The cryptocurrency service provider Lido Finance has announced plans to expand support for staked Ether (stETH) across the ecosystem of Ethereum’s Layer Two (L2) networks..
In a blog post on July 18, the Lido team noted that it would initially start by supporting Ether staking via bridging to L2 using wrapped stETH (wstETH). Later, it will allow users to stake directly on L2 “without the need to bridge their assets” to the Ethereum mainnet.
Regarding partner L2s, the team stated that, prior to the announcement, it had already integrated its bridged staking services with Argent and Aztec.. He added that the next set of partnerships and integrations would be revealed in the coming weeks.
Once L2 staking support is ready, the Lido team noted that it will start with the L2 heavyweights first.Arbitrum and Optimism, before expanding to other L2s that have sufficient “demonstrated economic activity”.
Since L2 is designed to reduce the cost of Ethereum transactions, the team touted that this move will allow users to stake ETH with lower fees. while also gaining “access to a new suite of DeFi applications to amplify returns.”
“There are several types of L2. We believe that in the future, a large part (if not most) of economic activity and transaction volume will migrate to both general-purpose and special-purpose Layer 2 networks.”
“Each of these networks will benefit from or need staking solutions to support the economic activities of their users and ensure that all users of the networks in the Ethereum ecosystem have the ability to participate in the security of Ethereum”it is stated.
According to the Lido website, it currently has over 4.2 million ETH staked on the platform, which is worth around $6.5 billion, making it one of the largest providers in terms of total stETH value. and second in terms of total value locked (TVL) on the decentralized finance (DeFi) platform.
Lido provides staking rewards in a number of other assets, including Solana (SOL), Kusama (KSM), and Polkadot (DOT), but is primarily used for its ETH staking services.which offer annual returns of around 3.9%.
Once a user deposits their ETH on the platform, a tokenized version of their deposit is minted as stETHwhich can be used in other lending or yield services of other DeFi protocols.
stETH is pegged at a predicted ratio to ETH of 1:1. However, the ratio dropped to 0.95 from 1 ETH in May, following the collapse of the Terra ecosystem.of USD 40,000 million.
Untying the asset poses limited risks to long-term hodlers and stakers. However, it runs the serious risk of causing liquidations for anyone who takes leveraged positions against the asset.. Defunct companies like Celsius Network and Three Arrows Capital have been singled out as major users of stETH.
At the time of writing, the leverage ratio is correct as Lido offers a 1:1 exchange for ETH and stETH. However, partner decentralized exchange aggregator 1inch is also offering a 2.36% discount to mint stETH, suggesting that depositors can currently get back more value from stETH than the amount of ETH they deposit through 1inch.
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