Lido Community Staking: Rewards & Penalties

https://blog.lido.fi/community-staking-module-rewards-penalties/

Lido Community Staking: Rewards & Penalties

The third blog in the series on the Community Staking Module (CSM) delves into the intricacies of reward distribution within CSM and between modules, alongside an examination of CSM’s strategies in addressing possible MEV stealing. For the previous parts refer to the list below:

 

What are rewards?

When running validators on Ethereum, operators may receive two types of rewards. The first type is known as Execution Layer (EL) rewards, which encompass priority fees and potential MEV rewards earned as a result of block production. The second one consists of Consensus Layer (CL) rewards, which validators receive upon the correct execution of certain Consensus Layer duties such as attestations, sync committees, and block proposals.

 

When CSM operators use the Lido protocol to run validators, they accrue two kinds of rewards:

  • Validator rewards: a share of the total protocol rewards mentioned above (relative to the operator’s share of active validators in the protocol, and multiplied by a module-specific operator rewards share variable), and
  • Bond rewards: staking rewards generated from the bonded tokens.

 

The following section explains the first kind of rewards (i.e. validator rewards).

 

Reward Smoothing Between Modules

Under the Staking Router’s architecture, multiple modules will be present, each having registered different subsets of validators with potentially different performance levels. For example, the Curated Module is generally expected to outperform CSM (as node operators curated operators who validate as a business), thereby contributing more significantly to Consensus Layer rewards. Conversely, an underperforming module may generate a lower reward return.

 

Lido Community Staking: Rewards & Penalties

 

To minimize the reward disparity, smoothing is employed by the Staking Router. This involves averaging the rewards across different modules, taking into account the number of active validators in each.

 

When it comes to Execution Layer rewards, the independent operators in CSM do not need to worry about producing a block with a low MEV bonus or proposing a block only once or twice every six months, since EL rewards are part of the protocol-wide rewards smoothing mechanism. This reward smoothing feature ensures that volatile rewards (if an operator is running few validators) are instead consistent and close to the average expected value.

 

Reward Socialization Inside CSM

Another innovative feature is reward socialization within CSM via the use of a Performance Threshold, which is used to determine reward distribution. Per claim period (frame), validators whose performance exceeds a certain threshold will share the rewards received by CSM (based on their share of active validators).

 

On the other hand, underperforming validators whose performance falls below the threshold will receive no rewards for the given frame.

 

Lido Community Staking: Rewards & Penalties

 

Most importantly, since CSM is geared towards community stakers, the idea is to allow for a reasonable performance leeway, ensuring that Node Operators do not receive reduced rewards due to short-term performance dips caused by factors such as internet or power outages. Additionally, the existence of the “bad performers” sub-set actively discourages free-riding behaviors (e.g. not running the validators that have been registered) and poor validator operation.

 

While the approach has been proposed, the threshold has not yet been determined. As always, feel free to share any ideas or thoughts on the forum proposal.

 

Penalties & MEV Theft Detection

In the previous section, we mentioned that a Node Operator’s bonds would be penalized if the balance of any of their validators were to fall below the default initial deposit amount at the time of validator withdrawal, or if they are found to be misappropriating MEV rewards.

 

While the first penalty situation, which involves monitoring validator balances, is straightforward to check, MEV stealing detection can be complex due to the variety of block-building approaches in use and the infeasibility of accounting for all cases.

 

At this juncture, it’s proposed to follow the current approach for CSM to monitor and assess MEV theft, and form a CSM committee dedicated to temporarily freezing the bond in case of MEV stealing detection. However, the actual penalties would be enforced through on-chain governance (i.e. Easy Track).

 

Since the proposed approach might be sub-optimal, contributors are looking for community feedback on the alternatives to MEV stealing monitoring & mitigation.

 

What’s Next?

The next (and final) article in the Lido Community Staking series will discuss stake allocation algorithms and validator exit rules. Stay tuned!

 

If you would like to continue any topical discussions related to CSM, please join our Discord CS forum –  #community-staking-forum.

Lido Monthly Report: January 2024

https://blog.lido.fi/lido-monthly-report-january-2024/

Lido Monthly Report: January 2024

Welcome to the January edition of the Lido Monthly Report, a comprehensive source for insights into all of the latest developments.

 

This report reviews another month of noteworthy metrics, new collaborations, and ongoing developments that highlight the overall performance and progress of the Lido middleware solution.

 

TLDR:

  • Despite the discontinuation on Lido on Solana, TVL surged by approximately $420 million, t0 $21.6b / 9.4m ETH, driven by increased staked ETH through Lido.
  • 7,648 users chose to stake their ETH using Lido for the first time in January.
  • Liquidity incentives across all chains saw a substantial decrease of over 76%.
  • A Snapshot vote passed a TempCheck proposal for selecting a team to develop a wstETH bridge on the Binance Smart Chain.
  • The Node Operator Community Call #14 featured updates on the Simple DVT staking module and the introduction of the Mempool Stream service by Eden Network.
  • Collaborations expanded with wstETH support on zkSync, Mantle, and Linea, while lending protocol Spark introduced incentives for wstETH depositors.
  • Node Operators within the Lido middleware solution are actively diversifying Execution Layer (EL) clients, aiming to reduce reliance on the majority client (currently Geth).

 

Protocol Performance

In this section, you will find key metrics that offer valuable insights into the overall performance of the protocols over the month of January.

 

Lido Monthly Report: January 2024

 

  • Despite the official discontinuation of Lido on Solana, the increase in staked ETH through the Lido middleware solution contributed to the Total Value Locked (TVL) increasing by approximately $420-million.
  • Throughout the first month of 2024, precisely 7,648 users opted to stake their ETH through the Lido middleware solution for the first time.
  • The Liquidity Observation Lab reduced liquidity incentives across all chains by over 76%.

 

stETH Performance

In this section, you will find key metrics that offer valuable insights into the overall performance of the Lido’s Ethereum staking token over the month of January.

 

Lido Monthly Report: January 2024

 

  • It is important to note that these metrics also include wstETH – the wrapped, non-rebasing version of stETH.
  • With precisely 14,723 users choosing to hold stETH for the first time, the total number of stETH holders is expected to exceed 350,000 within the coming month.
  • As a result of the decrease in liquidity incentives, wstETH on Layer 2s experienced a notable decrease on Arbitrum and Optimism respectively.

 

Governance

In this section, you will find notable proposals that have arisen from the Research Forum, along with their advancements through the voting processes on Snapshot and Aragon.

 

Snapshot

Among the various Research Forum proposals considered and deliberated upon during the past month, six proposals were subjected to Snapshot votes this month.

 

  1. TempCheck: Choosing team to build wstETH bridge on BNB: details

This proposal conducted a ‘temperature check’ vote to select a team for developing a wstETH bridge on the Binance Smart Chain (BNB). Four eligible submissions were received from:

  • LayerZero
  • Wormhole & Axelar Multibridge
  • Chainlink CCIP
  • Hyperlane & Hadron Labs.

Of these options, the final results revealed that 81.13% of votes were in favor of Wormhole & Axelar Multibridge.

Proposal Outcome: Successful ✅

 

Aragon: Omnibus Votes

Following the successful Snapshot votes, a selection of these proposals were consolidated into one Omni-Vote within Aragon’s 2-Phase voting process:

 

  1. Vote #171 : details

This on-chain vote primarily included:

  • Replace Jump Crypto with ChainLayer in Lido on Ethereum Oracle.
  • Deactivate node operators Jump Crypto (ID 1) and Anyblock Analytics (ID 12) in Curated Node Operators Registry.
  • Update the names of node operators: Change “HashQuark” (ID 20) to “HashKey Cloud,” and “Prysmatic Labs” (ID 27) to “Prysm Team at Offchain Labs.
  • Upgrade Easy Track setups to allow funding in DAI, USDT, and USDC, audited by Oxorio, including permissions for EVMScripExecutor to transfer USDT and USDC with a single transfer limit of 2M.
  • Switch DAI top-up setup to DAI, USDT, and USDC top-up setup for all Lido Contributors Group multisigs (RCC, PML, and ATC), as well as LEGO multisig.
  • Decrease Easy Track limit for TRP multisig as recommended by the TRP committee.

Proposal Outcome: Successful ✅

 

Community

In this section, you will find recaps of vital community gatherings, with a particular emphasis on the Node Operator Community Calls. These recaps serve to capture and share insights from these gatherings, fostering active engagement and meaningful discussions within this expanding community.

