One of the individuals behind Lido Finance, the largest DeFi application for staking cryptocurrency, warned that service providers such as Lido are facing a new range of implications in the wake of the US Securities and Exchange Commission’s clampdown on the sector.
(Bloomberg) — One of the individuals behind Lido Finance, the largest DeFi application for staking cryptocurrency, warned that service providers such as Lido are facing a new range of implications in the wake of the US Securities and Exchange Commission’s clampdown on the sector.
“I have been getting a lot more questions about ‘does this impact Lido, what are your thoughts on this?’” said Jacob Blish, head of business development at the decentralized autonomous organization, or DAO, that manages Lido Finance. “I personally think this is a net benefit for on-chain permissionless liquid staking or staking providers, but it really depends on what the final resolution is.”
Lido Finance has more than 4.8 million Ether staked on the platform valued at about $7.2 billion, according to data from blockchain data firm Nansen. On Thursday, Kraken reached a settlement with the SEC over allegations that the exchange’s staking service was an illegal sale of securities.
DeFi apps let people trade, lend and borrow without intermediaries and often anonymously through the use of automated protocols. Many in the DeFi community argue that the autonomous aspect pushes the apps outside the guidelines of regulators since no individual benefits directly.
If the US regulators eventually conclude that no US individual can interact with any staking services at all, then “we have a different problem,” Blish added.
Staking involves earning rewards by locking up coins to help order transactions on various blockchains such as Ethereum. Coinbase Global Inc., Kraken, Binance and other centralized exchanges have waded into staking products to diversify revenue. Lido Finance was launched in December 2020. Its investors include Andreessen Horowitz.
“The most disappointing thing is we as an industry keep getting asked for transparency, but then me as a US citizen, I get no transparency and how [regulator’s] decision-making process is going,” Blish said.
Staking services provided by both centralized and decentralized platforms let users stake coins without setting up specialist computer equipment nor having a minimum amount of 32 Ether. The value of staked assets was estimated at $42 billion at the end of 2022, based on a report from Staked and Kraken.
According to Blish, unlike centralized platforms such as Kraken, Lido serves as a “plumbing” function in providing staking service.
“It’s a software,” Blish said. “A user either says I choose to engage with the service that is being offered or I don’t. And the user has full control.” He clarified that currently, withdrawals of staked Ether tokens are still not enabled yet on Ethereum blockchain, but once the withdrawals are enabled, users have complete control of their funds.
The governance of Lido is managed by the Lido DAO. Members of the DAO decide on key parameters of Lido protocol through voting. The codes run Lido’s project are open-sourced and publicly available on the blockchain. Blish, who is based in New York, said contributors to the DAO like himself are based around the globe.
“The biggest risk I personally see as a US-based person is if they come down and say you can no longer even interact with or contribute to these types of protocols,” Blish said. “Then me as a contributor to the DAO, does that mean I can’t work on Lido anymore? Do I have to go leave and do something else?”
(Corrects to clarify that Coinbase Ventures isn’t an investor of Lido Finance. The story originally ran Feb. 12.)
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