One of the better products of the decentralized industry after digital currencies is undoubtedly decentralized finance (DeFi).
Like digital currencies, DeFi too is a facility based on the digital currencies’ underlying technology of Blockchain.
Being a financial solution, DeFi is no different than a credit facility secured by a borrower from a lender/financial solution provider such as a bank, etc.
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However, with the induction of DeFi, there are a lot of questions that are being raised regularly pertaining to the future outcome of the industry.
One of the major questions that are being asked actively relates to ‘lack of competition’.
DAO and Lido Finance
Data, compiled by DefiLlama, indicates astonishing differences in amounts between the world’s leading and largest DeFi protocols.
The data points out the difference of $2 Billion plus between the world’s second and third-largest DeFi protocols namely Lido Finance and Aave.
The data further points out the huge difference of amount exceeding $3 Billion among the world’s leading and third largest DeFi protocols namely DAO and Aave.
World’s Biggest TVL in DeFi
DAO’s current total value locked (TVL) exceeds US$ 6.63 Billion which is the world’s highest TVL so far. However, the reason behind this humongous TVL is not only the DAO’s ‘decentralized stable currency.
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Instead, it is because the integrated services and above 400 applications in DAO’s stable currency which has been the reason behind DAO’s TVL.
Lido Finance Benefits
At number two is Lido Finance which had, at one point in time, also secured the top position by outperforming its archrival DAO. However, DAO quickly took the crown back from Lido Finance.
One of the major reasons why Lido Finance is so much utilized after DAO is that Lido Finance enables users to pile up their liquidities against staked assets.
For instance, Lido Finance users can easily convert their Ethereum coins into stETH tokens with an open period for coin locking. This allows users in staking their Ethereum without losing their ability to manage their Ethereum.
This is why investors have been actively utilizing Lido Finance over other DeFi protocols.
One cannot determine whether DeFi projects such as DAO and Lido Finance and their dominance are potentially harmful to the decentralized finance sector.
However, the potential dangers for retail users cannot be ousted considering the lack of competitors for protocols like DAO, Lido Finance, and Aave.
In the recent past, the token issuance scheme initiated by Lido Finance was hugely debated. A lot of concerns were also recorded by industry experts against the scheme.
The reason is that Lido Finance’s native token is edging down in terms of value, however, stETH uses Ether coins as means of exchange.
So for example, if the volatility is trending down, then there shall be a liquidity crisis against stETH. Resultantly, users would lose the significant value of exchange.