 

NOCC Call #14

The latest Node Operator Community Call covered several important topics:

  • Will, a Lido DAO contributor, provided a update on the Simple DVT staking module. He discussed the successful completion of ObolNetwork’s DVT testnet metrics and progress with SSV Network, indicating upcoming activities and testing phases.
  • Andreas from Eden Network introduced the Mempool Stream service, enhancing block value and ETH rewards. Additionally, historical Ethereum MEV ecosystem datasets are now freely accessible in Eden Network’s documentation.
  • Lido DAO contributor Dmitry Gusakov presented the Request for Proposals for the Community Staking Module (CSM), Lido’s first permissionless module, fostering community involvement and innovation.

 

For more details, see below for the full call:


 

Collaborations

In this section, you will find all the collaborations that have been established in the past month, as leading companies and protocols integrated with the Lido protocols, further expanding the reach and impact of its liquid staking tokens.

 

Integrations

  • wstETH expanded its support on three new major networks, namely zkSync, Mantle and Linea.
  • Leveraging native integrations with Wormhole and Uniswap V3 pools,
    seamless cross-chain transfers of wstETH across Ethereum, Arbitrum, Optimism, Polygon, and Base are now enabled.
  • Lending protocol Spark introduced an incentives program for wstETH depositors, with the current wstETH supply on the platform standing at approximately 584,000.

 

Additional

  • With the imminent implementation of the Community Staking module, Lido DAO contributors have unveiled a comprehensive blog post series aimed at explaining this innovative staking design.

 

  • Node Operators within the Lido middleware solution are striving to diversify Execution Layer (EL) clients following the stabilization and maturation of minority clients post-Merge. They aim to reduce reliance on the majority client (currently geth) to enhance network resilience.

 

  • Lido Analytics has built a comprehensive range of Dune dashboards, enabling stakeholders to access a wide range of data for informed decision-making and transparency.

 

  • The Lido middleware solution remains steadfast in its efforts to diminish the risk associated with supermajority client dominance in the Ethereum network.

 

Stay Connected

To conclude, another chapter is brought to a close in the Lido Monthly Report. To remain continuously updated, be sure to subscribe to receive all upcoming reports. Furthermore, to stay connected with the growing community, follow Lido DAO through the various channels provided below.

 

Resources

Simple DVT: Obol Testnet Results

https://blog.lido.fi/simpledvt-obol-testnet-results/

Simple DVT: Obol Testnet Results

The Lido x Obol Simple DVT Testnet has officially ended, with the overall Lido x Obol validator set surpassing all of the minimum requirements to move forward to mainnet!

 

This was the 3rd testnet allowing Node Operators to run validators utilizing the Lido protocol with Obol’s DVT solution, following the first testnet in 2022 and second testnet in 2023, and the first DVT testnet by any staking protocol to be held on the Holesky testnet.

 

As described in the Simple DVT Module Proposal, participation in a Simple DVT testnet is a requirement for Node Operators seeking to participate in running validators using the Lido protocol via the Simple DVT Module on mainnet.

 

Operators (including solo stakers) interested in participating in the next Simple DVT Testnet can sign up here.

 

What is the Simple DVT Module?

The Simple DVT Module (SDVTM) is expected to be the second mainnet Lido protocol module, slated (pending DAO vote) to be added in Q1’24. The module is intended to battle test Obol and SSV Network based DVT on mainnet, while adding the first opportunity for solo and community stakers to run validators using the protocol.

 

According to the proposal, the module would be initially capped at 0.5% of total Lido stake (with the option to be increased via DAO vote) and is expected to allow for the addition of  over 250 net-new Node Operators to the protocol in the first six months post-launch.

 

Importantly, the SDVTM is intended to be wound down within 3 years, during which time more scalable DVT modules with permissionless elements are expected to be added to the protocol.

 

The “Simple DVT Module Committee” will be responsible for creating and executing Easy Track motions specifically for Simple DVT that can create new clusters, activate and deactivate existing clusters, raise and lower cluster key limits, and change cluster manager and reward addresses. These processes will be executed via the Easy Track optimistic governance process with a 72 hour window for LDO holders to veto any motions made.

 

Mainnet participants and clusters will be proposed to the DAO by the Lido Node Operator Subgovernance Group (LNOSG), a sub-committee of the DAO made up of Lido on Ethereum and Lido on Polygon Node Operators, in addition to independent members of the staking community. The proposed participants and clusters will be posted to the Lido Research forums; if after a week there are no significant disagreements, the Simple DVT Module Committee will launch Easy Track motions to add the Node Operators to the Simple DVT Operator registry.

 

To learn more about the SDVTM, read the full proposal here.

 

Obol Testing

The Obol testing began in November 2023 on Holesky testnet, with a total of 214 Node Operator participants consisting of solo stakers, community stakers, and professional node operators. Participants were split into 32 clusters of 7 members (with a 5/7 threshold configuration) that in most cases attempted to match geographic regions and achieve diversity of underlying infrastructure type (e.g. home machines, bare metal in a data center, and public cloud).

 

Each cluster also contained at least one Node Operator from the Lido on Ethereum Curated set to ensure one participant experienced with the processes required to run validators through the protocol was included in each cluster. Eight of the clusters were formed (or filled with a replacement) to test greater geographic diversity, with nodes run by participants from a combination of either Europe and the Americas or the Asia Pacific Region and Europe. Overall, participants ran nodes from 39 different countries, including participants in North & South America, Europe, the Middle East, Africa, Asia, and Australia (fingers crossed one day we will include Antarctica!).

 

Simple DVT: Obol Testnet Results

 

Each cluster started the process by choosing a “Cluster Coordinator”, a participant that would be responsible for creating a Safe multi-sig and initializing the Distributed Key Generation (DKG) ceremony for each cluster. Each cluster’s SAFE also consisted of a 5/7 threshold, and represented their cluster in the Lido Node Operator registry on Holesky.

 

Next, cluster participants each submitted and verified an “Individual Manager Address”, used for signing messages in the Safe and Obol cluster, and an optional “Individual Reward Address” that participants could choose to receive validator rewards to in lieu of their Individual Manager Address.

 

Once completed, Cluster Coordinators created their respective cluster Safes and participants configured their nodes, generated 100 validator keys via DKG, and submitted the keys to the Simple DVT Module on Holesky. Due to the early-stage nature of the Holesky testnet, MEV-Boost was not initially supported, requiring participants to directly connect to relays via their CL client. The relays used included the Eden Network relay, Flashbots relay, and Titan relay. During this period, some participants were replaced due to technical difficulties or lack of activity, leading to the final number of 196 participants that would complete the trial.

 

The testnet Simple DVT Module Committee raised key limits for each of the clusters over the course of a week to 5, and then began the initial monitoring period. After a week, attestation Effectiveness and Uptime results were promising (due to the large number of validators on Holesky, no trend was yet observed in the low number of block proposals) and validator key limits were raised to 50 for all clusters.

 

During the next monitoring period, it was observed that while Attestation Effectiveness and Uptime continued to perform well above the benchmarks, the aggregate Block Proposal Success Rate was well below the required 70% minimum threshold, at ~ 54%. While some clusters had successfully submitted all possible block proposals, a significant number of clusters had missed the vast majority of slots, and in some cases missed all of them.

 

At this point, the Obol team’s analysis of the missed proposals identified four main issues:

  1. General NO misconfigurations (generally related to their beacon nodes);
  2. Cluster latency;
  3. Issues with Holesky MEV Boost relays, and;
  4. Lack of a stable version for the MEV-Boost sidecar client on Holesky.

 

Soon after this analysis, Flashbots added MEV-Boost support to Holesky, the Obol team deployed an upgraded Charon version, v0.18.0, and also began additional troubleshooting with the relay teams. A rapid improvement was observed in the aggregate Block Proposal Success Rate, with an improvement to 63% in less than a week. As this improvement was being observed, cluster key limits were raised from 50 to 100, for 30 of the 32 clusters.

 

Two of the clusters, “Crimson Coyote” and “Glacial Gull” were among those with a 0% Block Proposal Success Rate. These clusters had both lost members due to inactivity during the course of testing, but were kept online to test potential performance impacts. Over the next weeks, the Glacial Gull cluster lost an additional member while another participant was having hardware issues, resulting in validator downtime. It was then determined that the validators should be exited by the remaining members and replacements filled to restart the cluster with a full 7 members. While the Crimson Coyote remained running in a 6/7 format, multiple participants had intermittent hardware issues, leading to sustained poor performance. For these reasons, these clusters were limited to a maximum of 50 active validators for the course of the trial.

