Lido DAO surpasses Ethereum (ETH) fees, joins the “fat app” trend

Lido DAO fees are inching up due to increased interest in staking ETH. They briefly surpassed Ethereum’s, as the major network saw lowered direct usage.

Lido DAO is still the leading liquid staking app, taking in more than 40% of staked ETH. The increased interest in deposits drives the fees, boosting the popularity of Lido’s re-staking token.

Read: EigenLayer enhances EigenDA security to counter Sybil and DDoS attacks

The recent trend of growing fees brings a “fat app” season. Due to scaling solutions and lower on-chain activity, major blockchains are no longer a direct driver of revenues. Instead, fees are flowing in from the apps themselves. During times of slow token price action, the potential for fees and redistribution, in addition to other incentives, is adding to the appeal of DeFi projects.

fat applications pic.twitter.com/HWQCh6FDiA

— Token Terminal (@tokenterminal) June 23, 2024

Those fees are separate from regular transaction prices and turn into earnings for the protocol. Some protocols have a schedule to redistribute fees to token holders. Fat apps also signal that users have clustered to specific DeFi hubs, which promise the biggest returns and a good risk profile.

Stakers that lack 32 ETH for a solo node can join several projects, including Rocket Pool, and receive both APR from the staking smart contract, as well as corresponding tokens to use again in DeFi protocols.

Lido DAO remains the staking protocol leader

Lido DAO has more than $32B in value locked, making it one of the biggest DeFi protocols. The value is based on the Ethereum market price multiplied by the amount of ETH staked. Lido DAO draws in $1.22B in annual fees at this activity level.

Also read: DeFi revival: In shifting narratives, fee-generating protocols look more appealing

One reason for the growth is Lido DAO’s relative ease and first-mover advantage. The project is also supported by DappRadar, offering easier staking. Based on activity data, Lido DAO achieves its results with around 9K monthly active wallets.

Lido DAO revenues peaked in March at above $115M, but have remained between $79M and $90M for the past few months. After expenses, the protocol brings in between $2M and $5M monthly.

The activity on Lido DAO also supports Curve, one of the riskier but pivotal protocols. Curve carries over 40% of the stETH volume, with another 52% on Bybit. Curve remains one of the “fat apps”, which distributed $3.9M in token incentives in the past month.

The value locked in Lido DAO is more than all other combined staking and re-staking protocols. Only about five protocols have more than $1B in value locked. Lido DAO repeated the feat of JitoDAO, which also turned up as a “fat app.” Recently, JitoDAO also drew in more apps than the Solana main net.

Lido DAO grows its re-staking program

One reason for the uptick in fees is that Lido DAO is starting its native re-staking program. Until recently, stETH was only used in third-party apps as a valuable asset for collateral.

After opening re-staking, Lido DAO will use stETH as another layer of security for a new crop of apps. This will allow Lido DAO to compete directly with EigenLayer and carry a new group of apps, similar to the Actively Validated Services (AVS).

Recently, Lido DAO announced it would partner with Mellow Finance for building special stETH vaults. Mellow will also issue a new Liquid Restaking Token (LRT) in exchange for locking up stETH collaterals. Additionally, Lido Finance wants to extend the number of validators. Despite the large number of ETH locked through Lido, most tokens support around 40 well-established validators.

Introducing Early Adoption for the Community Staking Module 🌐https://t.co/qSPkbrcCp2

This initiative will allow a set of independent operators to join CSM on mainnet prior to CSM opening to all, avoiding possible crowding out of capacity by large operators from Day 1.

👇 pic.twitter.com/vmzcv0eZYx

— Lido (@LidoFinance) June 19, 2024

For now, stETH is mostly concentrated to a handful of protocols, leaving a small share of the supply of 9.6M. In the past few months, Lido DAO stETH is also flowing into RestakeFi, though at a smaller rate than EigenLayer. The practice is seen as a way to receive returns even during a stagnant crypto market, but it may create dependencies based on assets locked through multiple protocols.

After the recent downturn, LDO tokens traded at $2.09, still above the bear market baseline. The price of stETH sank to $3,372.11, on par with the ETH market price. For now, stETH does not offer a premium, and in fact stETH has traded at a slight discount for most of the past quarter.

Cryptopolitan reporting by Hristina Vasileva

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