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As noted in recent days, Lido DAO (LDO) has experienced large growth in investor interest. As a result, the capitalization of the LDO token has seen a 35% weekly rise, up to the time of writing.
One of the factors that caused the altcoin to grow like this was Lido DAO's strong presence in decentralized finance (DeFi). Although it went through a correction in its total value locked (TVL), this week the DeFi platform managed to overtake the market leader MakerDAO by a few hours.
Currently, even though stablecoin parent Dai is still in the lead, its lead over the staking platform is slim. For example, MakerDAO has a TVL of $6.2 billion, while Lido DAO's total value locked is $6.1 billion.
However, Lido's impressive performance and Maker's weak performance is not only seen now. With the arrival of the Merge, Lido has experienced an increase in its fee revenue commensurate with Ethereum PoS gains. On the other hand, Maker has experienced a weak revenue performance because the demand for decentralized lending has decreased on the crypto market in 2022.
But what is Lido DAO?
Lido was developed to facilitate the stake of major altcoins on the market, such as Ethereum (ETH), Solana (SOL) and Polygon (MATIC). Besides having an intuitive platform, it enables investors to stake their assets by investing a low amount of money.
A fitting example of this is the staking of ETH. For a crypto investor to be able to earn income from the altcoin, they need to have at least 32 ETH locked up. In fact, an amount that is not very affordable for most crypto investors. Lido solves this issue by offering a platform with no minimum deposits or infrastructure maintenance.
Another highlight of Lido is that Ethereum staking is liquid. Thus, it offers the ETH token, which corresponds to the amount of ETH you have staked, so that this value can be used in DeFi's modes, and its income is beyond the staking.
Its token, LDO, gives voting power to its holders. The number of DAO participants is growing, with collaborators working together to build Lido's future. To make this step bigger and bigger, the network uses the LDO token, as it is responsible for granting governance rights in the DAO.
Something may threaten Lido's growth
However, it is important for the crypto investor to know that LDO is not going up forever. First, it is valid to take into consideration that other Ethereum staking platforms are emerging and this may take a lot of market away from Lido DAO.
That movement is already starting to happen with the platform's share of the staking decreasing in early 2023 to a fraction of 29%, something it has not experienced since April 2022, according to data from Dune Analytics.
One of the factors that may have motivated this movement is the market's view on the centralization of the staking of the main smart contract platform. In order to make this modality more decentralized, alternatives are being sought by investors.
In addition to other staking platforms, Lido DAO may lose this market to cryptocurrency exchanges. After all, it is very practical to leave your ETH locked in a platform where you already buy the altcoin.