 

It is a clear takeaway that for the mainnet implementation, when a cluster member goes inactive, before any serious issues can occur the cluster’s validators should be exited and a replacement participant will take the place in a new cluster.

 

Over the weeks following the Charon v0.18.0 upgrade the Block Proposal Success Rate continued to improve, and for the remaining 45 days of the test, the average aggregate Block Proposal Success Rate improved to 71.2%, surpassing the trial’s minimum requirement of 70%. As noted in the recent Simple DVT update post on January 17, the Block Proposal Success Rate for the 7 days preceding the end of testing remained above 85% for 6/7 days.

 

To conclude the testing, all of the validators were exited on January 22nd, and participants successfully completed claiming of rewards via the Simple DVT Reward Distribution process, as outlined in the January 17 update post.

 

Performance Results & Learnings for Mainnet

Simple DVT: Obol Testnet Results

Aggregate Results

As seen in the image above, the aggregate metrics for the Lido x Obol testnet surpassed all of the Minimum Testnet Success Characteristics outlined in the Simple DVT Module Proposal, with 97.93% Uptime, 84.53% Attestation Effectiveness, and a 71.17% Block Proposal Success Rate (all metrics per Rated). In addition, outside of Block Proposals, Obol cluster performance also surpassed the tracked aggregate average for the entire Holesky network. As a result, the Obol trial passed all requirements for Obol based DVT to move forward to the mainnet SDVTM.

 

Cluster Results

Simple DVT: Obol Testnet Results
Simple DVT: Obol Testnet Results
Simple DVT: Obol Testnet Results
Simple DVT: Obol Testnet Results

 

At the cluster level, 18 of the 32 clusters surpassed the Minimum Block Proposal Success Rate benchmark of 70%, 9 finished with between 50% – 70%, and 5 finished with Block Proposal Success Rate lower than 50%. 29 of the clusters surpassed the minimum Uptime requirement, and 31 of the clusters surpassed the Avg. Attestation Effectiveness requirement.

 

Upon further investigation by the Obol team, four key factors were highlighted as reasons certain clusters underperformed: 1. Latency, 2. Hardware, 3. Beacon Node, and 4. MEV-Boost and Relays.

 

Latency

While most clusters were formed to maintain a non-extreme geographic distance (and therefore latency) between cluster participants, eight clusters contained a mixture of participants across continents in order to either test the impact on cluster performance or as a result of replacing a participant. Of these 8 clusters, 5 fell below at least one of the performance benchmarks.

 

Additionally, of the 6 clusters containing only participants from the Asia Pacific region, only two surpassed the benchmark. Issues with latency were clearly observed in these clusters, likely due to the significant size of the region. For example, while the distance from Lisbon to Moscow is approximately 3,900 km, the distance between Seoul and Sydney is over 8,300 km.

 

The results of this testnet have made clear that when Simple DVT is deployed on mainnet, an even greater focus must be placed on geographically tuning clusters.

 

Hardware & Beacon Node

In certain clusters with a higher number of solo and community staker participants, persistent hardware problems occurred throughout the trial. While there are a multitude of potential issues related to hardware, follow up surveys clearly show that many of those participants with issues were using low-performance VPS offerings, not running hardware with a sufficient number of CPUs, and in some cases using HDD storage.

 

This caused numerous issues related to Beacon Nodes falling out of sync, especially as the number of active validators per cluster increased.

 

As a result, participants moving forward to mainnet will have to confirm that their hardware specifications meet the minimum requirements recommended by Obol for mainnet.

 

MEV-Boost & Relays

Throughout the testnet, issues related to the early-stage of community infrastructure  on Holesky were a challenge. Before the start of the testnet, MEV-Boost and publicly available MEV-relays from any of the major providers were not available on Holesky. Lido DAO and Obol contributors requested relay providers to stand up infrastructure for Holesky, and the teams from Eden Network, Flashbots, and Titan all graciously agreed to help support the testnet.

 

While an alpha version of MEV-Boost was made available during the validator setup phase of the trial, it was determined to wait for a more stable release before connecting to the sidecar. As a result, participants directly configured relays to their beacon nodes for the first weeks that validators were online.

 

While overall relay performance was suitable to start, certain issues expected in the normal course of testing were encountered. Exacerbating this, issues such as overbidding and suboptimal geographical relay placement for some clusters impacted performance.

 

Following the Charon v0.18.0 upgrade, MEV-Boost was added to all of the participant’s nodes. The introduction of MEV-Boost added another set of challenges for some clusters that were already experiencing latency issues. Per Obol’s analysis of the testing, in 25% of cases, MEV-Boost related latency added over 2 seconds to the process while each node fetched the block header (vs. the ~ 4 second requirement for the entire process to be concluded for chain inclusion).

 

Later in the trial, a mixed approach was taken where some clusters continued to use MEV-Boost and others went back to connecting to a single relay via the beacon node. While those directly connected generally showed superior performance, the benefits also must be weighed against the optionality MEV-Boost provides in receiving bids from multiple relays.

 

While some of these issues are expected to be less of an issue on mainnet given the maturity and higher hardware investments by relay providers, a mixed approach between clusters utilizing MEV-Boost and relays connected to the beacon node will likely be taken as performance results are analyzed. Additionally, the Obol team was able to take advantage of the testing to come away with additional insights into the relationship between Obol DV nodes and MEV-Boost and relays, where continuing improvements to the Charon client will likely drive higher performance over time.

 

Among other takeaways from the trial, it is clear that additional focus will be paid to improving the alerting resources for SDVTM participants. While Lido contributors have already made the Ethereum-Validators-Monitoring dashboards open source, additional work is underway to help improve the alerting resources available to SDVTM participants.

 

Participant Performance

While specific participant performance will not be discussed in this blog post, there is an important point to note: participants in clusters that did not reach the minimum performance benchmarks are not automatically excluded from moving forward to mainnet.

 

In many cases, these clusters contained a majority of Node Operators who were highly cooperative with their clusters, responsive to updates and testing requirements and whose nodes were performant.

 

The LNOSG will meet in the coming weeks to examine the quantitative performance results of the trial at the aggregate, cluster, and participant level and will also have the opportunity to examine the qualitative metrics obtained via survey and notes from the trial from the Lido DAO and Obol contributors.

 

Following their meeting, a forum post will be made on the Lido research forums to propose the clusters and participants to move forward to mainnet in the first stage (and potentially for the second stage). Each participant will receive an email with individual feedback noting their status and inviting them to participate in the next testnet if they so choose.

 

Path to Mainnet

Following the posting of the LNOSG suggested list to the forums, the DAO will have one week to discuss the proposal and state any objections. If no objections arise, clusters will begin the coordination process and the Simple DVT Module Committee will commence Easy Track motions (which can be rejected by LDO token holders) to register the clusters on the Lido Simple DVT Module registry.

 

In parallel, the SSV Network trial is currently underway and expected to be complete by the end of February or early March. Upon completion, a similar blog post will be shared with the community and an additional LNOSG process will follow for those participants.

 

When the steps outlined above are completed (pending success of the SSV trial) and SSV clusters are added to the registry, the Simple DVT Module Committee will raise key limits for both Obol and SSV clusters to 5, and a 30 day monitoring period will begin.

 

Following this monitoring period, performance will be shared with the DAO. If the results show strong performance, cluster key limits will be raised again and additional clusters will be added to the module.

 

Future Simple DVT Testnets

The next round of Simple DVT testnets are expected to commence in late March or early April. The requirements to participate are provable experience running an Obol node or SSV Operator. All solo stakers, community stakers, and professional node operators are invited to apply.

 

Please fill out this form if you are interested in participating.

 

Depending on the number of participants that move forward from these two testnets, it is possible the module will reach stake capacity. If that is the case, a discussion and vote can be held for the DAO to consider raising the 0.5% of Lido stake limit.

 

Other Notes

A huge huge thank you is due to all of the community and ecosystem members that made this testnet possible.

 

Without the support of the relay and MEV infrastructure teams from Eden Network, Flashbots, and Titan, the testing and takeaways from this testnet would not have been possible.

 

Next, thanks go to the Protofire team, who with the support of LEGO, deployed and maintained an instance of Safe on Holesky that was pivotal to the trial, and to Rated, for setting up Holesky monitoring earlier than planned.

