The Ultimate Lido Finance Review

Summary

The script introduces Lido, a staking service that simplifies the process for users and has amassed significant stake, raising concerns about its power over top blockchains. Lido addresses staking difficulties and liquidity issues, offering a solution with its stETH token. Despite impressive growth and adoption, concerns arise from Lido's tokenomics, centralized distribution, and unclear token emissions schedule. The future roadmap includes decentralization and governance improvements, but the script concludes with a cautious stance on investing in Lido's LDO token due to these issues.

Takeaways

• 🚀 Lido is a staking service, not a blockchain, that simplifies the staking process on various blockchains.
• 💰 The staking market, where Lido operates, is huge, currently exceeding $50 billion and expected to grow further.
• 🔒 Lido addresses two main problems: the difficulty of staking independently and the loss of liquidity and flexibility during staking.
• 📈 Lido's staked ETH token (stETH) can be traded or used in DeFi protocols, offering users more flexibility and liquidity.
• 🛡️ Lido's system delegates the staking process to validators without giving them direct access to users' funds, enhancing security.
• 🌍 Lido has experienced significant growth, becoming the largest depositor of staked ETH on the Beacon Chain with over $7 billion staked.
• 🚩 The LDO token, used for governance, has three red flags: poor value capture, centralized distribution, and unclear token emissions.
• 🔧 Lido's roadmap includes improving decentralization, governance processes, and expanding to other blockchains beyond Ethereum.
• 🏆 Lido faces competition from both centralized entities like Coinbase and decentralized projects like Rocket Pool.
• ⚖️ The final verdict on Lido is positive, especially for its service, but caution is advised regarding its LDO token due to weak tokenomics.

Q & A

What is the name of the staking project discussed in the transcript?

The name of the staking project is Lido.

What does Lido aim to solve in the staking process?

Lido aims to solve two main problems: the difficulty of staking by oneself due to technical requirements and the loss of liquidity and flexibility when coins are staked.

What is the token symbol for Lido's project?

The token symbol for Lido's project is LDO.

How does Lido handle the staking of Ethereum?

Lido stakes Ethereum on behalf of users by receiving ETH in their staking pool smart contract, staking it, and giving users their own stETH token in return.

What is the advantage of using Lido's stETH token over traditional staking?

The stETH token can be traded or used in DeFi protocols as if it were actual ETH, providing liquidity and flexibility while still allowing users to earn staking rewards.

How does Lido ensure security for the staked funds?

Lido does not give direct access to the staked funds to validators; instead, it delegates to them, which is more secure.

What is the current state of Lido's growth and adoption?

Lido has experienced significant growth, with a large amount of ETH staked through their platform, making them the largest depositor of staked ETH on the Beacon Chain.

What are the three red flags mentioned regarding Lido's tokenomics?

The three red flags are: 1) LDO is currently only for governance and does not capture value through fee sharing or buybacks, 2) The token distribution is highly centralized with a significant portion allocated to insiders, and 3) There is a lack of clarity on token emissions and the unlocking schedule.

What is Lido's approach to improving centralization issues?

Lido plans to create a permission list to allow anyone to become a validator, reducing the need for approval by their DAO.

What is the final verdict score given to Lido in the transcript?

The final verdict score given to Lido is 7 out of 10.

What are some of Lido's competitors in the staking market?

Some of Lido's competitors include Coinbase, which is the second-largest entity for ETH2 deposits, and Rocket Pool, a decentralized competitor that supports Ethereum.

Outlines

00:00

🚀 Introduction to Lido Staking Service

The video script introduces Lido, a staking service that simplifies the process of staking on various blockchains. It emphasizes Lido's significant stake accumulation, which has raised concerns about its influence over top blockchains. The narrator contemplates whether to invest in Lido's token, LDO, and decides to evaluate the project across six categories. The staking market's vast potential, especially with the growth of proof-of-stake blockchains and Ethereum's upgrade to proof-of-stake, positions Lido for substantial growth. The script outlines two main staking issues: the technical difficulty and risk of running a validator node and the loss of liquidity when coins are staked. Lido addresses these by providing a user-friendly staking pool and a stETH token that maintains liquidity, allowing users to earn staking rewards passively.

