The crypto market has witnessed a turbulent situation in the weeks following the FTX crash, but Lido Finance, a liquidity staking protocol, has become a bright spot in the midst of this chaos. Since October 26, the Lido protocol has been earning $1 million or more in fees daily, according to DeFiLlama.
Lido fees and earnings over time. Lido has been raising over $1M a day since Oct 26 pic.twitter.com/GHkzSzYIOo
— DefiLlama.com (@DefiLlama) November 18, 2022
Let’s analyze the fundamentals of the network to understand why this trend continues.
What is behind the growth of Lido Finance?
Lido’s rise began in May 2021, before the FTX collapse. The box office hit an all-time high on November 10, with box office revenue nearly exceeding $2.6 million. The protocol earns 10% of the total Ethereum (ETH) staking rewards generated from user deposits.
The data also shows that the steady growth of deposits in line with the Ethereum PoS consensus leads to an increase in Lido fee collection.
General Lido deposits. Source: Dune Analytics.
Lido’s fee income moves in tandem with Ethereum’s Proof-of-stake (PoS) income as Lido sends the received Ether to the staking protocol. After the FTX crash, Ethereum activity surged thanks to a surge in decentralized exchange (DEX) activity. Ethereum fees and earnings also reached a 30-day peak on November 8, with $9.1 million in fees and $7.3 million in revenue.
Ethereum commissions and income. Source: Token terminal
New and Daily Active Users Continue to Grow
The number of unique contributors to the Lido protocol has reached 150,000, indicating that Lido continues to attract new users. The increase in unique deposits comes after centralized “earning” programs showed weakness due to exposure to FTX, Genesis, BlockFi and others.
Unique Lido deposits. Source: Dune Analytics.
Daily active users and holders of Lido tokens (LDO) also increase by Lido. Daily active users hit a 90-day high of 837 on Nov. 17, according to Token Terminal data, further bolstering the platform’s positive momentum.
Lido token holders and daily active users. Source: Token terminal
Related: DeFi platforms profit amid FTX crash and CEX exodus
Lido’s market cap doesn’t match the fundamentals of the network
While fees, deposits, and Lido earnings continue to rise, the market cap of LDO tokens has not kept pace.
As mentioned above, Lido hit its all-time high on Nov. 10, while its market capitalization dropped from $1.2 billion to $663.7 million.
Over the same period, the price of LDO tokens fell from $1.80 to a low of $0.90, according to Coingeco.
Lido turnover market capitalization and fees. Source: Token terminal
Despite the overall market decline, Lido is showing strong fundamentals across multiple fronts. Steady growth in DAUs, revenue, and new unique contributors are all key components to gauge the growth and sustainability of the DeFi platform.
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