 

Also, thank you to the Obol Labs team, who have continued to drive significant improvements to the Obol technology suite and for all of their diligent work assisting participants during the testnet. The results of this testing show that Obol based DVT is not only feasible, but will drive further decentralization across infrastructure, software, and geographies for Ethereum based validators. See Obol’s analysis of the testnet here.

 

Finally, and most importantly, to all testnet participants: thank you for keeping your nodes running, going through multiple rounds of upgrades and changes, and especially for your enthusiasm in helping to drive the decentralization of the Ethereum network.

 

Obol Testnet #3 Participants

  • Cluster 1: dgnatiuk, demrwr, HashKey Cloud, Nodera, Raccoon Nodes, Serenita, SuperJax
  • Cluster 2: Chainnodes, kobzar3830, PowerStaking, sodiumstar, Stakely, stellar_the_one, systemd
  • Cluster 3: _bara_kuda, Dappnode, Eridian, Piconbello, RockawayX, TRUPROCRYPTO
  • Cluster 4: Chainode Tech, DVStakersSpacesider, Kukis Global, kvqd777, MGTeam, minivipers, Valakas
  • Cluster 5: Cryptoria, Liquify LTD, narko2t1, natalia3647, Node3.Tech, RockLogic GmbH, SECARD
  • Cluster 6: 01node, Deutsche Telekom, Simply Staking, SpaceX, Thenop.io, TrustedAdvizer, vladislav7137
  • Cluster 7: A41, Blockblaz(G11 tech labs pvt. ltd.), DVStakersSpacesider, Kunyoung Kim – IT Times.com, Lefey, StakeWithUs
  • Cluster 8: anvel, H2O Nodes, Metanull, ramza107, SenseiNode, Sub7 Security, Web3DAO
  • Cluster 9: Barracuda, Everstake, GraphOps, nodeproxyz, Power Intelligence, Republic Crypto, yura_zp
  • Cluster 10: Blockscape, Cosmostation, dimsome, Everlasting Global, nodeADDICT, testnet.cn, thucnguyen#8149
  • Cluster 11: Allnodes, amarkelov, Dappnode, knightsemplar, natalia_256, TdrSys, Yutu
  • Cluster 12: BeeHive, Cryptology, Eridian, jayjay, LinkPool, Nethermind, VanGogh
  • Cluster 13: CryptoManufaktur, farukyasar, F5 Nodes, Las01, LIVE.NODE, maxim_101, Node Guardians
  • Cluster 14: Cryptology, Finoa, Nokey, nodeskuge, noxuspace, Stakin, TRUPROCRYPTO
  • Cluster 15: BeeHive, Chainlayer, deNodes, katesizova, Tesla, testovich, val4n17
  • Cluster 16: Chainlayer, ContributionDAO, Lavender.Five Nodes, Pier Two, RockX, Starnodes, Validation Cloud
  • Cluster 17: DSRV, goldstream777, Infinite Lux Staking, MGTeam, Power Intelligence, rrrmmmmm, Spectrum Staking
  • Cluster 18: Launchnodes, mahof, Metanull, Piconbello, SenseiNode, Staking4All, Steaking Frens, UniqNodes, Web3DAO
  • Cluster 19: alkadelta, Konstantin#1194, P2P.org, PhiNodes, Starnodes, Светлана1969#2890, yellowbee#7307
  • Cluster 20: 🅰🅻🅴🆇ⒾⓉ, antonduzhenko, Infstones, Nodes.Guru, Range, systemd, Weaitonamazerid
  • Cluster 21: b, Conqueror, Highnok, LIVE.NODE, Mahof, P-OPS, Staking Facilities
  • Cluster 22: Ebunker, GoldenTrust, Imperator.co, KingSuper, RockX, Validation Cloud, Youngha Kim – IT Times.com
  • Cluster 23: 01Node, Cryptofisher, Investernco, Kukis Global, Liquify LTD., Pacobits, Polkachu
  • Cluster 24: HashKey Cloud, HellmanResearch, Investernco, kobya4evo, Luck#7063, NodeInfra
  • Cluster 25: GlobalStake, Investernco, irina#7966, lcofjurn, NakoTurk, RockawayX, StakingCabin
  • Cluster 26: Applepai, ChainOps, Coinstamp, CryptoManufaktur, CVJoint, H2O Nodes, rodion007#5553
  • Cluster 27: Astronodes, Colinka | BeeHive,DMITRY | SCANDALIST, DragonStake, lesya, Simply Staking, Swiss Staking
  • Cluster 28: Blockpower, Crouton Digital, daniilkir, Eridian, iicc1, SNC.xyz, Stakin
  • Cluster 29: A41, Cat6, Chainbase, Forbole, Luganodes, StakeWithUs
  • Cluster 30: Anonstake, archimedes0159, cryptozab, D-Stake, guglez, igorzp60, P2P.org
  • Cluster 31: 1to, Andrei0707#1159, Blackb0x, Bware Labs, Cosmostation, DSRV, OranG3cluB
  • Cluster 32: Di-nodes, goooodnes, Metanull, SenseiNode, SpaceX, tungnguyen.zk

Lido’s wstETH goes to Linea

https://blog.lido.fi/wsteth-goes-to-linea/

Lido’s staked ETH is now available on Linea.

Lido's wstETH goes to Linea

 

In collaboration with Lido DAO contributors and as part of its commitment to advancing the Ethereum ecosystem, staked ETH has now made its way to Linea. Linea opens new avenues for DeFi enthusiasts to leverage the benefits of wstETH within its thriving ecosystem.

 

➡️ To bridge your wstETH to Linea: bridge.linea.build

➡️ For tutorials & instructions: help.lido.fi/en/articles/8804728-bridging-wsteth-to-linea

 

What is Linea?

Linea stands as a leading zk-rollup on Ethereum, offering EVM equivalence, scalability, and reduced transaction costs while preserving Ethereum’s security guarantees through zero-knowledge proofs. Boasting consistent growth in Total Value Locked (TVL) and supported protocols, Linea has become a primary network in MetaMask and a key infrastructure provider for the Lido middleware solution.

 

Recognizing the pivotal role of stETH in the Ethereum ecosystem with a market capitalization of currently $23B and over 330,000 holders, Linea integrates wstETH to meet the growing demand within the Ethereum community. This move aims to provide enhanced user experiences, foster greater adoption, and increase the utility of wstETH on Linea.

 

Bridging to Linea

To bridge your wstETH to Linea, simply follow these four easy steps.

  1. Select Bridge: Visit Linea’s website and choose between it’s recommended MetaMask bridge and other third-party bridges.
  2. Connect your wallet: Once you have selected your bridge of choice, connect your wallet.
  3. Select wstETH: Choose the desired amount of wstETH to bridge to Linea.
  4. Approve and Confirm: Complete the bridging transaction, which typically takes about 15 minutes.

 

Lido's wstETH goes to Linea

 

Following this bridging transaction, your wstETH will be available on Linea. In case of issues or questions, refer to the Linea bridging guide.

 

What’s Next?

The integration of Lido’s wstETH on Linea brings forth exciting opportunities for users within our ecosystem. In the coming weeks, Linea users can expect to explore wstETH across various applications, including collateral, lending, farming, indexing, and more.

 

This collaboration represents a significant stride towards unifying the Ethereum ecosystem, providing stability, and expanding the options available to users in the Layer 2 space.

 

Resources

Lido Community Staking: Bonding

https://blog.lido.fi/community-staking-module-bonding/

Lido Community Staking: Bonding

The second blog of a four-part explanatory series about Lido Community Staking Module (CSM), will dive into its bonding mechanism. Check out the rest of the parts of the series below:

 

Why Bonding?

A bonding mechanism was proposed to be utilized in CSM to facilitate permissionless onboarding of independent Node Operators. Taking into account the staking landscape, bonding has proven effective in:

  • Onboarding numerous independent Node Operators in a permissionless manner;
  • Allowing for the creation of mechanisms that would compensate stakers in the possibility of inappropriate or malicious actions by Node Operators;
  • Increasing economic alignment between Node Operators and stakers.

 

Only ETH (stETH) as Bond Token

ETH will be the only token required for bonding, with no additional tokens needed. The requirement of secondary bonding assets is unacceptable for some Node Operators, especially ETH maximalists since they would prefer to not have exposure to assets which may fluctuate in value compared to ETH. Furthermore, using ETH as a sole bond token keeps straightforward logic of collateral and possible implications it’s intended to cover existing in ETH only.