05:02

💡 Lido's Technology and Market Adoption

This section delves into Lido's technology, explaining how users can stake their ETH through a smart contract, receive stETH tokens in return, and enjoy the benefits of staking without the complexities and risks. The stETH tokens can be traded or used in DeFi protocols, and holders accumulate staking rewards through a re-basing process. The script also discusses Lido's validator system, which enhances security by not giving validators direct access to staked funds. The narrator rates Lido's solution and technology highly, praising its elegant approach to solving staking challenges. The growth and adoption of Lido are then highlighted, showcasing its impressive user base and the amount of ETH staked, which indicates a successful capturing of the staking market opportunity. The integration of stETH in various DeFi platforms contributes to its network effects and attractiveness to users.

10:03

🔍 Lido's Tokenomics and Future Outlook

The final paragraph examines Lido's tokenomics and future roadmap. It points out several red flags, including the token's limited utility for governance without fee sharing or buybacks, a highly centralized token distribution, and an unclear token emission schedule, which could lead to market unpredictability and manipulation. Despite these concerns, the script acknowledges Lido's solid growth and presents its roadmap, which includes plans to reduce centralization, strengthen governance, and expand support to other blockchains beyond Ethereum. The competitive landscape is also discussed, noting the presence of rivals like Coinbase and Rocket Pool. The narrator concludes with a measured verdict, appreciating Lido's service but advising caution regarding the LDO token due to its tokenomics. The script ends with a prompt to watch another review video for a comparative perspective.

Keywords

💡Staking

Staking is the process of participating in the validation of transactions on a blockchain network by locking up a certain amount of cryptocurrency. In the video, staking is central to the discussion, as Lido is a service that facilitates staking on various blockchains, addressing common challenges such as high entry barriers and the need for technical expertise.

💡Proof-of-Stake (PoS)

Proof-of-Stake (PoS) is a consensus mechanism used by some blockchains, where validators are chosen to add the next block based on the number of coins they hold and are willing to 'stake' as collateral. The video highlights the growing importance of PoS blockchains and how Lido taps into this market by simplifying the staking process for users.

💡Lido

Lido is the main project discussed in the video, which provides a staking service that allows users to stake their assets on multiple blockchains without dealing with the complexities of running validator nodes. Lido's solution is praised for its simplicity and security, and the video analyzes its market opportunity, technology, and future prospects.

💡LDO Token

The LDO token is Lido's native governance token. The video discusses the tokenomics of LDO, pointing out its role in governance but criticizing it for not capturing value directly from Lido’s staking services. The token’s centralized distribution and lack of a clear emission schedule are highlighted as major concerns for potential investors.

💡Validator

Validators are entities or individuals responsible for verifying and adding new blocks to the blockchain. In the context of Lido, validators play a crucial role by using staked assets to perform these tasks. Lido delegates the staked assets to approved validators, ensuring security and decentralization.

💡StETH (Staked ETH)

StETH is a token given to users who stake their Ethereum through Lido. It represents their staked ETH and can be used in various DeFi applications while still accruing staking rewards. The video emphasizes how StETH enhances liquidity and flexibility for stakers, making Lido’s service more attractive.

💡Rebasing

Rebasing is a process by which the balance of a token like StETH is automatically adjusted to reflect staking rewards. The video explains that users holding StETH will see their balance increase daily without needing to perform any transactions, which simplifies the reward distribution process.

💡Market Opportunity

Market Opportunity refers to the potential for growth and profitability in a specific market. The video rates Lido’s market opportunity highly, noting that the staking market is vast and expanding, particularly with Ethereum’s transition to PoS. This sets the stage for Lido to capture a significant share of this growing market.

💡Tokenomics

Tokenomics is the study of the economic model and distribution of a cryptocurrency token. The video provides a critical view of Lido's tokenomics, pointing out the issues with LDO's value capture, centralized distribution, and the lack of a clear emission schedule, which could lead to uncertainty and price manipulation.

💡Decentralization

Decentralization refers to the distribution of power and control away from a central authority. The video discusses the importance of decentralization in Lido's governance and validator selection process, noting that Lido plans to make the validator selection process more permissionless in the future to reduce centralization risks.

Highlights

Introduction of Lido, a staking project with a unique service model that doesn't involve a traditional layer one blockchain.

Lido's accumulated stake has raised concerns about the power it wields over top blockchains.

Evaluation of Lido's token, LDO, across six different categories for a comprehensive analysis.

The staking market's vast potential, with over 50 billion dollars staked and significant room for growth.

