Lido, the liquid staking leader, has recently upgraded to the second version on Ethereum. This upgrade promises to bring improved efficiency and security to the already successful DeFi protocol.
What is liquid staking?
Before diving into the upgrades, let’s first understand what liquid staking is. Staking is the process of holding a cryptocurrency to support the network and validate transactions. In return, stakers receive rewards. However, staked assets are typically locked up and cannot be easily traded or used.
Liquid staking, on the other hand, allows stakers to receive staking rewards while still being able to use and trade their staked assets. This can increase liquidity and reduce the opportunity cost of holding staked assets.
Lido’s liquid staking
Lido is a decentralized staking protocol that allows users to stake Ethereum 2.0 tokens (ETH) without having to run a validator node themselves. In return, users receive stETH, a token that represents their staked ETH on the Ethereum network.
This allows users to participate in staking rewards while still having the ability to use their staked ETH in other DeFi protocols, such as lending and borrowing platforms. StETH can also be easily traded on decentralized exchanges (DEXs) and used as collateral for loans.
Lido has been incredibly successful since its launch in November 2020. At the time of writing, Lido has over $3 billion worth of ETH staked, making it the largest staking pool on Ethereum.
Lido v2 upgrade
The Lido team has recently released Lido v2, which promises to bring several improvements to the protocol. These improvements include increased efficiency, lower fees, and improved security.
Lido v2 brings significant improvements to efficiency by reducing gas costs and improving transaction speeds. Gas costs are the fees paid to perform transactions on the Ethereum network. By reducing the amount of gas required to perform staking and unstaking transactions, Lido v2 can save users money and improve the overall user experience.
In addition, Lido v2 also introduces batched transactions. This means that multiple staking and unstaking transactions can be combined into a single transaction, further reducing gas costs and improving efficiency.
One of the main benefits of liquid staking is increased liquidity. However, high gas fees have been a barrier to entry for many users. Lido v2 addresses this issue by significantly reducing fees.
The Lido team estimates that users can save up to 50% in gas fees compared to the first version of the protocol. This makes it more accessible for users with smaller amounts of ETH to participate in staking rewards.
Finally, Lido v2 brings several improvements to security. One of the main concerns with staking is the risk of slashing, where staked assets are confiscated as a penalty for malicious behavior.
Lido v2 reduces the likelihood of slashing by increasing the number of validators that stake ETH with Lido. This diversifies the risk and makes it less likely for a single validator to engage in malicious behavior.
In addition, Lido v2 also introduces a new insurance mechanism called Guardians. Guardians are a group of trusted entities that oversee the validator nodes and monitor their behavior. If a validator is found to be engaging in malicious behavior, Guardians can trigger a failsafe mechanism to protect staked assets.
Lido has been a game-changer for Ethereum staking, allowing users to enjoy staking rewards while still maintaining liquidity. With the release of Lido v2, the protocol promises to become even more efficient, secure, and accessible.
As the DeFi ecosystem continues to grow, liquid staking is likely to become even more popular. Lido’s success and continuous innovation make it a leading player in this space and one to watch in the coming years.
Lido, a leading Ethereum staking provider, recently announced its upgrade to the second version, also known as V2. This has sent their native governance token, LDO, up by 10% to $2.15 in the past 24 hours, according to CoinDesk data.
One of the new features of the upgrade is that users can now easily unstake their stETH and receive ETH at a 1:1 ratio, with most users taking about a day, provided that the exit queue on the Beacon chain is empty. However, the maximum time it could take for a validator to exit and withdraw from the staking queue stands at 5 days and 14 hours, based on data from network explorer, Rated.
Additionally, users will now receive an NFT as an intermediate step between requesting to unstake and claiming their ETH. According to Lido marketing lead Kasper Rasmussen, this NFT could also be listed for trading on Blur and Opensea, but it does not affect the withdrawal process.
This upgrade is a significant milestone for Lido as they currently command about nearly 80% market share of liquid staking derivatives on Ethereum, according to blockchain analytics firm, Nansen. Additionally, Lido has already withdrawn more than 278,000 ETH at the time of writing, making it the fourth largest entity by ETH withdrawals, trailing crypto exchanges Kraken, Coinbase, and Binance.
The new V2 has also undergone nine total audits from several firms, such as Statemind and MixBytes, with Oxorio expected to finish its audit by the end of May. Vice President of Stanford Blockchain Club, Kydo, notes that the change to V2 is important because it is “derisking the entire Lido tech stack.” Rasmussen further explains that with the new upgrade, users can “both enter and exit the staking house, which has to derisk the staking experience in some way or another.”
Overall, Lido’s upgrade to V2 is a significant milestone for the company as it continues to provide secured and efficient staking services to Ethereum users. With the addition of the new unstaking feature and the use of NFTs, Lido is continuing its mission to offer a seamless user experience while at the same time offering a more derisked staking process.