Key takeaways:
- Lido DAO is expanding its stETH token to Layer 2 blockchains
- stETH will be made available on supported L2s via a wrapped token version called wstETH
- Lido’s staking pools account for nearly a third of the entire amount of ETH staked in Eth2 smart contract
Lido DAO to roll out stETH support on networks with “demonstrated economic activity”
Lido DAO announced on Monday that it is bringing the platform’s stETH tokens to a wide range of Layer 2 (L2) networks, specifically those that have demonstrated sufficient “economic activity.” According to the company’s blog post, stETH won’t be available on L2 blockchains directly but rather through a new token called wstETH, which is a wrapped version of stETH.
The Lido DAO team took to Twitter to share the news with the broader crypto community. “Ethereum is scaling, and so is Lido,” remarked the team.
In preparation for the eventual Merge of the Ethereum Proof-of-Work (PoW) mainnet and the Proof-of-Stake (PoS) powered Beacon Chain – which will see the Ethereum network transition to the highly efficient PoS consensus mechanism – numerous ETH holders have been depositing their ETH to in Eth 2.0 smart contract to earn a competitive rewards rate. But there is a caveat. In order to earn rewards on deposited ETH, users must supply at least 32 ETH (worth roughly $49,000 at current market rates). Also, the deposited ETH is locked until the eventual roll-out of the Ethereum 2.0 upgrade.
Here’s where Lido DAO comes in. The platform allows users to stake any amount of ETH via Lido’s staking pools and earn roughly 3.9% APY on their investment. In addition, while the deposited ETH is locked, the platform issues an equivalent amount of rebasable stETH tokens, which allows users to engage in trading and various decentralized finance (DeFi) services with their stETH, while earning staking rewards at the same time. stETH is designed to track the value of ETH at a 1:1 ratio.
It is worth noting that stETH did depeg earlier in the year, amid the sudden cryptocurrency downturn sparked by the historic collapse of the Terra ecosystem.
Lido DAO accounts for roughly a third of the total ETH staked
By expanding stETH to L2 networks via wstETH, users will have access to a broader range of DeFi products and services at lower costs. Plus, users will be able to participate in Ethereum staking directly from L2 networks in the future, according to the company. The Lido DAO team captured the essence of yesterday’s reveal in the following statement:
“Ethereum is scaling, and Lido is following suit. We’re beyond pleased to unveil our expansion plans for Lido on L2, starting with the expansion of stETH across the growing L2 DeFi ecosystem. For Ethereum stakers, this means staking with lower fees and access to a new suite of DeFi applications to amplify yields.”
Initially, wstETH has been integrated with Argent and Aztec. The team is eyeing Arbitrum and Optimism for the next stage of expansion.
There is currently roughly $6.5 billion worth of ETH staked in Lido DAO liquidity pools. For context, the entire amount of ETH staked in the Eth 2.0 smart contract stands at $20.1 billion, according to Etherscan data.
Lido DAO’s native governance token LDO surged by over +140% in the past seven days. The token could grow by an additional 50% in the next week, if our algorithmically generated price predictions prove to be correct.
