According to CoinMarketCap data, Lido Finance’s native token jumped more than 10% in the last 24 hours. It climbed from $4.25 to $4.82 at its peak, jumping to $4.82. LDO has since recovered some and is currently trading at $4.56. This is 6.7% more than the previous day.
The token of the project is a governance token that allows holders to vote on proposals and adjust fees within Lido Finance.
This is just the latest move in a bullish week for LDO. In the past seven days, LDO’s token has increased by more than 25%. The token traded at $3.66 on March 28th. LDO’s value has more than doubled in the last month, if you look back.
This little-known cryptocurrency’s bullish price action is likely to be tied to the Ethereum2.0 upgrade. In which the number 2 network will change from a Proof of Work (PoW), consensus mechanism to a Proof of Stake (PoS).
This shift is known as “The Merge” and will occur by Q2 or possibly slipping into Q3. According to ConsenSys CEO Joe Lubin and Ethereum cofounder Joe Lubin.
What is Lido Finance?
Lido Finance allows users to deposit their Ethereum holdings, and then earn a return. This is not the same as providing liquidity on a Decentralized Exchange ( DEX); rather, these deposits are used for security of the PoS-based Ethereum 2.0.
PoS networks, like miners in a PoW network’s PoW network, require validators to verify that legitimate transactions are approved and rejected by the network. Users can “stake” the native cryptocurrency of the network to become validators, unlike miners who require a lot of computing hardware and electricity.
Ethereum users can become validators simply by purchasing 32 Ethereum.
However, at today’s prices this is a staggering $111,921 which is prohibitively high for most users.
You can also stake 32 Ethereum and lock it up. It cannot be redeemed until the transfer has been completed. It’s an expensive amount of money to keep in limbo for any length.
This is what Lido tries to fix.
You can deposit as much Ethereum as you like to earn 3.9% in Ethereum. You can’t unstake Ethereum but you will receive another cryptocurrency as an exchange receipt. This token is known as “staked Ethereum” (or “stETH”) and is equivalent to one ETH.
Users can also earn additional yield from this asset through platforms such as Curve or Aave, as stETH is more widely adopted within the larger decentralized finance ( DeFi) ecosystem.
LDO’s growth is likely due to increased adoption and anticipation surrounding the Ethereum Merge event.