 

It’s proposed to stake the bonded ETH instead of locking it in the contract as an unproductive asset, so Node Operators would gain the staking rewards once they deposit the bonds.

 

Lido Community Staking: Bonding

 

Bond as a Coverage

It’s proposed that bonds be utilized as cover in the scenarios when Node Operators intentionally or accidentally negatively impact staking rewards. The following specific cases are considered:

  • Validator balance after exiting is lower than the default MEB (i.e. 32 ETH, but it might be changed with EIP-7251);
  • MEV stealing.;

 

Lido Community Staking: Bonding

 

It cannot be 100% guaranteed that the bond is sufficient to cover all possible losses, especially if malicious actors were to steal a huge amount of MEV. To significantly reduce the risk of uncovered losses, CSM will introduce a fascinating bonding mechanism that associates bonds with the Node Operator instead of the individual validator. This means the aggregate total of bonds provided by an operator that runs multiple validators could cover the losses caused by any of its validators.

 

Another important feature of the proposed model is “non-linear bonding” as a way to reduce the appeal of Sybil attacks (i.e. an entity controls multiple Node Operators, each with at least a validator). It allows Node Operators to operate more than one validator with bond requirements that decrease based on how many validators have been registered with the NO address. Ongoing research indicates that gradual bond reduction can discourage Sybilling and EL stealing. Furthermore, it lowers entry barriers for those who want to run more validators.

 

Bond Size Considerations

The figures for bond size and non-linear bonding curve have not been decided yet. These will be voted on by the DAO sometime before mainnet release, taking into account the latest changes in factors such as technical validator risks and Ethereum updates.

 

At present, according to a recent risk assessment analysis, a 4 ETH bond is sufficient to cover possible losses and most missed profits in a modelled realistic scenario, and a 2 ETH bond is sufficient to cover all direct losses (CL penalties) in the same realistic scenario.

 

In addition, a competitive bond size (i.e. 4 ETH or even less) should be applied to further lower the entry barrier to run a validator and to be more profitable for Node Operators than vanilla solo staking, and even other services. Lido contributors in the analysis introduced two metrics (i.e. “rewarded capital” and “rewarded capital multiplier”) to easily compare capital efficiency of bond provision among different protocols.

 

What’s Next?

After the introduction of CSM’s bonding design, the next post will discuss the innovative design of reward measurement and distribution, as well as penalties.

 

Stay tuned!

 

Resources

Lido’s wstETH goes to Mantle Network

https://blog.lido.fi/wsteth-goes-to-mantle/

Lido’s staked ETH can now be bridged to the Mantle Network ecosystem.

Lido's wstETH goes to Mantle Network

Lido contributors are pleased to announce the formal launch of Lido’s wrapped staked ETH (wstETH) on the Mantle network.

 

Mantle is an Ethereum L2 solution featuring an EVM-compatible execution environment. Since launching, Mantle Network has seen almost 50 million total transactions spread across 1.7m unique wallet addresses. DAO-governed and built around the MNT token, Mantle boasts an impressive collection of ecosystem applications for ETH stakers to benefit from, together with a network TVL of $300m+.

 

The original bridging proposal can be found here: https://research.lido.fi/t/wsteth-deployment-on-mantle/5991

 

➡️ To bridge your wstETH to Mantle: bridge.mantle.xyz

➡️ For tutorials & instructions: help.lido.fi/en/articles/8842617-bridging-wsteth-to-mantle

 

What is Mantle?

Mantle Network is a novel EVM-compatible L2 technology stack built for scaling the Ethereum network. Using Mantle, users and developers can interact with exciting Web3 applications in a rapid, low-fee environment. Mantle has been developed using a modular architecture that integrates optimistic rollup protocol with a unique data availability solution to allow for Ethereum security inheritance whilst improving the data accessibility process.

 

Bridging to Mantle

Bridging to Mantle is straightforward and you can transfer your staked ETH in just a few minutes. Here’s how it works:

  1. Visit bridge.mantle.xyz and connect your wallet.
  2. Choose the wstETH amount you want to deposit.
  3. Approve the bridge to interact with your tokens if asked. This will require a small gas fee in ETH to make the approval.
  4. Proceed with the deposit after confirming the bridging details.

 

Following this transaction your wstETH will be available on Mantle. In case of issues or questions, refer to the Mantle bridging guide.

 

Frequently Asked Questions

How can I view my wstETH balance on Mantle in my wallet?

If the wallet doesn’t auto detect your wstETH, you can manually import wstETH into your wallet using the contract address: 0x458ed78EB972a369799fb278c0243b25e5242A83.

 

Are there any bridging fees?

Network fees are required to pay for the gas costs on Ethereum and Mantle. There are no extra fees specifically for using Mantle native bridge.

 

How long does it take to bridge?

Depositing to Mantle typically takes about 12 minutes. Withdrawing from Mantle to Ethereum takes approximately 7 days.

 

Do I need MNT to withdraw wstETH from Mantle?

Yes, you have to initiate a wstETH withdrawal on Mantle first and it takes some MNT as L2 gas fees. For a new user to Mantle, the MNT bonus will be sent to your address after depositing any token (e.g. wstETH) from Ethereum to Mantle.

 

What’s Next?

The integration of Lido’s wstETH on Mantle brings forth exciting opportunities for users within the Lido and Mantle ecosystems. Over the coming weeks, Mantle users can expect to be able to use their wstETH across a number of Mantle-based applications, including lending, farming, indexing, and more.

 

This collaboration represents a significant stride towards unifying the Ethereum ecosystem, providing stability, and expanding the options available to users in the L2 space.

 

Resources

Lido Community Staking: An Overview

https://blog.lido.fi/lido-community-staking-an-overview/

Lido Community Staking: An Overview

On December 15th, the Lido DAO gave the green light for the development of Community Staking Module (CSM), paving the way for community stakers to utilize the Lido protocol to run validators in a permissionless manner.

 

To assist the community in understanding the workings of the CSM, a series of four explanatory blog posts will be published, covering:

  • #1: Overview of Community Staking Module (CSM)
  • #2: Bonding
  • #3: Rewards & Penalties
  • #4: Stake Allocation & Validator Exits/Ejections

 

What is Community Staking Module (CSM)?

The term “community stakers” has been widely used throughout the Lido forums to refer to independent individuals (e.g. solo stakers) or groups running Ethereum validators.

 

Community Staking Module (CSM) will most likely be the third Lido on Ethereum module after the Curated Module and Simple DVT, and the first to offer permissionless entry allowing community stakers to operate validators by providing an ETH-based bond.

 

Lido Community Staking: An Overview

 

1. Goals

To narrow the initial goals from the Lido Community Staking Manifesto and form more practical applications, the following CSM goals were accepted:

  • Allow for permissionless entry to the Lido on Ethereum Node Operator set and enfranchise solo-staker participation in the protocol;
  • Increase the total number of independent Lido on Ethereum Node Operators to 300+ independent Node Operators within months of mainnet launch.

 

2. Key Features

To make CSM more attractive to the community stakers, the following features were introduced:

  • EL rewards and MEV are smoothened with the other modules (e.g. the Curated Module) so CSM Node Operators could potentially gain more stable rewards that are closer to the average MEV ones;
  • A reasonably low bond is targeted for Node Operators so it can cover more prospective operators;
  • ETH (stETH) is the only token for bond and rewards without any involvement of other assets;
  • Node Operators are provided with more friendly UX and pay less gas fees for on-chain operations;
  • Node Operators are supposed to gain more rewards than vanilla solo staking;

 

Why Community Staking Module?

Lido started with a mission to keep Ethereum decentralized and to democratize access to staking. Currently Lido has only one Node Operator module, which is DAO-curated and consists of 37 professional staking providers.

 

In an effort to enhance the protocol’s decentralization by incorporating a broader range of operators, the Lido DAO approved the development of a module that allows for permissionless Node Operator entry.

 

Lido Community Staking: An Overview

 

In light of two upcoming Ethereum features estimated to be released in the near future, it is more feasible for the protocol to sustainably accommodate permissionless access. Namely, EIP-4788 will allow Lido smart contracts to fetch data (e.g. validator balances) in a trust-minimised way, and EIP-7002 will allow Lido for on-chain exit of malfeasant protocol validators through the protocol’s validator withdrawal credentials.

