- Lido is losing market share.
- But the world’s second largest liquid staking protocol has a plan.
- It hinges on the outcome of a crucial $10 million grant vote.
Lido is at a crossroads.
The $17 billion liquid staking protocol has already become the leading player in its field, having captured 27% of the Ethereum staking market.
But a new proposal aims to pump that share and fight off competition from startups and rival services from industry giants like Binance and Coinbase.
The cooperative that governs the protocol is voting on a $10 million grant funding request with the goals of increasing Lido’s market share to over 30%, getting more institutions to use the protocol, and building brand awareness.
Lido’s overall operating budget, which the grant proposal is a part of, is a jump from last year, Pol Lanski, CEO of blockchain infrastructure firm Dappnode and Lido DAO delegate, said on X.
Last year Lido spent just over $47 million. This year, Lanski said, it’s around $65 million. Lanski voted in favour of the grant.
The vote comes as Lido’s share of the liquid staking market has fallen from a high of 92% to 68% — the lowest level since January 2021, according to DefiLlama data.
The proposal aims to claw back some of that lost ground.
Lido is the second largest protocol behind DeFi lender Aave. The liquid staking sector in total holds $25 billion worth of Ether for users.
Competitive market
Lido lets investors stake Ether for a 3% annual yield and receive stETH, a tradable version of staked Ether investors can use in DeFi.
This is different to conventional staking where tokens are locked up while staked, and cannot be utilised elsewhere.
So far, the Lido grant vote has received near-unanimous approval from token holders, with some 43 million token votes cast in favour and just 22 against.
Lido’s focus is to use the grant to encourage other DeFi protocols to integrate with Lido and use stETH.
This will involve targeted outreach to protocols, development of integration guides and technical documentation, and the creation of incentive programmes for protocols integrating stETH.
It will also go towards the creation of dedicated institutional onboarding processes, integrating stETH at regulated platforms, and running education sessions and workshops for institutional users.
But expanding its already dominant position in a highly competitive market is easier said than done.
Since its April 2023 launch, Binance’s liquid staking product wBETH has challenged Lido’s market dominance. It now occupies almost 15% of the liquid staking market and is the second biggest liquid staking token behind Lido’s stETH.
Targeting institutions
The grant proposal is part of Lido’s bigger push to sway institutions to use the protocol.
In August, Lido launched an institutional arm to cater to crypto-curious hedge funds, family offices, venture capitalist firms, investment funds and trading firms.
This came with a focus on additional features, like segregated staking pools with know-your-customer checks, designed specifically for institutional clients, Kean Gilbert, Lido’s institutional relations lead, previously told DL News.
The vote closes on March 24.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.