Is Lido Dangerous for ETH?

📢 Sponsor | 💡 Telegram | 📰 Past Editions

Good Morning,

The news cycle is actually pretty slow, despite the ongoing SBF trial. SocialFi remains as the dominant trend while the markets are trending down with ETH breaking below $1,600.

Maybe that’s because the ETH Foundation just sold more assets.

In Today's Email:

• What Matters: Lido’s concentration concern 🤔

• Products: SpringX, a web3 accelerator 🏎️

• Charts: Solana NFT, Friend Tech (still) 📈

BROUGHT TO YOU BY

Aldrin

Becoming a liquidity provider in DeFi can be tricky. You need to balance the value of two tokens and hedge for impermanent loss.

What if… there’s a way to make it more convenient?

Introducing Aldrin's RAMM: Revolutionising Liquidity Provision in AMMs!

Aldrin's RAMM is an oracle-based AMM that optimizes capital efficiency while significantly reducing impermanent loss. Moreover, RAMM’s single-asset deposits make it convenient and hassle-free.

RAMM will soon be available on popular blockchain networks such as Polygon, BNB Chain, Arbitrum, and Sui.

Don't miss out on this opportunity to be part of the future of liquidity provision!

Follow Aldrin on Twitter!

WHAT MATTERS

Lido & Ethereum Centralization Concern

State of play: Lido constitutes nearly 1/3 of Ethereum's staking, with top providers including Lido collectively controlling 50% of the market share.

• The increase in Ethereum staking post-Merge and Shanghai upgrades has led to greater network centralization and reduced staking yields.

• Despite being a decentralized staking platform, Lido involves significant centralization, according to JPMorgan analysts.

• Centralization risks in Ethereum include potential single points of failure, attack targets, or collusion, jeopardizing community interests through transaction censorship or front-running.

JPMorgan’s analysts also expressed concern over rehypothecation in liquid staking growth.

• Using liquidity tokens as collateral in various DeFi protocols could trigger widespread liquidations if staked assets suddenly drop in value or face attacks or protocol errors.

What’s next: Lido is unlikely to self-limit.

• The viable solutions are ensuring decentralization or initiating a hard fork if Lido compromises the protocol, with both approaches guarding against Ethereum's centralization by other entities.

Our take: Lido's decentralization dilemma highlights crypto’s business vs. decentralization conflict.

• Entities that offer fee-based services, naturally seek to maximize power, resisting self-limitation without external pressure.

• Lido's dominance is indicative of the current state of Ethereum’s staking incentive design and prevailing market forces.

For builders and investors: The Ethereum community's concerns and potential interventions, like forking to curb Lido's dominance, are valid responses to the prevailing staking incentives and market forces.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

PRODUCTS OF THE WEEK

SpringX, a Web3 Startup Accelerator

An ecosystem for growth created by founders for founders. Spring Xcelerator (SpringX) is a Web3 startup accelerator launched by BuidlerDAO.

• SpringX's 14 advisors cover Web3 domains globally, offering expertise from angel funding to token issuance.

• SpringX's 14 project initiators cover various sectors, with 4 successfully issuing tokens, 7 raising over $10M in funding, and 11 operating internationally across areas like GameFi, DEX, and more.

• SpringX's investment partners have allocated $20M to the program, creating opportunities for graduates to secure crucial investments.

Other cool products:

• Hedge3, a DeFi trading widgets

• UtcPay, a trustless digital asset payment protocol

• SNPIT, a blockchain-based NFT Game-Fi

• Tradetomato, a platform for trade and portfolio automation

• Trading Digits, an all-in-one crypto analytics & on-chain market data tool

CHARTS OF THE WEEK

Solana NFT Trading Steadies

Credit to OurNetwork for the original piece.

State of play: After an 80% weekly volume drop since January 2023, Solana's NFT market has relatively stabilized over the past three months.

• The competition intensifies between marketplace giants Magic Eden and Tensorswap.

• Each now holds about 50% market share, down from Magic Eden’s 98% in 2023's start.

• Ethereum marketplaces compete by cutting royalties, while Solana ones enforce royalties and adjust maker/taker fees.

• Due to Tensorswap's AMM maker fees, Magic Eden, initially with 0.4% maker and 1.4% taker fees, now provides a 0.4% maker rebate.

• Solana now makes up 8% of weekly NFT trading volume.

Our take: This may signal the local bottom of the NFT market.

FriendTech Attracts 300K Users

Credit to Messari for the original tweet.

State of play: FriendTech has attracted 300K unique users and now generates $320K in daily fee revenue, outperforming OpenSea by 6x.

Ally Zach shared an analysis of the sustainability of Friend Tech’s growth:

• Despite post-launch fluctuations, Friend Tech's user activity is now stable with 6k new and 9k daily returning users. However, average weekly trading retention has dropped from 22% to nearly 5%.

• Friend Tech uses market dynamics for content pricing, aiming for fair creator pay, but this model may challenge those used to traditional subscriptions.

Our take: The platform must establish itself in the SocialFi sector and incentivize quality content to ensure sustained user engagement and revenue stability.

QUICK BITES

• Yuga Labs cuts staff.

• Huobi recovers $8M in stolen Ether.

• CFTC weighs penalizing ex-Voyager’s CEO.

• Stars Arena drained $2.9M in AVAX tokens.

• SEC argues that cryptocurrencies lack inherent value.

• FTX had a mysterious friend with a $8 billion account.

• Tom Emmer’s maneuver and what it means for crypto.

• MakerDAO explores using tokenized uranium as collateral.

• FriendTech developers have raked in nearly $20M since launch.

• FTX used random numbers to generate the size of its insurance fund.

NOTEWORTHY READS & MEME

• Arthur Hayes’ read on the intersection of crypto and AI.

• Galaxy Research’s read on the state of onchain RWAs.

• DLNews’ read on how to track token unlocks.

If you enjoy reading this issue, please consider subscribing. It takes 1 minute of your time but it would mean the world to us 🙇

Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.