The value of decentralized financial (defi), protocols fell to $110.35billion on Friday. This was after the total value (TVL), had been more than $200billion eight days prior. Lido is a liquid staking protocol and today’s second-largest defi app in terms of TVL. It has seen a significant decline of 49.66% over the last week.
Curve’s stETH:ETH Peg Skews, Lido Adds New Pool With Liquidity Incentives
While being exposed to the Terra blockchain blunder, Lido’s bonded ethereum tokens have been under pressure due to an imbalance on Curve’s bonded ethereum (stETH) and ethereum pool. Lido’s liquid staking protocols announced that Curve Finance was going to offer liquidity incentives in an effort to reduce the current imbalance surrounding the stETHETH peg.
“We are deploying an additional Curve Finance pool to improve the liquidity around the stETH:ETH peg,” Lido tweetedThis will be on 12 May 2022. “This new pool will feature an additional 1M LDO in incentives for the next week and is currently almost empty, suggesting high rewards to initial depositors.” Before the announcement, Curve’s stETH:ETH pool was showing a 2% discount amid the chaos surrounding the Terra blockchain.
Crypto journalist Colin ‘Wu’ Blockchain explained what was taking placeOn Thursday. “The ETH/stETH asset ratio in Curve’s largest TVL steth (ETH+stETH) pool is skewed,” the journalist tweeted. “ETH/stETH=36.48%/63.52%, people are exchanging stETH back to ETH. Users who are using stETH for leveraged staking need to be aware of potential de-pegging risks.”
Team Plans to Migrate Curve and Balancer Pools, Lido’s TVL Shed $10.26 Billion in a Week’s Time
In the same Twitter thread, Lido described the firm’s plan to mitigate the issue on Curve’s platform. “[The plan is to] migrate liquidity from the existing Curve and Balancer pools to a new one (recommended deposit ratio at current rate is 13 stETH for every 1 wETH) to maximise rewards,” Lido added on Thursday. “The new pool contains 1,000,000 LDO for the next week in rewards.”
Some people were skeptical about the idea of creating a pool for the biggest defi protocol by value locked. “Is it a good idea? UST was attacked during liquidity migration,” one individual asked.
Lido, a liquid staking app, was also exposed to Terra blockchain. According to defillama.com statistics, 49.66% has fled the Terra platform since last Wednesday. Lido has $9.13 billion of value, but it had $19.39 billion on May 5. $10.26 billion has been removed from Lido’s TVL since May 5 and $4,130 in LUNA remains.
What do you think about Lido adding liquidity incentives to Curve’s pool? Comment below and let us know how you feel about the subject.
Images CreditsShutterstock. Pixabay. Wiki Commons