An introduction to Lido's earnings from staking ETH

Lido serves as the curator of node operators. Only operators who pass Snapshot voting will be granted a whitelist. Moreover, Lido’s staking income is not easily affected by market fluctuations, and its overall performance is relatively stable. Node operators first enter the Lido test network for testing, and then enter the main network to run ETH nodes. Lido does not require node operators to pledge the same amount of ETH. On the contrary, the node operators selected by LidoDAO must have experience in asset mortgage, and the risks are covered by the insurance provided by LidoDAO. For now, this approach will make the system more capital efficient, with eight operators currently on the whitelist. At this point, everyone also basically knows what is the income from Lido staking? Below, the editor will take you to learn more about it.

How about Lido staking income?

The current profit model of Lido mainly relies on taking 10% of the pledge income as protocol income. Among them, 5% is owned by the staking node operator, and the other 5% goes into the Lido treasury and is governed by LDO. Compared with market fluctuations, staking income is less affected, so its currency-based income is almost unaffected by the market. In December, Lido’s protocol revenue was slightly lower than GMX, but total protocol fees exceeded Uniswap.

Due to the expectations of Shanghai’s upgrade and Lido’s leading position in the industry, Lido is expected to attract more pledged assets and obtain higher protocol returns from these pledged assets. Lido’s continued rise this year also reflects market sentiment towards it.

With the upcoming Shanghai upgrade of Ethereum, the ETH staking service provided by the DeFi platform must also be upgraded immediately to adapt to the new changes. As the largest ETH staking service provider, Lido announced the launch of the LidoV2 upgrade on February 8. This is the largest upgrade to date and a major change on the road to further decentralization. This upgrade will enable Lido to better cope with the changes brought about by the Shanghai upgrade and provide safer and more efficient staking services. The launch of LidoV2 marks Lido’s significant progress in decentralization and user privacy protection, providing users with better choices and experiences.

LidoV2 upgrade will be carried out in two aspects, namely staking Router (staking router) and withdrawal.

Analysis of the future prospects of Lido staking

Lido has a very high market share in the staking market and almost monopolizes the entire industry, which has caused concerns among some investors. Among them, Vitalik suggested that staking projects should self-limit the number of stakes they control, and proposed 15% as an upper limit threshold. However, Lido did not adopt this suggestion.

On June 24 last year, LidoDAO held a vote to discuss whether Lido should be self-restricted. The results showed that 99.81% of LDO holders voted against, expressing their disapproval of self-restriction on Lido. The main argument of these opponents is that they believe there is no need to limit themselves because others will take corresponding measures; centralized exchanges (CEX) have already taken corresponding measures; and no one can meet the demand yet.

On the other hand, if the dominance of the ETH staking market is handed over to centralized institutions, such as Coinbase, whose market share is second only to Lido, this may bring some disadvantages. First of all, this goes against Ethereum’s goal of building a decentralized network. Ethereum was originally designed to build a financial ecosystem without trusting intermediaries, and the involvement of centralized institutions may destroy this decentralized nature. Secondly, centralized institutions are more susceptible to regulatory intervention, as there have been some cases in the past. For example, the U.S. Securities and Exchange Commission (SEC)’s penalty against Kraken sparked widespread controversy. Such regulatory intervention may have a negative impact on the operations of centralized institutions and the rights and interests of users. Therefore, judging from the current situation, it is unlikely that a centralized institution will replace Lido as the dominant player in the ETH staking market. Maintaining the principle of decentralization and maintaining the dominance of decentralized staking protocols such as Lido will be more beneficial to the stability and development of the Ethereum ecosystem.

The above content answers the question for everyone: What is the income from Lido staking? To sum up this issue, although Lido’s ultra-high staking market share has always been criticized, it is undeniable that Lido’s liquidity, composability and returns can be achieved without the interference of ideological concerns and external conditions. Lido has an absolute advantage in the ETH pledge market. In a winner-take-all market, Lido share is the result of market competition and an inevitable trend in the decentralization of ETH pledge. With the upgrade of Ethereum Shanghai and the central pledge institution Due to policy restrictions, investors are generally optimistic about Lido's future development trend.

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