The world of cryptocurrency is constantly changing, with digital currencies rising and falling each day. In the midst of this volatility, it can be hard to pick a token that is worth investing in.
Looking at the biggest winners of this year, one crypto that has caught my eye is Lido DAO (LDO 0.35%). Despite its impressive year-to-date gains of more than 170%, I believe that this is a digital asset worth looking into.
Let’s explore why this decentralized liquid-staking platform for Ethereum (ETH -0.33%) is a worthy consideration as its value continues to climb.
What you need to know about Lido DAO
Before deciding whether to invest in Lido, it is important to understand what this blockchain project does.
Lido is a leading liquid-staking solution for digital assets that rely on proof-of-stake consensus mechanisms. As opposed to proof-of-work networks like Bitcoin, which require a lot of computing power to verify transactions, proof-of-stake cryptos use a process whereby users stake their tokens as a way to validate that transactions are accurate.
Lido’s network is designed to create a more energy-efficient future for crypto. Currently, the staking solution is mainly focused on Ethereum, but it also brings together node operators to manage the validation infrastructure on Solana and other blockchains.
Put simply, Lido allows smaller investors to pool their funds to get into staking. For Ethereum, the amount required to set up a validator node is 32 ETH tokens (roughly $50,000). For those who don’t have enough money to invest in Ethereum, Lido is an invaluable platform.
Investors can think of Lido as a way to decentralize the staking process. For those bullish on decentralization, this project has a lot of potential.
Why invest in Lido today
Lido DAO offers a number of benefits for cryptocurrency investors. Firstly, users can get involved in the governance of their supported projects and earn rewards for doing so. This helps to create an engaged community and drive demand for the token.
In addition, part of all fees from transactions on the platform are redistributed to holders of the LDO tokens as dividends, making it a great choice for those looking to make passive income.
Other advantages include the option to take out loans against crypto assets, earn yield and access to staking pools with higher rewards than traditional decentralized finance (DeFi) protocols. Plus, Lido’s intelligent contracts are audited by Chainsecurity, so users can be sure that the protocols are secure and compliant.
But what about the potential for a staking ban from the SEC?
There are some risks to consider with Lido’s current model. As the leading staking solution for Ethereum, how the SEC chooses to view staking activity is important. So, when the SEC made comments about the potential to restrict staking to individual investors, it caused a stir in the crypto world.
Coinbase Global CEO Brian Armstrong expressed his opinion on the matter before the SEC comments, calling the restriction of staking a “terrible path” for the U.S. to take in order to gain crypto dominance. It remains to be seen how much of an impact these comments will have on regulators.
Worth considering on dips
Lido DAO is a project that could shape the future of decentralized staking, for better or worse. It is clear that regulators are keeping an eye on yield-producing processes, but investors should take Lido’s one-of-a-kind staking model and its lead in Ethereum staking seriously.
Those in the know understand how important Lido’s decentralized liquid-staking solution is for the viability of proof-of-stake blockchains everywhere. In order for this sector to grow in an energy-efficient way, projects like Lido are essential.
Because of these reasons and more, I think Lido is worth considering on any dips going forward.
Chris MacDonald holds positions in Ethereum and Solana. The Motley Fool has positions in and recommends Coinbase Global, Ethereum, Lido DAO, and Solana. The Motley Fool has a disclosure policy.
