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Ethereum $70M Andreessen Horowitz: A Game-Changing Boost for Lido Finance

By Bank Deets · · Updated

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In March 2022, venture capital firm Andreessen Horowitz (a16z) announced an investment in Lido Finance, the Ethereum liquid staking protocol. The deal was widely reported at $70 million in LDO, Lido's governance token.

At the time, Ethereum was still running on proof of work. This article explains what the deal was and how things have changed since.

Decentralized Staking Gains Momentum

Ethereum's move to proof of stake (PoS) happened in stages. The Beacon Chain, a separate proof-of-stake chain, launched on December 1, 2020.

On September 15, 2022, the Merge joined the original Ethereum Mainnet with the Beacon Chain. That completed Ethereum's switch to proof of stake, so the transition is no longer "still unfolding."

Staking has a high bar for individuals. Running your own validator requires a deposit of at least 32 ETH, plus hardware and technical upkeep. At ETH prices in early 2022, 32 ETH was worth roughly $90,000.

Simplifying Staking Complexity

When a16z announced the investment, it said it was also staking part of its own ETH through Lido. Liquid staking pools ETH from many users, so you don't need 32 ETH or your own validator.

In return, stakers receive a token (stETH) that represents their staked ETH and can be used elsewhere. That removes much of the operational work for institutions and individuals, though it adds smart contract and protocol risk.

The terms "Eth1" and "Eth2" have been retired. Ethereum.org now calls the original chain the "execution layer" and the proof-of-stake chain the "consensus layer." After the Merge, there is just one Ethereum.

Lido was founded in 2020. Its Ethereum product lets users stake any amount of ETH, without running a validator, and receive stETH.

Funding Momentum Continues

The a16z deal wasn't Lido's first large raise. In April 2021, a Lido DAO treasury diversification proposal called for selling 10% of the LDO supply to Paradigm and other strategic partners for 21,600 ETH.

Under that proposal, Paradigm would buy 70 million LDO (7% of supply). Reports at the time valued that round at about $73 million.

Nothing in this article is investment advice. Crypto assets are not FDIC-insured, staking carries risks including smart contract failures and slashing, and token prices can fall sharply.

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