 

A variety of mechanisms, including bonding, reputation & DVT could be employed to cultivate a more diverse operator base. At this juncture, CSM was proposed to adopt a bond-based design since it has proven to be a great approach to validator set formation. A bond can be used as cover for inappropriate actions (e.g. validators’ offline, slashing, or MEV stealing) and as an alignment mechanism between Node Operators and stakers.

 

Potential Partnerships

Community participation in either running validators or building tools is a key step for a successful permissionless module, so the Lido CS team contributors are eager to establish partnerships and collaboration with the Ethereum ecosystem for tooling development that could facilitate the use of the CSM.

 

Some notable examples of such tools include DappNode, Avado, Stereum, Sedge, and eth-docker. If you have any ideas, please reach out in the research forum.

 

What’s Next?

Since the vote has passed, the DAO agreed on the proposed timeline below.

 

Holesky testnet deployment for CSM is assumed to happen in Q2-Q3 2024. Furthermore, the mainnet release was scheduled in Q3-Q4 2024, assuming there are no significant obstacles or implementation issues.

 

Lido Community Staking: An Overview

 

Additional Resources

Lido’s wstETH goes to zkSync

https://blog.lido.fi/wsteth-goes-to-zksync/

Lido’s staked ETH is now available throughout the zkSync ecosystem.

Lido's wstETH goes to zkSync

 

In collaboration with Matter Labs and txSync, Lido DAO contributors are pleased to present the deployment of Lido’s staked ETH on zkSync Era Mainnet.  

 

Lido’s wstETH on zkSync ushers in numerous new opportunities and use-cases within the flourishing DeFi ecosystem whilst further cementing the liquidity and stability of staked ETH.

 

This deployment marks the beginning of an exciting journey across the zkSync ecosystem with numerous integrations and opportunities to be unveiled in the coming weeks. Stay tuned!

 

➡️ To bridge your wstETH to zkSync: portal.txsync.io/bridge

➡️ For tutorials & instructions: help.lido.fi

 

What is zkSync?

Launched in March 2023, zkSync is an EMV-compatible L2 scaling solution for Ethereum built around zk-rollups, a zero-knowledge proof technology. zkSync enhances the scalability of Ethereum by moving most transaction processing off the main chain, thereby reducing congestion and gas fees.

 

With its efficient scaling capabilities, zkSync enables faster and more cost-effective transactions on the Ethereum network, offering an improved user experience for decentralized applications.

 

Bridging to zkSync

Bridging your wstETH to zkSync is simple; follow the steps below to bridge:

  1. Go to portal.txsync.io/bridge.
  2. Connect your wallet.
  3. Choose amount of wstETH to bridge.
  4. Choose your zkSync Era Mainnet address.
  5. Approve and confirm the bridging transaction.

 

Lido's wstETH goes to zkSync

 

The bridging process takes approximately 15 minutes after which your wstETH will be available on zkSync. In case of issues or questions, refer to the zkSync bridging guide.

 

What’s Next?

The zkSync wstETH bridge aims to fuel the growth of staked ETH across the zkSync-based DeFi ecosystem, bringing liquidity and reward opportunities to zkSync users. The zkSync ecosystem brings with it significant demand for wstETH and the opportunities it brings to the DeFi protocols, and their users, across the space.

 

zkSync users can expect to find wstETH available as collateral, lending, farming, indexing and much more over the coming weeks.

 

The deployment of Lido’s wstETH to zkSync marks an important step in expanding and unifying the Ethereum ecosystem, bringing the stability and liquidity of staked ETH to L2s.

 

Resources

Institutional Grade Liquid Staking With Hashnote and Lido

https://blog.lido.fi/institutional-grade-liquid-staking-with-hashnote-and-lido/

Institutional Grade Liquid Staking With Hashnote and Lido

Lido and Hashnote have collaborated to create institutional-grade access to Lido’s liquid staking.

 

The Hashnote’s Institutional stETH Fund brings Lido Staked Ethereum (stETH) to more institutional stakers globally, combining complete on-chain transparency with a regulated and compliant framework.

 

At the core of this collaboration is the concept of liquid staking, pioneered by Lido with stETH. Liquid staking allows users to have immediate liquidity on their staked ETH, so they can participate in the rewards of staking Ethereum without giving up the liquidity of a directly tradable asset. This is in direct contrast to traditional staking which brings with it illiquidity and inaccessibility through timed lock-ups required to earn rewards. Many market makers already quote stETH directly against fiat and stables, making the liquidity nearly as good as Ethereum itself.

 

This year’s surge in demand for liquid staking is unmistakable, and according to the Dune board, 78.1% of all distributed ETH is staked via liquid tokens. However, adding a new Digital Asset class into a regulated fund structure is no easy task. It introduces significant security and infrastructure challenges, coupled with the necessity to maintain regulatory frameworks such as KYC, AML, audit, and reporting overhead. Not only this, risk exposure grows significantly as well, given the uncountable amount of high-profile hacks in the crypto industry and the ever growing complexity of the blockchain ecosystem.

 

Hashote and Lido’s collaboration tears down these barriers, offering regulated institutions a fully compliant, secure, and transparent regulated fund structure built on top of open source, decentralized liquid staking middleware.

 

Hashnote’s Institutional stETH Fund enables:

  • Institutional-Grade Reliability: Hashnote & Lido vault is designed to meet the highest standards of institutional investors.
  • Regulatory Compliance: Hashnote is regulated by the Commodity Futures Trading Commission (CFTC) as a CPO and its funds are registered with the Cayman Islands Monetary Authority (CIMA) as mutual funds, providing their services to both U.S. and non-U.S. entities. The executive team has several decades of combined experience in compliance frameworks, global financial markets, derivatives, and structured income products.
  • KYC/ AML compliance: To maintain KYC/AML compliance, the Hashnote ecosystem operates as a “walled garden” where every participant (both customer and liquidity provider) must be whitelisted. Each participant goes through the KYC/AML process to verify the identity and documentation of each entity.
  • Security: Hashnote Smart Contract Vaults are managed by multi-party computation (MPC) wallets. Client / Wallet Address whitelisting is maintained and enforced by Hashnote proprietary smart contract. All smart contract code is audited by third parties.
  • Hassle-Free Management: The user-friendly interface makes staking easy and convenient. Monitor your staking rewards, track performance, and manage your assets effortlessly. A dedicated Hashnote support team is here to assist you every step of the way
  • Enhanced Rewards: With Hashnote & Lido institutional staking, you can maximize your participation in staking rewards. The Hashnote platform provides access to staking on Lido, allowing you to earn rewards with ease without giving up liquidity.

 

With this collaboration, institutions can benefit from stETH’s institutional-grade liquidity by using staked liquid tokens as collateral in the stETH Hashnote Options Vault to generate even higher rewards.

 

Characteristics of the Institutional stETH Fund

The Institutional stETH Fund developed in conjunction with Lido and Hashnote has numerous benefits, including:

  • T+0 redemption available when needed due to stETH’s inherent institutional-grade order book depth.
  • Zero slippage redemption available through standard ETH unstaking protocol.
  • No leverage
  • On-chain transparency
  • Hashnote Liquid Staking Fund is fully KYC/AML compliant
  • Auto-compounding rewards
  • Diversified node operators and distributed counterparty exposure

 

As a trusted institutional on-chain asset manager, Hashnote can provide a liquid, user-friendly experience for any ETH staking exposure by building on Lidos institutional-grade, open-source, liquid staking middleware.

 

Get in touch with Hashnote to get started: hashnote.com.

LidoConnect 2023 Recap

https://blog.lido.fi/lidoconnect-2023-recap/

LidoConnect 2023 Recap

 

LidoConnect was an amazing day of staking-focused learnings in Istanbul 🇹🇷

 

As an extension of DevConnect, LidoConnect featured a series of curated talks, panels and workshops which form the foundation and future of the Ethereum staking ecosystem.

 

Designed to ignite curiosity, raise interesting questions and turn viewers and participants into dedicated explorers of the liquid staking ecosystem.

