With a 70 million US dollar investment from a16z, why is the pledge protocol Lido repeatedly favored by VCs

Ethereum is undergoing a transition from PoW (Proof of Work) to PoS (Proof of Stake). When Ethereum 2.0 arrives, stakers will replace current miners and act as validators in the network. In the past year or so, users have been able to stake ETH in the Ethereum beacon chain to get rewards. Since there is a capital threshold of 32 ETH for self-staking, and ETH cannot be withdrawn for a long time, many staking solution providers have also been born.

Venture capital giant Andreessen Horowitz (a16z) invested $70 million in Ethereum staking solution provider Lido Finance on March 4. This is the second funding round for the solution in a year, having raised $73 million in the agreement last May.

From the official website page, Lido's function is very simple. After connecting the wallet, users can pledge any amount of ETH, and then they can receive daily income. In fact, large centralized trading platforms such as Binance and many DeFi protocols also provide similar services. Why does Lido gain the favor of capital one after another?

a16z officially stated that "no need to trust" is an important plus point for Lido. This DeFi protocol plays the functions of DAO and smart contracts. On the one hand, DAO is used to manage user funds, and at the same time, validator nodes are selected through community voting; on the other hand, Lido uses multi-party audited smart contracts to avoid centralized security risks.

In addition, users can obtain a pledge certificate stETH after staking ETH in Lido. In addition to being exchangeable for ETH, the certificate can also be pledged in other DeFi protocols to increase income. Compared with centralized staking service providers, Lido has more advantages in terms of transparency and yield.

As the public chain of PoS mechanism gradually becomes the mainstream of the encryption world, the decentralized staking protocol is expected to gain more usage. Of course, for these protocols, ensuring the security of the code and the security of user assets is always the top priority.



Lido Finance raises $70 million from a16z

pledge

Ethereum is undergoing a 2.0 upgrade. It is expected that this summer, it will switch from PoW to PoS consensus mechanism. Its biggest feature is that it cancels the workload proof mechanism of "computing power is king", and supports users to temporarily deposit or mortgage a certain amount of ETH. Become a validator to validate transactions on the network and earn rewards for doing so.

On November 3, 2020, the Ethereum Foundation announced the address of the pledge contract of the Ethereum PoS layer "Beacon Chain", which supports users to deposit at least 32 ETH for pledge and earn ETH inflation rewards. Withdrawal is not open, all pledged ETH will take a long time to be withdrawn.

In the PoS mechanism, the more ETH staked and the stakers, the more validators, and the more reliable the network security. It can be said that staking is the key guarantee for the operation of Ethereum 2.0.

According to the data of the masters of the Ouke cloud chain, as of March 6, more than 9.83 million ETHs have been locked in the pledge contract of the Ethereum beacon chain. However, not everyone has only pledged 32 ETH. After the emergence of many centralized and decentralized pledge solutions, the capital threshold for pledgers has been lowered. Lido Finance is one of the representatives of decentralized pledge solutions.

On March 4, Lido Finance announced that it has secured $70 million in funding from venture capital giant Andreessen Horowitz (a16z), its next round of funding following May 2021. On May 6 last year, Lido Finance completed a $73 million financing led by Paradigm and followed by Coinbase Ventures, Three Arrows Capital and other institutions.

In less than a year, Lido Finance has completed more than $140 million in financing, a number that is conspicuous enough to look at the entire cryptosphere.

According to Lido’s official Twitter account, a16z aligns with the Lido community’s commitment to decentralization and making Ethereum staking as easy and secure as possible, “Besides, they fully support our roadmap to a completely trustless staking solution. In addition, a16z also pledged some of its ETH holdings on Lido, “because they recognize that Lido removes a lot of operational complexity for institutional investors.”

In fact, in the DeFi world with complex functions and operation logic, Lido's functional interface and underlying logic are very simple. Click on the pledge button on its official website, and you can see the interface for pledge ETH. Users only need to connect their wallet to quickly pledge ETH.