On Friday, the value locked in decentralized finance (defi) protocols fell to a low of $110.35 billion after locking in more than $200 billion in total value (TVL) eight days earlier on May 5. A specific defi protocol called Lido, a liquid staking platform and TVL’s second largest defi app today, lost a significant 49.66% of its value over the past week.
stETH of the curve:Ethereum Peg Skews, Lido add new pools with liquidity incentives
While exposed to Terra blockchain missteps, Lido’s bound Ethereum tokens have been under pressure due to an imbalance between Curve’s bound Ethereum (stETH) and Ethereum pools. Liquid staking defi protocol Lido has announced that it is deploying liquidity incentives to Curve Finance to improve the imbalances surrounding stETH:Ethereum pin up.
“We are deploying an additional Curve Finance pool to improve liquidity around stETH:Ethereum nails,” reads tweet May 12, 2022. “This new pool will be rewarded with an additional 1 million LDO next week and is currently almost empty, indicating high returns to initial depositors.” Before the announcement, Curve’s stETH:Ethereum Amid the confusion surrounding the Terra blockchain, mining pools are showing a 2% discount.
Crypto journalist Colin ‘Wu’ Blockchain explains what happened on Thursday. “this Ethereum/stETH asset ratio at Curve’s largest TVL steth (Ethereum+stETH) pool is skewed,” the reporter tweeted. “Ethereum/stETH=36.48%/63.52%, people exchange stETH back Ethereum. Users who use stETH for leveraged staking need to be aware of potential decoupling risks. “
Team plans to migrate curves and balance pools, Lido’s TVL loses $10.26 billion in one week
In the same Twitter thread, Lido described the company’s plans to mitigate the problem on the Curve platform. “[The plan is to] Migrate liquidity from existing Curve and Balancer pools to new pools (recommended deposit ratio of 13 stETH per 1 wETH at current rates) to maximize returns,” Lido Add to Thursday. “The new pool contains 1,000,000 LDOs for next week’s rewards.”
As far as value locking is concerned, the move to create new pools on the largest defi protocols has been questioned. “Is this a good idea? UST attacked during liquidity migration,” one person ask.
Liquid staking app Lido has also had a significant impact on the Terra blockchain, with 49.66% of its value leaving the platform since last week, according to statistics from defillama.com. Lido currently holds a value of $9.13 billion, but on May 5, it held $19.39 billion. Since May 5, $10.26 billion has been removed from Lido’s TVL, with $4,130 remaining in LUNA.
What do you think of Lido adding liquidity incentives to Curve’s pool? Let us know what you think about this topic in the comments section below.
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