 32 ETH to participate, Lido opens up staking to everyone by allowing the user to block any amount of ETH;
- Liquidity of blocked funds. Ethereum 2.0 stacking participants cannot dispose of their funds for some time. However, Lido offers stETH tokens in exchange for your blocked ETH, thereby enabling their use and exchange in the Decentralized Finance Ecosystem (DeFi);
- Decentralized governance. Lido DAO is managed by the community using the LDO token, providing transparency and protection from centralized power;
- Automatic computation of rewards. The protocol automatically calculates and accrues rewards for staking, making the process of participation more convenient for crypto-enthusiasts;
- Working with different blockchains. Lido allows stacking other cryptocurrencies such as Solana (SOL), Polygon (MATIC), and others.
Investors and project funding
As for investors, since its inception, the platform has attracted the attention of many well-known funds and crypto-enthusiasts who have supported the project financially.
According to Crunchbase, Lido, a prominent player in the decentralized finance (DeFi) space, has successfully secured an impressive funding amount of $167 million across four funding rounds. The latest funding round was concluded on September 14, 2022, further strengthening Lido’s financial standing and growth prospects.
The remarkable funding achievements of Lido are attributed to the support and investment of seven notable investors. Among them, Dragonfly Capital and Andreessen Horowitz have emerged as the most recent investors, bringing their expertise and resources to propel Lido’s mission forward.
By attracting diverse investors and accumulating substantial funding, Lido solidifies its position as a critical player in the DeFi landscape. With its innovative solutions and commitment to unlocking the potential of decentralized finance, Lido is well-positioned to continue making a significant impact in the industry.
Lido native token – LDO
LDO tokenomics is a complex and elaborate model for creating, distributing, and using a native Lido DAO token.
To begin with, the LDO token is used to manage the Lido DAO protocol, allowing its holders to vote on various proposals and decisions regarding the development and improvement of the stacking protocol.
Also, this native token is used to stimulate various activities related to the development and support of the protocol. We should remember commissions because LDO is used to pay commissions within the staking protocol and other services of Lido DAO.
As for the issuance of the LDO token, it was conceived in such a way as to ensure the extensive distribution of tokens among the participants of the ecosystem.
It was carried out in several stages:
- Token sales. A portion of the initial issuance was sold to investors to raise funds to develop the platform and support its operations;
- Reserve for the team and advisors. A certain percentage of the initial issue was allocated to the team and advisors of the project to motivate them to work effectively on the development of the organization;
- Rewards for participants. Most of the LDO tokens were allocated for distribution as rewards to the platform itself;
- Lido DAO treasury. A significant percentage of the LDO tokens have been saved in a special treasure (vault) to fund various initiatives to develop Lido DAO.
Pros and cons of Lido DAO
- Availability of Ethereum 2.0 stacking to all users, with no minimum capital thresholds;
- Ability to use stETH tokens in DeFi-protocols, which makes stacking more flexible and attractive;
- Decentralization of protocol management and development through the DAO model;
- Attracting large investors and community trust.
- Possible risks associated with decentralized governance and decision-making;
- Difficulty understanding and using the protocol for those new to cryptocurrencies.
Lido DAO is a promising and exciting project that makes it much easier for crypto-enthusiasts to participate in Ethereum 2.0 stacking. Thanks to the decentralization of management through the DAO mechanism, Lido could become one of the leading projects in stacking and DeFi shortly (if it is not already).
But, as is tradition, we remind you that this is a review article, not a call to action. The best and safest option is to conduct your own DYOR before investing in any particular project.