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Andreessen Horowitz Invests $70M in Ethereum Staking Platform

By:
Martin Young
Published: Mar 4, 2022, 02:48 GMT+00:00

Crypto venture capital giant Andreessen Horowitz, also known as a16z, has announced a substantial investment in the Ethereum staking platform Lido.

Ethereum
Key Insights:
  • A16z has used some of its ETH stash as part of the deal.
  • Lido has an 80% liquid staking market share with $10B ETH staked.
  • Ethereum staking currently yields just below 5% APY.

On March 3, venture capital juggernaut Andreessen Horowitz announced its latest big crypto investment. The firm has injected $70 million into the Lido staking platform for Ethereum.

Lido offers staking services, simplifying the process for retail crypto investors. Staking independently involves a fair bit of technical knowledge in setting up hardware and software. There is also a minimum stake of 32 ETH (around $87,500 at current prices) to become a network validator on the ETH 2.0 chain.

Additionally, staked ETH needs to be locked up for at least a year until the two Ethereum chains merge later in 2022.

Lido allows investors to stake smaller amounts without the hassle of running their own software and hardware. It takes a cut of the staking rewards in return for the services provided. Several major crypto exchanges, such as Binance and Kraken, also offer similar staking services.

 

Staking Economy Growing

Ethereum is currently still running on a proof-of-work blockchain that involves energy-intensive mining. However, it will switch to a more environmentally friendly proof-of-stake consensus mechanism this year.

Staking Ethereum has already been occurring since December 2020, when the Beacon Chain was launched. According to the network explorer, there has been 9.7 million ETH staked, worth around $26.5 billion at the time of writing.

A16z explained that Lido provides a way to earn extra yields beyond the current 4.9% APY. It issues a token called STETH representing the locked ETH that can be used on other decentralized finance platforms.

“By issuing an Ethereum-native liquid token, Lido allows you to use staked ETH as collateral within DeFi in the same way you can use ETH currently.”

Investing its own Ethereum

The firm added that it also staked a portion of a16z’s Ethereum holdings on the Beacon chain in addition to its investment.

According to TechCrunch, there is currently around $10 billion worth of Ethereum staked with Lido giving it an 80% market share of the liquid staking ecosystem. The assets are split across 76,000 individual crypto wallets, according to Lido co-founder Konstantin Lomashuk.

In addition to Ethereum, Lido also supports liquid staking for Solana (SOL), Kusama (KSM), and Terra (LUNA) blockchains and plans to launch on Polygon (MATIC) later this month.

About the Author

Martin has been covering the latest developments in the blockchain and digital asset industry since 2017 when he made his first investment. He has previous trading experience and has worked extensively in IT over the past 2 decades.

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