Lido Finance, a cryptocurrency staking service company, has declared its intention to spread throughout the Ethereum Layer 2 network. In addition, the company announced that it will expand its support for the Ethereum ecosystem through services on the stakes of Ethereum (stETH).
The Lido team revealed the plan through a blog post. The basic step is to maintain Ether staking through the L2 bridge while using wrapped stETH (wstETH). Over time, you no longer need to bridge your assets to the Ethereum mainnet. Therefore, users can bet tokens directly on the Layer 2 network.
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Service providers are primarily focused on ETH staking services. The user is rumored to receive an annual yield of about 3.9% using the platform. The company also provides staking rewards for a variety of assets such as Polkadot (DOT), Solana (SOL) and Kusama (KSM).
The record shows that more than 4.2 million Ether, worth about $ 6.5 billion, have been bet on the site. This value makes Lido one of the largest platforms with a total stETH value. It also stands as the second largest locked total (TVL) within the DeFi ecosystem.
In that operation, when the user deposits ETH on Lido, the platform creates a tokenized version of the deposit as stETH. Minted tokens can be used to provide yield services or be borrowed from other distributed protocols.
In addition, Lido is expanding its partnerships with other Layer 2 networks. Prior to their announcement, the service team said the company had already completed a bridge staking service between Aztec and Argent. In addition, we are heading for more integrations and collections that we plan to unveil in the coming weeks.
The Lido team has also confirmed that once L2 staking support is complete, L2 champions Optimism and Arbitrum will begin their activities. The company then gradually expanded its activities to other L2 networks, setting a positive record of economic activity.
Benefits of using L2 for Ethereum staking company Lido Finance
Staking service companies aim to allow users to enjoy lower rates while staking ETH and other tokens. This comes from the concept that L2 was developed to reduce the cost of Ethereum transactions. The company is also committed to providing customers with access to a variety of decentralized applications that maximize yield during staking.
The team also said that the L2 network needs a staking solution to enhance its support for users’ economic activities. As such, the plan has been extended to ensure that Ethereum users are committed to maintaining the security of the entire ecosystem.
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Normally, stETH performs pegging equivalent to Ether at a ratio of 1: 1. However, due to the collapse of the Terra ecosystem in May, the pegs will drop to 0.95 per Ether.
Long-term holders and stackers have a limited risk of betting ETH depegging. The severity lies in eliciting the leveraged position of the asset and can lead to liquidation. Distorted companies such as Three Arrow Capital (3AC) and Celsius Network have reported using stETH.
Currently, Lido operates in the correct ratio of 1: 1 for the exchange between ETH + and stETH. However, one of its partners, the 1-inch DeFi Exchange Aggregator, offers discounts of up to 2.36% while creating stETH. Therefore, while using 1 inch, the depositor gets more stETH for the deposited ETH.
Featured image from Shutterstock, chart from TradingView.com