- Lido Finance [LDO] surpassed MakerDAO [MKR] to become the biggest DeFi protocol in January 2021.
- The total value locked (TVL) of Lido’s smart contracts went past $8 billion in the same month.
- Despite its success, the native token was down 5.82% at press time.
Lido Finance Becomes Biggest DeFi Protocol
In January 2021, Lido Finance [LDO] overtook MakerDAO [MKR] to become the biggest decentralized finance (DeFi) protocol, according to DappRadar. The total value locked (TVL) of its smart contracts also crossed $8 billion during this period, showcasing a growth of over 36%. This surge in activity could be attributed to liquid-staking protocols becoming increasingly popular following Ethereum’s transition to the Proof-of-Stake algorithm.
ETH 2.0 Behind Growth?
As per DefiLlama, ETH tokens locked with Lido Finance surged by 30% in January due to the increasing staking activity. This rise can be attributed to Ethereum developers confirming the roll out of Shanghai Upgrade as users had an opportunity to earn rewards for their locked tokens. Data from IntoTheBlock revealed that ETH staked with Lido Finance was over five million at press time. Moreover, supply side fees or rewards accrued by stakers increased more than 30% while earnings jumped by 65%.
Competition From Centralized Exchanges
However, there were some worrying developments as well such as Lido’s diminishing market share in ETH staking market which currently stands at 29%, according to Dune Analytics. Additionally, it faces competition from centralized exchanges like Coinbase which could affect its TVL going forward.