Since 2019, Lido has played a key role in the Ethereum ecosystem, enabling user participation in staking through the introduction of the liquid asset stETH. However, growing competition has prompted Lido to reassess its strategies.
Changes in Lido's Strategies
After Lido captured about one-third of all staked ETH, it has shifted focus from a market share race to use case expansion. In 2023, it launched version V2, significantly simplifying the validator onboarding process and increasing opportunities for both individual stakers and smaller participants. Additionally, stETH has expanded into Ethereum Layer2 networks like Arbitrum and Optimism, enhancing its integration within the DeFi ecosystem.
Lido's Business Model and Governance
Lido charges a 10% fee on staking rewards while leaving the principal untouched, ensuring stable revenue. Its governance model features a dual-layer system in which LDO token holders belong to one layer and stETH holders obtain veto rights on decisions, thereby increasing the protection of user interests. This helps mitigate censorship-related risks and ensures more decentralized governance.
Competition and the Future of the Staking Market
Over the past two years, Lido's share of the staking market has decreased to around 24%. Competitors such as Rocket Pool and Frax Ether have intensified competition with unique business models. This change is seen as an opportunity for Lido to shift focus from pursuing market share to expanding the use cases of stETH. As Lido continues to adapt its strategies, its future remains intrinsically linked to the development of Ethereum itself.
Lido demonstrates how a company can adapt to the changing Ethereum ecosystem by combining scale and decentralization. With its new approach to expanding stETH's use cases and commitment to decentralized governance, Lido will continue to be a significant player in the staking market.
