On Friday, the value locked in decentralized financial protocols (defi) fell to a low of $110.35 billion after a total locked in value (TVL) of over $200 billion eight days ago on May 5. One particular defi protocol called Lido, a liquid betting platform and the second largest defi application by TVL to date, lost significantly in value, losing 49.66% in the past week.
Curve’s stETH:ETH Peg Skews, Lido adds new pool with liquidity incentives
While Terra’s blockchain has been buggy, Lido’s bond ether tokens have come under pressure due to an imbalance in Curve’s bond ether pool (stETH) and ether pool. Defi-protocol liquid-stacking Lido announced that it was rolling out liquidity incentives in Curve Finance to improve the imbalance that was occurring around the stETH peg: ETH peg.
“We are deploying an additional Curve Finance pool to improve liquidity around the stETH binding:ETH peg,” said Lido tweeted on May 12, 2022. “This new pool will include an additional 1M LDOs as incentives over the next week and is currently nearly empty, suggesting high rewards for initial contributors.” Prior to the announcement, Curve’s stETH pool:the ETH pool was showing a 2% discount amid the chaos surrounding the Terra blockchain.
Cryptojournalist Colin ‘Wu’ Blockchain explained what was going on Thursday. “At ETH/stETH, the asset ratio in Curve’s largest TVL stack pool (ETH+stETH) is skewed,” the journalist wrote on Twitter. “ETH/stETH=36.48%/63.52%, people trade stETH back to ETH. ETH. Users using stETH for leveraged betting should be aware of the potential risks of de-pegging.”
team plans to move pools of curves and balancers, TVL Lido lost $10.26 billion in a week
In the same Twitter thread, Lido described the firm’s plan to fix the problem on the Curve platform. “[The plan is to] move liquidity from the existing Curve and Balancer pools to the new pool (the recommended deposit ratio at the current rate is 13 stETH for every 1 wETH) to maximize rewards,” said Lido added on Thursday. “The new pool contains 1,000,000,000 LDOs for next week’s rewards.”
Some people have questioned the move to create a new pool on the largest defy protocol in terms of blockchain costs. “Is it a good idea? UST was attacked during the liquidity migration,” said one person asked .
The liquid betting app Lido has also been heavily impacted by Terra’s blockchain, and since last week, 49.66% of value has gone from the platform, according to defillama.com statistics. Lido currently holds $9.13 billion, but had $19.39 billion on it on May 5. Since May 5, $10.26 billion has been removed from TVL Lido, and $4,130 remains in LUNA.
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