Lido's solution to two main staking problems: difficulty of self-staking and loss of liquidity.

How Lido works: staking ETH and receiving stETH tokens that can be traded or used in DeFi protocols.

Lido's validators operate without direct access to staked funds, enhancing security.

Technology rating of 8 out of 10 for Lido's elegant solution to staking challenges.

Impressive growth and adoption of Lido, with a significant amount of ETH staked.

Lido's staked ETH token, stETH, is widely integrated across various DeFi platforms.

Tokenomics red flags for Lido, including lack of value capture and centralized token distribution.

Lido's roadmap includes plans to improve centralization and governance processes.

Lido's expansion to other chains beyond Ethereum as part of their future vision.

Competitive analysis comparing Lido with Coinbase and Rocket Pool in the staking market.

Final verdict of 7 out of 10 for Lido, highlighting its value but concerns over LDO tokenomics.

Sponsorship mention of Bits Gap, a trading bots platform offering various strategies for different market conditions.

Transcripts

i just discovered a staking project

that's gonna blow your mind but it's not

what you're thinking because it's not

some boring old layer one blockchain

instead it's a service that helps you

stake on those chains this project has

accumulated so much stake that people

are starting to worry about the amount

of power they have over the top

blockchains but all i'm thinking is dang

should i buy their token well to answer

that question let's evaluate them across

six different categories and then end

with my final verdict so the name of

this project is lido and their token

symbol is ldo but before we analyze

their token we got to look at its

overall market opportunity because a

project could be amazing but if its

market size is too small then we don't

want to touch it right it could be the

best project ever and capture 100 of

their niche but if their niche is only

worth like 1 billion dollars then

there's not a lot of room for growth

fortunately this is not a problem for

lido at all they are in the staking

market which is huge if we look at all

the proof-of-stake blockchains out there

and then add up the amount that people

have staked on them then we get a number

north of 50 billion dollars and i bet

that will continue to grow as more

proof-of-stake blockchains launch and as

more people decide to stake for passive

income ethereum will also

single-handedly boost the staking market

once they complete their upgrade to

proof-of-stake right now their staking

participation rate is only 10

so there's a lot of room for growth and

that 90

unstaked amount represents pure

opportunity for projects like lido to be

more specific lido solves two main

problems when it comes to staking the

first problem is that staking by

yourself is quite difficult some

blockchains require a minimum amount of

stake which could be in the tens of

thousands of dollars and even if you

have that you'd have to run some

complicated validator hardware which

requires technical skills that most

people don't have if you try running a

validator node and mess up you could

lose some of your staked coins through a

process called slashing which makes the

whole thing risky for beginners now the

second problem is that you lose

liquidity and flexibility when you stake

your coins because they're effectively

locked up and that's why a lot of people

don't want to deal with staking they

want the flexibility to use or trade

their coins whenever they want so by

addressing both of these issues lido is

able to serve the majority of users who

are interested in staking that's why i

rate their market opportunity a 9 out of

10. their opportunity is pretty much as

big as the staking market gets but in

order to capture their market

effectively they gotta have a great

solution and great technology so let's

see if they do by first understanding

how it all works so you start by sending

eth to their staking pool smart contract

they stake that eighth for you and they

give you their own state eath token or

st eth in return this st eth you can

trade it or use it in d5 protocols as if

it were actual eth but if you hold that

token in your wallet you can accumulate

eight staking rewards it gets sent to

you through a process called re-basing

and you don't have to do anything to get

it your st balance is updated once a day

to reflect your staking rewards and

there's no transaction needed you also

don't have to pay anything extra to use

lido they just deduct a 10 cut from your

staking rewards by the way this ste

token that you get you will eventually

be able to swap it back for each on a

one-to-one basis a few months after the

merge upgrade happens okay so that's how

lido works but we're still missing a key

part of their system they're validators

or node operators they are the ones that

are actually using the staked eth to do

the consensus work for ethereum like

they process transactions they store

data and they add blocks to the

blockchain but with lido's approach

those validators do not have direct

access to our staked funds because lido

doesn't send our coins directly to the

validators they delegate to them instead

which is much better in terms of

security and for their work lido

validators get a 5 cut of the staking

rewards overall i think their solution

is elegant and solves the problem well

that's why i'm giving them an 8 out of

10 when it comes to technology but just

how well has their tech translated into

actual growth and adoption well let's

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below all right back to lido's growth

