Crypto liquidity staking platform Lido on Tuesday announced the first steps and technical details about stETH expansion across the Layer-2 DeFi ecosystem. In the initial launch phase, Ethereum (ETH) staking derivatives are bridged to Layer-2 solutions Arbitrum and Optimism.
With Ethereum scaling using Layer-2 ZK-rollups, Lido is also supporting Ethereum by bringing stETH on Layer-2.
Lido Announces Details on Expanding stETH to Layer-2
Ethereum staking provider Lido Finance aims to create highly liquid staking assets having widespread applications across the DeFi space. Lido in a series of tweets on August 16 announced updates on its Layer-2 expansion plan, giving details on the initial phases of development and technical guidelines.
The initial step is bridging ETH staking derivatives to Layer-2 solutions Arbitrum and Optimism, using wrapped stETH (wstETH). It will allow Lido to build Layer-2 ETH staking in the future.
The liquid staking protocol has used AAVE’s Governance bridging contracts for L1 to L2 governance, which enables admin functionality guarded by Lido DAO, rather than multisigs. In addition, Emergency Brakes multi-sigs are available on Ethereum Mainnet, Optimism, and Arbitrum for enhancing security.
Next, a snapshot vote for DAO approval of bridge plans will be launched following a successful public audit of governance bridging contracts for Arbitrum and Optimism.
The expansion plan to Layer-2 is based on the idea of offering lower fees to Ethereum stakers. Also, the benefits of earning more yields through new DeFi applications on Layer-2.
DeFi Giant’s Growing Dominance in Ethereum Staking
Lido leads among Ethereum staking providers, having over 31% market share for Ethereum staking. According to its website, over 4.28 million ETH is staked on Lido, which is worth around $8.04 billion.
Lido’s dominance in Ethereum staking is always under debate due to the centralization risk. Moreover, staked Ethereum (stETH) losing its peg to Ethereum during the liquidity crisis after the Terra crash is also a reason.
The exposure to Layer-2 solutions may likely increase Lido’s dominance in Ethereum staking.
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