 

Thank you all for an amazing event – see you at LidoConnect 2024 🏝️

 

LidoConnect – Full Event Stream

Check out the full stream below including all the exciting talks and panels. Find the full agenda below the stream 🎥

 

 

Agenda

  • 15:00 – Welcome speech 👋
  • 15:05 – Talk: Lido – The Road So Far (Isidoros Passadis, Lido)
  • 15:30 – Talk: A set-theoretic view of Ethereum coteries (Michael Neuder, Ethereum Foundation)
  • 15:50 – Talk: Dual Governance at Lido (Sam Kozin, Lido)
  • 16:10 – Panel: Why do you keep destroying yourself? (Kadmil, Rune Christensen, Sam Kozin, Charlie Feng)
  • 17:20 – Talk: Proposed changes to Ethereum staking mechanisms (Vasiliy, Lido)
  • 17:40 – Panel: What makes for better money, ETH or LSTs? (Marin, Justin Drake, Tarun Chitra, Konstantin Lomashuk)
  • 18:30 – Panel: When you trust no one but two of three… (Max Merkulov, Zahary Karadiov, John Guibas, Misha Komarov, Alex Potapkin)
  • 19:00 – Afterparty 🍸

 

LidoConnect – Gallery

Missed LidoConnect? Face your FOMO head on below… 📸

 

 

Leveraging Distributed Validator Technology (DVT) with Simple DVT

https://blog.lido.fi/leveraging-distributed-validator-technology/

Leveraging Distributed Validator Technology (DVT) with Simple DVT

On October 26th, 2023, the Lido DAO voted on the deployment of a Simple DVT Module, a proposal that could play the first step in significantly diversifying the Lido Node Operator set and drive future innovation within the Ethereum staking ecosystem.

 

In the previously linked research forum lies great discussion and debate with much deeper insight into what DVT could do for Lido DAO and beyond. In this article we’ll take a more broad overview into what Simple DVT is, why it’s promising and how it all works.

 

What is Distributed Validator Technology (DVT)?

In its essence, distributed validator technology functions as a system that operates similarly to a multisig setup for running a validator. Rather than relying on a single node operator, DVT relies on multiple node operators, each managing distinct nodes that communicate and collectively reach consensus to fulfil validator responsibilities.

 

Leveraging Distributed Validator Technology (DVT) with Simple DVT

 

The benefits of DVT are substantial. It enhances validator resilience, mitigating single points of failure through active:active redundancy, mitigating risks of validator downtime. It also promotes decentralization in various aspects, including across infrastructure, geographical distribution, and client diversity. Additionally, DVT enhances security by using Distributed Key Generation (DKG), adding an extra layer of protection against potential threats.

 

One significant development in the world of DVT is the proposed introduction of the Simple DVT Module within the Lido protocol. This module is designed to make using validators through the Lido protocol more accessible to a wider audience by utilizing DVT. It leverages the established design of the Curated Operator Module and will utilize DVT solutions provided by two leading providers, Obol Network and SSV Network.

 

Furthermore, this module builds upon the experience gained during the 2nd and upcoming 3rd DVT testnet trials, helping to ensure a well-optimized deployment.

 

The participants in this initiative represent a diverse range of stakeholders. From individual and community stakers to professional node operators and curated node operators, the Simple DVT Module aims to involve anyone interested in the evolution of decentralized blockchain validation.

 

Why Simple DVT?

The fastest route to enhancing Lido protocol’s decentralization and security lies in adopting DVT. By accommodating a more extensive range of Node Operators, this technology significantly amplifies the network’s decentralization, distribution, and resilience. DVT’s flexibility allows for the use of various hardware setups, diverse client implementations (like EL and CL clients), and wider geographical distribution.

 

Leveraging Distributed Validator Technology (DVT) with Simple DVT

 

With the proposed introduction of the Simple DVT Module, the stage is set to put Obol and SSV’s DVT solutions to the test on mainnet. This practical trial will serve as a critical demonstration of the performance and resilience benefits of DVT in a real-world environment, helping to lay the foundation for its expanded adoption within the Lido protocol with the potential for more permissionless onboarding.

 

What does DVT mean for Node Operators?

 

The Simple DVT Module opens doors for solo stakers, community stakers, existing node operators, and other staking organizations. It invites them to participate in the upcoming third and fourth Lido DVT testnets. Following rigorous performance assessments, the Lido Node Operator Subgovernance Group (LNOSG) will propose clusters for mainnet deployment, leading to a richer diversity of validators.

 

A Phased Approach

Initially, a limited number of clusters will operate, and the number of validators per cluster will be modest. This cautious approach allows the DAO and LNOSG to monitor performance and its impact. In the case that this proves successful, more clusters and validators can join the mainnet.

 

The next phase, expected to unfold after three months of mainnet performance on par with the broader operator set, may witness the LNOSG proposing an increase in the number of validators per cluster to more meaningful levels.

 

The Economics Behind DVT

To encourage Node Operator participation and support DVT providers, the Simple DVT Module proposes a 2% treasury fee and an 8% module fee (as described in the Lido Staking Router technical docs), shared between Node Operators and DVT providers. This economic model acknowledges the unique challenges of running a small number of validators and aims to sustain DVT technology development.

 

Leveraging Distributed Validator Technology (DVT) with Simple DVT

 

Mitigating Risks with Simple DVT

The proposal offered two risk mitigation options for DAO consideration. The first option proposed using the existing cover fund to mitigate stETH staker losses in case of unusual events. The second option suggested opening an RFP process to source third-party cover providers.

 

Leveraging Distributed Validator Technology (DVT) with Simple DVT

 

The DAO decided to use option one and self cover. The reasoning from research is as follows:

Per research from the Lido Analytics Contributor Workstream 4 and as an example assuming 1400 validators (70 clusters running 20 validators each), the cover fund currently holds more than enough stETH to compensate for potential losses under most conservatively realistic scenarios, even assuming intentional malicious behavior of all participating NOs: (i.e. no more than 4 ETH loss per Validator, assuming no correlation penalty and triggerable exits implemented within the next year).

 

Simple DVT: What’s Next?

With Simple DVT Module approved, it will serve as a temporary module, operating initially at 0.5% of Lido stake, with potential for expansion through DAO votes. It is not intended to operate indefinitely, but rather to pave the way for more sophisticated DVT modules that could allow for elements of permissionless onboarding.

 

Leveraging Distributed Validator Technology (DVT) with Simple DVT

 

The proposal also grants the Simple DVT Module Committee the authority to execute Easy Track governance motions, efficiently facilitating cluster operations, while still allowing LDO holder input. This critical step in the adoption of DVT technology is a testament to Lido’s commitment to decentralization, accessibility, and innovation.

 

As the Ethereum ecosystem evolves, the Lido DAO is poised to lead the way, promoting the democratization of staking while keeping Ethereum secure and decentralized. This is a defining moment in the journey towards a more robust and diverse Ethereum validator set.

 

Simple DVT: Resources

Lido Goes to Base

https://blog.lido.fi/lido-goes-to-base/

wstETH is now available throughout the Base ecosystem 🔵

Lido Goes to Base

Today, Lido DAO contributors are pleased to present the launch of wstETH on Base.

 

Led by KyberSwap, Beefy and Superbridge, the availability of the wstETH Base bridge opens up the benefits of staked ETH to the Base ecosystem, further enhancing Ethereum liquidity and stability.

 

The availability of wstETH to Base builds upon successful earlier launches across Arbitrum, Optimism, Polygon and Cosmos. Since its launch in August, Base has cemented itself as one the leading Ethereum L2s with impressive user growth, unique applications and a vibrant developer community.

 

With the availability of wstETH to Base, users of Base will now be able to use their staked ETH across the growing Base DeFi ecosystem, whilst protocols on Base will be able to integrate wstETH to further enhance liquidity and usability.

 

➡️ To bridge your wstETH to Base: superbridge.app/base

➡️ For tutorials & instructions: help.lido.fi

 

The Role of wstETH Across Base

The wstETH Base bridge brings the multiple benefits of Lido’s staked ETH to users and protocols of Base, further growing the usability of Ethereum L2s.

 

In the beginning, Base users can look forward to interacting with wstETH across dApps like KyberSwap, Beefy and Aerodrome. In the near future, users can expect wstETH to be made available across many more growing protocols. Stay tuned 👀

 

Bridging wstETH to Base: Step by Step

The process for bridging to Base is as simple as can be.

  1. First, head to the Superbridge App and choose ‘Base’.
  2. Connect your wallet and choose ‘wstETH’.
  3. Choose the amount of wstETH you want to bridge to Base and approve the use of your tokens for the bridging.
  4. Once confirmed, sign the transaction and wait a few minutes.

