Ethereum (ETH) and decentralized finance (DeFi) are undergoing a seismic shift, as the transition to Eth2 and a proof-of-stakes consensus mechanism is helping to increase the value proposition for the networkwhich has historically been plagued by scaling issues and high transaction costs.
Alongside this transition has been the introduction of liquid staking, which is helping to add utility to DeFi and giving investors the option to do more with their assets than simply lock them up indefinitely. Liquid staking could also help investors build more capital efficient portfolios.
One protocol that has benefited from the shift to liquid staking is Lido (LDO), a platform that allows investors to earn staking rewards on their tokens while allowing them to put the resulting LP tokens to work on a variety of trading protocols. decentralized finance (DeFi).
The data from Cointelegraph Markets Pro and TradingView they show that the price of LDO has risen 28% from a low of $1.27 on Feb 21 to a daily high of $1.64 on Feb 22.
Three reasons for the LDO price reversal include the launch of support for Kusama (KSM) staking, an increase in the total value locked in the protocol, and the growing popularity of liquid staking in the cryptocurrency market.
LIDO adds KSM staking
The most recent addition to the Lido platform has been the addition of Kusama liquid staking.
Lido for Kusama on Moonriver is here ️
Stake your KSM with Lido for daily rewards and to put your staked assets to use across the Kusama DeFi space.
Learn more here: https://t.co/BOqLg6oFAv
— Lido (@LidoFinance) February 18, 2022
This integration has been made possible through a development partnership with the Moonriver network, a protocol that focuses on compatibility between Kusama and the Ethereum network (ETH).
KSM holders who decide to stake on Lido will be able to continuously earn staking rewards with an APR of 18%while also being able to use Staked Kusama (stKSM) on various DeFi platforms for additional returns.
Other benefits include staking without the delay of link and unlink periods and the ability to maximize staking rewards by dynamically reallocating Lido to the most profitable KSM validator nodes.
TVL goes off
A second metric to keep in mind is the total value locked on the platform. Lido’s current TVL stands at $10.97 billion, according to data by Defi Llama.
After peaking at $13.26 billion on December 26, 2021, the total value locked on Lido fell to a low of $7.74 billion on January 31as the sale of the entire market significantly reduced the value of the tokens in the protocol.
Since then, TVL has recovered to $10.97 billion, even though the total cryptocurrency market capitalization has remained flat. The incorporation of new assets such as KSM could be a reason for the increase in TVL.
Lido also supports Ether, Terra (LUNA), and Solana (SOL).
Liquid staking makes interaction with DeFi more pragmatic
Another factor helping to give LDO a boost is the growing popularity of liquid staking.
Before the addition of liquid staking, token holders had to choose between earning rewards through network-only staking and withdrawing them from circulation, or putting them to work in DeFi protocols through paired liquidity pools.
With liquid staking, investors can benefit from the best of both worlds by staking tokens to help secure the network along with the potential for a return. in DeFi by pledging the assets staked as collateral.
For example, users who bet on Solana (SOL) on Lido can also lend their stSOL on Apricot Finance for an additional 32% APR. There is also a voting proposal in AAVE suggesting adding stETH as collateral in the AAVE v2 market.
If Lido keeps adding multi-chain assets for staking and liquid stakingcould open the door to further price appreciation of the platform’s native LDO token.
What’s more, As the cryptocurrency ecosystem continues to embrace the transition to POS, liquid staking is likely to increase in popularity, which could also result in future earnings for LDO.
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