American Venture Capital Fund, Andreessen Horowitz, popularly known as a16z, has invested $70 million into Ethereum-based protocol, Lido Finance.
This is Lido’s first funding round since May 2021. Andreessen Horowitz invested in Lido because it wants to support the adoption of decentralised staking solutions for Ethereum 2.0, the new version of the Ethereum network.
Lido allows crypto investors to lock up their crypto for a specified period and earn interest by investing it in promising decentralised finance projects. This process is called staking.
A spokesperson for Andreessen Horowitz mentioned that Ethereum 2.0 marks a significant shift in the network’s consensus algorithm by ushering in the adoption of proof-of-stake (PoS) and other upgrades that could enhance its scalability and reduce gas fees.
The VC firm also highlighted that staking ETH has strong barriers due to the high standards for becoming a validator on the blockchain. To become a full validator on the Ethereum network, users must be able to stake at least 32 ETH, which is worth over $103,000 at the time of this publication.
In addition to investing in Lido, Andreessen also confirmed that it is staking a portion of its ETH holdings on the BB Beacon Chain through Lido’s protocol.
According to the firm, “Staking with Lido removes many of the operational complexities that institutional investors have faced.”
Despite being open and available to the general public, Ethereum has always been plagued with scalability issues. The network was not designed to carry out so many transactions simultaneously and struggles to meet the demand of being the second most popular blockchain.
Ethereum Founder, Vitalik Buterin, and other developers decided to improve the framework and make it easier to verify transactions and add blocks to the blockchain. The transition to Ethereum 2.0, which began in November 2020, is ongoing and is expected to end in 2022.
