Lido Finance Hits $20 Billion TVL Milestone, but Faces Decentralization Concerns

Lido Finance, the leading liquid staking protocol, achieved a significant milestone in November 2023, surpassing $20 billion in Total Value Locked (TVL). Despite this success, there are growing concerns about the protocol's centralization, casting a shadow on its achievements.

Sharp Surge in Staked ETH

Source: DeFiLlama

The DeFi project experienced an 18.61% surge in TVL since October, reaching levels not seen since April 2022. The total value locked now exceeds the combined TVL of the second and third-ranked protocols. Lido's success is attributed to the launch of version 2, allowing users to withdraw Staked ETH [stETH] to Ethereum [ETH], increasing confidence in the staking process.

Stellar Growth in Staked ETH

Staked ETH rose to 9.27 million, a notable 5.17% increase, fueled by double-digit gains in ETH's price in November. The number of unique ETH stakers surpassed 200,000, marking a 2.96% rise from the previous month.

Not All Cheers for Lido

Source: DeFiLlama

While Lido dominates the liquid staking sector with a remarkable 77.27% market share, concerns about centralization and security risks have surfaced. Ethereum developer Evan Van Ness labeled Lido as the "biggest attack on Ethereum's decentralization," emphasizing the protocol's potential to manipulate the network if the 33% market share limit is breached.

Token Performance

Despite Lido's success in TVL, its governance token, LDO, traded at $2.30 at the time of writing, recording modest gains of just 1.6%. This tepid performance contrasts with the thriving liquid staking front, prompting a closer look at the dynamics within Lido Finance.

It's crucial to acknowledge Lido Finance's success in TVL growth, but the concerns raised about centralization and potential security risks highlight the delicate balance it faces. As the protocol continues to evolve, addressing these issues becomes paramount for sustaining long-term credibility and trust within the Ethereum community.