Lido Offers Partnership Encouraging a stETH-Based Restaking Ecosystem

  • Lido has seen outflows for several months as procedures for liquid restaking increase.

The main Ethereum liquid staking protocol, Lido, seeks to promote innovative restaking architecture centered on its stETH coin.

A plan to create the Lido Alliance and support “Ethereum-aligned” initiatives by means of a collaboration and endorsement umbrella was released on May 13 by web3 financial consultancy firm Steakhouse Financial.

By encouraging the construction of infrastructure centered around Lido’s liquid staking token (LST), stETH, the alliance would concentrate on restaking.

The alliance is working to advance three different kinds of protocols: actively delegated services (AVSs), tokens that are permissionless restaking (LRTs), and new projects that offer permissionless restaking architecture.

According to the proposal, Lido Alliance is a framework that Lido DAO can use to find and honor initiatives that have a similar goal and set of values and that can benefit the stETH ecosystem. Expanding the stETH ecosystem in line with Ethereum promotes network decentralization.

If approved, Lido would create an Alliance workgroup whose duties would include evaluating potential new members, supporting current members, and terminating those who are thought to be in violation of the alliance’s alignment with Ethereum or stETH.

The holders of LDO tokens would oversee the Alliance’s membership and activities.

The idea is made at a time when EigenLayer and liquid restaking token (LRT) protocols are posing a serious threat to Lido’s market share in relation to staked Ethereum.

By assigning staked assets to validate third-party AVSs installed on EigenLayer, which is presently positioned as Ethereum’s only significant restaking protocol, restaking enables users to earn additional yields on top of Ethereum staking benefits.

Lido’s market share has been declining recently because to the rising popularity of restaking, with users removing $1.4 billion worth of Ether from the platform in 30 days as of April 24. In contrast, within the same time period, the LRT protocols Renzo and EtherFi saw inflows of $429 million and $1.2 billion, respectively.

Since then, there has been no end to the trend of LRT protocols eating Lido’s lunch. Over the last 30 days, $151.7 million worth of Ether has left Lido, with EtherFi and Renzo reporting inflows of $396.4 million and $324.5 million, respectively.

StETH’s share of the staked Ethereum supply is at 28.7%, down from a peak of 32.5% in September. Therefore, according to DeFi Llama, Lido is the largest DeFi protocol with a total value locked (TVL) of $27.4 billion, followed by EigenLayer with over $14.5 billion.

Lido’s strategic advisor Hasu published a governance proposal on May 10th, with the aim of formalizing Lido’s position on restaking.

The proposal seeks to enable Ethereum-aligned validator services, establish stETH as the primary collateral asset utilized within restaking, and confirm that stETH should stay an LST token and not migrate to an LRT.

Network effects dominate the staking market and create a winner-take-most dynamic. Lido ought to adjust to the shifting tides.

Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.

Author: Puskar Pande

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