Incoming lending wars? Lido unveils security-first protocol for $54B on-chain credit market

Lido, an Ethereum-based staking giant, plans to expand into on-chain lending with an institutional and security-focused offering. In an X post, the team announced that the product, Lido Lend, will go live this quarter. As it stands, there are no specific timelines though. 

Lido Lend will be a modified version of decentralized lending platform Morpho Blue, but heavily skewed towards minimizing security risk and focused on professionals and institutions.

The project team noted that the move will be a ‘flywheel’ to its staking ecosystem. 

Lido Lend complements the stETH flywheel and Lido Earn. The synergy between these products opens a new growth vector for the Lido ecosystem, giving onchain natives everywhere a path to earn rewards in a user-forward and security-first manner.

Notably, the project singled out that it will only focus on well-known and liquid collateral such as stETH and WETH. This is likely part of the approach to reduce exposure to recent exploits tied to low liquid assets.

Can Lido challenge Aave and Morpho?

Well, Aave suffered immensely after the $292M KelpDAO exploit, with estimated bad loans climbing over $120M. Lazarus Group stole +89K unbacked rsETH tokens and used Aave to borrow liquid assets, including WETH. 

As a result, Aave adopted an aggressive framework to reduce such risk exposure, including axing assets with low adoption. However, it now seems that Lido sensed an opportunity from Aave’s security challenges. 

Analyst Konstantin Lomashuk echoed a similar view, claiming, 

Lido built the most secure staking solution in crypto: $24B+ staked. That market is solved. The next is lending. Too many hacks. Too much inefficiency. Lenders deserve far better protection. That’s what Lido Lend is built for.

Currently, the on-chain lending market is dominated by Aave, Morpho, and Spark (Sky, formerly MakerDAO). In terms of active loans, Aave dominates with 68% market share, followed by Spark at 13% and Morpho at 12%. 

Overall, on-chain lending’s total locked value (TVL) has recovered to $55B while active loans stand at $31B. Simply put, $55B in assets have been supplied, but only $31B has been borrowed, and Aave has been leading the market since 2021. 

Lido’s move will likely be read as a declaration of war in the lending market. However, the project denied the same and noted, 

Lido Lend is a tailored solution to meet the specialized needs of professional borrowers and long-term lenders, not the general purpose lending market. It is built to complement – not compete with- current market solutions.

Will LDO benefit?

It remains to be seen how the incumbents will readjust. That said, it’s unclear whether the growth will boost the LDO token or fuel its buyback program. 

At press time, the altcoin had pulled back 14% but was still within its H2 2026 rising channel. This suggested that it could rise higher.  

Final Summary

• Lido to enter the on-chain lending market with a security-first Lido Lend for institutions in Q4. 
• Aave currently holds 68% of the $55B lending market share.