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Staking perspectives from Lido Finance

Nov 30, 2023
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Liquid staking perspectives from Lido Finance: recent updates and initiatives

Following the activation of the beacon chain, individuals have the option to stake ETH in return for block rewards. The Ethereum beacon chain has garnered substantial interest. As part of the ongoing developments, ETH staked on the beacon chain cannot be withdrawn at present, with an estimated waiting period of 3 to 9 months for unstaking to become available.

Recognizing the lack of capital efficiency in staking ETH, Lido Finance introduced a solution by introducing a derivative token called staked ETH (stETH), which is backed one-to-one with the staked ETH. However, the exchange rate of stETH is not fixed and may fluctuate, trading at a premium or discount based on secondary market dynamics. Importantly, these fluctuations do not impact the fundamental backing of stETH. Users can utilize stETH in various DeFi protocols to generate additional yield on their staked ETH.

A growing Lido ecosystem

Lido empowers stakers by providing them with the flexibility to utilize their tokens across various networks and diverse protocols within the ecosystem. Presently, the Lido ecosystem boasts an extensive network comprising 94 decentralized applications (Dapps) distributed across five distinct networks, including Ethereum, Polygon, Arbitrum, Optimism and Base. Notably, this ecosystem recently welcomed the launch of the Base network, further expanding the scope and opportunities available to users within the Lido ecosystem.

The launch of wstETH on Base, spearheaded by KyberSwap, Beefy, and Superbridge, marks a significant stride for Lido DAO contributors.

Lido’s wstETH stands as an optimized iteration of stETH tailored for seamless interoperability within the realm of decentralized finance (DeFi). In contrast to stETH, wherein your balance experiences daily fluctuations due to accruing staking rewards, wstETH takes a non-rebasing approach, maintaining a constant balance for users. Instead of employing a rebasing mechanism, wstETH utilizes a share system to accurately represent the accumulation of earned staking rewards.

Why is this important?

The wstETH Base bridge launch holds particular significance in enhancing Ethereum’s liquidity and stability. By bringing the benefits of staked ETH to the Base ecosystem, this development not only fortifies the foundation of Ethereum but also opens new avenues for users and developers within the broader DeFi space.

Base, having solidified its position as one of the leading Ethereum Layer 2 solutions since its August launch, continues to impress with substantial user growth, innovative applications, and a vibrant developer community. The integration of wstETH into the Base ecosystem adds a layer of sophistication, allowing users to leverage their staked ETH across the expanding Base DeFi landscape.

This development is a testament to the industry’s commitment to fostering collaboration and cross-chain functionality. As the DeFi space continues to evolve, initiatives like the wstETH Base bridge contribute to the maturation of the ecosystem, providing users and developers with more options and avenues for innovation.

In conclusion, the launch of wstETH on Base is not just a technological feat but a strategic move that augments the broader DeFi narrative. It reinforces the notion that collaboration and integration are pivotal for the sustained growth and maturation of decentralized finance, pushing the boundaries of what is possible in the blockchain space.