Lido v/s Aave, Is LDO Taking the Lead?

Lido v/s Aave, Is LDO Taking the Lead?

Lido, a crypto staking service provider, announced plans to expand their staked Ethereum (stEth) protocol across various Ethereum layer-2 scaling solutions. This will make a wrapped version of staked Ethereum accessible across multiple other Defi ecosystems, both optimistic and ZK (zero knowledge) rollups.

What Does This Mean For Lido?

This new development means that Lido is expanding to layer 2.

Currently, over 30% of all stEth is processed through Lido. Lido itself is arguably one of the pillars holding up and securing the Ethereum network.

With Lido's new update, a wrapped version of stEth, also called wstEth will be available in layer 2 Defis. Before the announcement, Lido had already integrated its staking services with Aztec and Argent, adding that its newer integrations will be announced in the coming weeks.

Given that layer 2 solutions are designed to make the Ethereum network more scalable, Lido projects that its users will now be able to stake Ethereum with lower fees, and greater access to more Defi applications, for greater yield.

According to its website, Lido currently has more than 4 million ETH staked on its platform (about $6.5 billion). This makes them one of the biggest providers of stEth value, and second-place overall among other Defi platforms, in terms of TVL (total value locked)

How Does Aave Fit Into All Of This?

Over the crypto crash from April to June of 2022, Aave, the biggest crypto lending platform, managed to stay afloat. As of late even, Aave has been doing well for itself on the price charts.

Currently, Aave's closest competitor is Lido. While Lido has above $6.5 billion in TVL, Aave has a TVL of less than $3 billion. From this, it is obvious that the chances of Aave overtaking Lido are pretty slim.

The percentage of Lido's growth even dwarfs that of Aave. Last month, Lido's price soared by 33.5%, while Aave's moved by a mere 8.82%. A ratio of 3.8:1.

Reasons for Lido's Upgrade

One of the biggest issues any blockchain faces is scalability and its ability to react to the crypto market's volatility. 

As a staking platform, when a user deposits some Ethereum to be staked, a tokenized version, known as staked Ethereum (stEth) is used to represent the value of their deposit. This staked Ethereum can be used in borrowing or yielding services from other Defi protocols (like Aave).

stEth originally is pegged on a 1:1 ratio to the value of Ethereum. However, this 1:1 ratio shifted during the Terra ecosystem crash in May, bringing the value of stEth to 0.95 the value of Ethereum.

Although the peg's value has normalized at the time of writing, it posed a serious threat to the holdings of long-term stakers.

Price Analysis: How wide is the Margin Between Lido And Aave?

Lido's stEth has an available supply of 1,366,870, while Aave has 13,915,800. This reflects on their prices, as stEth currently sits at $1475 and Aave sits at $96.8.

Even though Ethereum is a proof of work blockchain, platforms like Lido, however, allow staking. This is in contrast to Aave allowing lending. While staking and lending are two different protocols, both of these platforms are still comparable.

One of the best performance metrics for comparing two platforms is the TVL or the "Total Value Locked". The TVL is a measure of the total dollar value of all locked assets on a protocol. By this metric, there is a clear gap between Lido and Aave, with Lido taking the lead.

While Lido currently has a TVL of $6.5 billion, Aave has a TVL of $1.17. A whopping 5.6:1 margin.

Related Stories

No stories found.
Voice Of Crypto