Lido’s Golden Goose

As readers know, Lido is the most popular liquid staking protocol in the crypto market. However, due to its popularity, some have voiced concerns about Lido acting as a centralizing force for Ethereum. The concerns center around the idea that as Lido becomes more popular and users stake more and more ETH with the protocol, Lido will eventually control enough of Ethereum’s stake to be in de facto control of it. This criticism came to a head more than a year ago when Lido voted on whether or not to limit its growth for the good of Ethereum. Lido voted the proposal down. But, the criticism remains that Lido could potentially exercise undue influence on Ethereum due to it controlling so much of the stake. 

To that end, Lido has been working on a vision of moving forward without potentially endangering Ethereum’s ecosystem due to centralization. Lido’s GOOSE program – guided open objective setting exercise – started in September and is a way for Lido’s community to align around a vision for the protocol. To that end, Hasu, a strategic advisor for Lido, has put forward his 3-year plan for Lido. Given the social standing of Hasu in the community, I recommend readers give this a read, as I think it will carry a lot of weight in Lido and determine its direction. 

At root, Hasus envisions Lido’s next three years as ones of increased decentralization. Hasu views the LSD market as a winner-takes-all; as such, Lido, as the most significant protocol, must ensure it moves towards security and decentralization. If Lido is insecure and centralized, it presents a systemic risk to the entire ecosystem. Lido can mitigate its own risks through clever protocol design. The initial stage in his strategy is Lido decentralizing more through allowing stETH to participate in governance. After this, Lido will endeavor to attract a minimum of 5,000 node operators through permissionless entry and a staking router. Finally, Hasu puts forward a vision where stETH becomes more ingrained in the ecosystem – almost becoming money. I don’t want to analyze Hasu’s vision, although it seems reasonable, but instead, I want to highlight it as something to follow. Lido is critical to Ethereum, and Hasu is a community leader in the crypto market and at Lido. The vision he outlined here will probably be what Lido follows, so I recommend users pay attention to the discussion around it. 

More RWA Moves

There are two proposals I want to highlight as they seem to signal more real-world-asset inroads into the ecosystem. The first, a proposal from Blueberry Protocol, asks that Arbitrum provide them with a grant to integrate a T-bill collateralized debt token into Arbitrum called TBY. The second proposal is from Backed Finance to add blB01 – short-term T-bills – to Compound as collateral. Real-world assets, especially T-bills, have become surprisingly popular in the last year. And based on these proposals, it seems like the market is seeing new entrants. I want to highlight these proposals because one of the market dynamics we often see is crypto projects pivoting to an already popular area and over-saturating it. There is still much room to grow for RWA’s, but I have a hunch that there may be too many protocols soon, which may over-saturate the small market for tokenized real-world assets – although the RWA narrative has slowed in recent months.

Honorable Mentions

• Aave takes steps to wind down governance on V2 and shift it to V3 of their protocol.
• ApeDAO received a proposal to fund the BAYC and MAYC statues for 183K APE.
• Bancor proposes using 100% of its fees for BNT market buys.
• To rebuild its brand after some controversy, Gitcoin received a proposal to modularize its grant program into different focus areas. 
• Pheonix Labs proposes SparkLend onboard USDC and USDT.