and adoption and i gotta say that i am

impressed by how far they've come just

look at this graph showing the amount of

eighth staked with lido it's certified

rocket ship and if we look at this chart

we see that lido is the largest

depositor of state eth on the beacon

chain more than double of the number two

entity coinbase lido also supports more

than just ethereum they have five

networks supported in total and

collectively there's around seven

billion dollars staked from over 175 000

users perhaps one reason that explains

this meteoric growth is that they've

done a great job at getting their staked

eath token integrated everywhere like

the curve pool for st eth and eth has

the highest total value locked in it

that pool even beats out the most

popular stablecoin pools like the one

for dye usdc and usdt you can also use

ste to do lending and borrowing through

ave or use it to mint die through maker

dao so we're starting to see real

network effects emerge for st east and

guess what that's gonna get even more

people to stake with them because

there's no reason not to if you can use

your ste as if it were ethe itself

overall lido's growth speaks for itself

and that's why i'm giving them an 8 out

of 10 for this aspect so we got all

these 8 out of 10 and 9 out of 10

ratings so that must mean that the token

is a buy right well not so fast because

i found three red flags when researching

their tokenomics first their token is

terrible at capturing value because ldo

is only for governance currently so if

you hold it you don't get a share of the

generated fees and they aren't doing

token buybacks either that means even if

their service gets more and more popular

it won't necessarily translate into

price appreciation for their token as

for their second red flag it's that

their token distribution is super

centralized like 64 of their initial

distribution was allocated to insiders

and even right now if you look at the

top 100 holders they have 91 of the

overall supply this means that whales

could easily manipulate the price of ldo

if they wanted to and the third red flag

is that we just don't know much about

their token emissions there's literally

no schedule as to when more of the

tokens will hit the market it's all up

to the dow's discretion and they can

release tokens whenever they please

currently there's 60 percent of their

supply circulating so a whopping 40

percent is yet to hit the markets and

that's not good from an investment

standpoint because we want to know what

the unlocked schedule is so that we can

be prepared for selling pressure overall

i'm not a fan of the tokenomics and i'm

giving them a 4 out of 10 in this

category now so far we've only looked at

the past but the future is what really

matters right so let's turn to the

roadmap to see if they have a convincing

vision and plan and one thing they want

to do is improve the centralization for

their project to do that they're going

to make a permission list to become a

validator for lido as of right now you

have to apply and get approved by their

dow in order to become one but in the

future they want to make it so that

anyone can join something else they're

working on is improving their governance

process to make it more robust and

resilient to capture this is actually

super important for ethereum because if

lido controls enough of the stake then

they'd have the power to screw with the

blockchain's operations so we really

don't want them to get corrupted and

that's why the team put it on their

roadmap to strengthen their governance

processes now another major goal of

theirs is to turn to other chains

besides just ethereum they started with

eth and once they found success there

they slowly expanded to other chains so

i expect that expansion to continue and

for them to improve their offerings for

those other chains too overall i think

they're headed in the right direction

plus they have a great track record so

i'm giving them a 7 out of 10 in this

area now lido is without a doubt the top

dog in their niche but they just can't

relax and pat themselves on the back

because they got competitors gunning for

them and the staking vertical like from

the centralized side there's coinbase

who's the second largest entity for eth2

deposits besides lido and coinbase

recently launched their own version of

staked eath called cb eth which you can

also use outside of their exchange

honestly coinbase looks formidable given

their millions of users and their solid

brand reputation and on the

decentralized side lido has competitors

such as rocket pool now rocket pool is a

lot smaller and they only support

ethereum but their rpl token is arguably

better than lido because it has actual

utility besides just governance for

example rocket pool validators have to

stake rpl in order to participate so if

their service becomes more popular then

that translates into direct demand for

rpl overall i think lido is in a good

place right now and they don't have too

much to worry about but in terms of

competitive advantage i'm giving them a

6 out of 10. alright it's time for my

final verdict and i'm giving them a 7

out of 10. i think lido is super

valuable and i wouldn't hesitate to use

it myself but as of right now i would

not touch their ldo token because

tokenomics matter and theirs is not

great remember i gave them a 4 out of 10

in that category either way we got to

keep our eyes on them to see how they

evolve and if you want to watch another

review video then catch this one about

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