Lido Finance surpasses MakerDAO as biggest Total Value Locked
Blockworks • January 09, 2023
This week, amid a surge in interest in liquid staking protocols, Lido Finance momentarily has overtaken Maker as the largest DeFi protocol.
According to information from defillama.com, Lido overtook Maker in TVL on Tuesday, something it had not frequently done in the previous year. Both protocols reached $6 billion in TVL on Wednesday, but they are still a far away from the almost $8 billion they had before FTX's collapse in early November.
Ethereum does not yet permit users to withdraw their staked tokens, in contrast to other proof-of-stake systems. Withdrawals will be made possible through a software upgrade code-named "Shanghai" that core engineers are currently developing.
Redemptions will be great for the ecosystem and not allow the first-mover to stay ahead without further decentralization. The possibility of withdrawals means that participants can more effectively move their assets while giving less uncertainty.
According to Dan Smith, a researcher at Blockworks, the lack of such an arbitrage opportunity between ETH and its derivatives, like Lido's stETH, has put pressure on liquid staking providers. As Smith noted in Blockworks' year-in-review, "one of the problems for staking derivatives throughout this year, particularly stETH, has been the ability to maintain price parity with ETH owing to the inability to directly arbitrage via withdrawals." This should therefore help alleviate concerns about prices while also enabling consumers to buy ETH if they so want.