 

Easy peasy – your wstETH is now on Base 🔵

 

For a more in-depth guide, visit ‘Bridging wstETH To Base‘.

 

Lido Goes to Base

 

Superbridge is the DAO-supported UI for bridging wstETH on Base using a native bridge. wstETH will also become available on the Base Bridge in the upcoming weeks.

 

Keep in mind that you must wrap your staked ETH to wstETH prior to bridging. To do that, head to stake.lido.fi/wrap.

 

What is Lido’s wstETH?

Lido’s wstETH is a wrapped version of stETH optimised for DeFi interoperability. Unlike with stETH – where your balance changes daily as staking rewards come in – wstETH is non-rebasing and keeps your balance fixed. Instead, wstETH uses a share system to reflect earned staking rewards.

 

Holding wstETH earns you the same staking rewards as when holding stETH, but rewards will only be realised when you choose to unwrap your wstETH back to stETH.

 

Lido Goes to Base

 

Learn more about wstETH here: stake.lido.fi/wrap.

 

What’s Next?

More than just a bridge, wstETH on Base marks an important step in improving the DeFi ecosystem on Base and further increasing the use of wstETH across Ethereum L2s.

 

Keep an eye out for upcoming announcements as wstETH becomes an integral part of the Base ecosystem.

Post Mortem: Lido on Ethereum Launchnodes Slashing Incident

https://blog.lido.fi/post-mortem-launchnodes-slashing-incident/

Incident Summary and Root Cause

Post Mortem: Lido on Ethereum Launchnodes Slashing Incident

At 15:55 UTC on October 11 2023, Lido DAO contributors alerted the Launchnodes Node Operator of a slashing event taking place which ultimately affected 20 of the validators that they operate as users of the Lido protocol. A full list of the validators impacted is provided in APPENDIX B below.

 

Within 10 minutes, the affected clusters were brought offline to mitigate potential further risk, and the Launchnodes team began to investigate the root cause. The root cause of the slashing boiled down to executing non-optimal fallback procedures during datacenter connectivity issues. In an attempt to restore validator connectivity, multiple validator client instances (an initial instance and a manually activated fallback instance) were pointed to a single Web3signer instance without slashing protection enabled at the Web3signer level and without blocking the initial instance from the signer (e.g. via firewall rules); this caused double votes to occur for the loaded validators, which led to attester slashings of 20 validators.

 

The fallback validator client was brought on and connected to Web3signer after an attempt had been made to deactivate the nodes attached to the original validator client instance by moving the associated EL node’s data container.

 

A full post mortem from Launchnodes’ perspective is available in APPENDIX A below. A full timeline of the incident can be found in section “4. Timeline” below.

 

Impact

The impact on stakers (stETH holders) from a penalties and missed rewards perspective is analysed below:

 

Description

Amounts

Initial slashing penalties

Penalties: 20 ETH

(Actual) (1 ETH penalty per validator slashed)

Additional slashing penalties (i.e. due to correlated slashing multiplier)

0*

* Projected. No additional slashing penalties expected, as thousands of additional validators would need to be slashed within the correlated 36-day period to trigger a penalty of 1 ETH per validator.

Slashing-subsequent validator duty inactivity penalties and missed rewards (attestations)

Attestation penalties*: 1.197 ETH

Missed Attestation Rewards*: 1.668 ETH

–Missed Target + Source Rewards: 1.235 ETH

–Missed Head Rewards: 0.432 ETH 


(*Projected. Assuming Projected base reward 377. Attestation penalty ~7304.75 gwei, Attestation reward ~ 10179 gwei. Slashing Vector 8192 epochs, incurred until the validators become withdrawable on the Beacon Chain)

Slashing-subsequent validator duty inactivity penalties (missed proposals and/or sync committees)

Missed proposal rewards*: 0.198 ETH
Sync committee penalties / rewards: N/A**

*Projected, based on expected value of 6.14 proposals for total 20 validators (avg proposal reward for 2w = 32,258,570 Gwei)
** See “interesting edge case” note in “Other Penalties”)

Slashing-subsequent inactivity leak

0*


* Projected. There is no inactivity leak expected as the network is not having issues finalising.

Penalties and missed rewards of the associated cluster (excluding 20 slashed validators)  de-activated during the Slashing investigation

Penalties: 2.188 ETH

Missed rewards: 3.426 ETH

Sum total of projected penalties and missed rewards of all impacted validators

28.677 ETH 

 

Resolution

Following the incident, Launchnodes shut down multiple clusters totalling 2582 validators (including the 20 slashed) to ensure no further slashing could take place. In order to prevent the slashing from spreading, Launchnodes nuked the original node clients & data (EL+CL nodes and validator clients) and the original Web3signer instance. Over the following hours, Launchnodes reactivated the remaining 2562 validators successfully without any further slashing event taking place, with slashing protection enabled on the new Web3signer instance.

 

Regarding staker compensation, Launchnodes has already disbursed 25.663 ETH to cover the initial slashing penalties and missed rewards due to infrastructure downtime, meaning that stakers suffered no reduced rewards on the day of the slashing, and has pledged to also compensate for additional penalties that the slashed validators will receive until they are withdrawn from the network.

 

Timeline

The order and timing of events was outlined below:

 

Oct 11, 15:41 UTC

Lido DAO contributor monitoring alerts fire, noting that a majority of  Launchnodes operated validators are offline. 

Oct 11, 15:41 UTC

Lido DAO contributors notify Node Operator Launchnodes of offline validators. Launchnodes acknowledges and confirms internal alerting worked and that the issue is being investigated.

Cause of the outage is local data center issues and troubleshooting is in progress. 

Oct 11, 15:47 UTC

Offline validators are gradually coming back online after the Node Operator has switched to a set of fallback nodes.

Oct 11, 15:53 UTC

ethereum-head-watcher (slashing monitoring system) alert went off indicating 2 validators were slashed. Lido DAO contributor observes validator slashings taking place on the Ethereum network and begins investigation. Validator slashings continue for the following 10 slots.

Oct 11, 15:55 UTC

Lido DAO contributors ping Node Operator of slashings which are corroborated by internal monitoring. 

Oct 11, 16:02 UTC

Launchnodes confirms validator infrastructure has been shut off

Oct 11, 16:05 UTC

20 validators confirmed slashed in total

Oct 11, 16:27 UTC

Lido twitter account provides public update notifying of the slashing incident: https://twitter.com/LidoFinance/status/1712142945783013393 

Oct 11, 16:43 UTC

Data center continues to have issues causing root cause analysis to not be able to take place at desired pace.

Oct 11, 18:52 UTC

Launchnodes executes a transaction to remove one undeposited key from the registry, resetting their “vetted keys” (i.e. staking limit) to the currently used number of keys so that no more stake would be allocated to the operator.

Tx: https://etherscan.io/tx/0x55bf362106c6f1f1a8a8632b60fb05c0b3ab5fc8e1cbd7459797ff8c10f35a0b

Oct 11, 20:00 UTC

Launchnodes prepares a plan to restore connectivity to remaining validators by nuking original nodes and Web3signer instance and using encrypted backups of key material to spin up new temporary instance until data center connectivity can be fully restored. As the baremetal server is reachable but the kubernetes clusters are not, this is a viable solution.

Oct 11, 22:28 UTC

Node Operator has nuked the server hosted in Data Centre 1 and has set up new the Web3signer instance. Web3signer slashing db has also been enabled.

Oct 11, 22:52 UTC

After taking above mentioned mitigation steps, Node Operator prepares to bring the first validators back online by gradually loading keys into the Web3signer instance and then monitoring performance. 

Oct 11, 23:23 UTC

Node Operator brings first 10 validators back online, successful attestations are observed.

Oct 12, 00:02 UTC

Additional 90 validators are brought back online following no observed issues.

Oct 12, 00:50 UTC

Next 400 validators are brought back online to observe performance. 500 total validators now actively attesting. 

Oct 12, 01:34 UTC

Additional 500 validators are brought back online. Performance monitoring continues with no issues observed since re-onlining began. 

Oct 12, 02:52  UTC

Additional 500 validators are brought back online. Performance monitoring continues with no issues observed since re-onlining began. 

Oct 12, 04:23  UTC

Additional 500 validators are brought online after removing 20 slashed keys from those being uploaded. Performance monitoring continues with no issues observed since re-onlining began. 2000 total actively attesting. 

Oct 12, 05:13  UTC

Additional 500 validators are brought back online. Performance monitoring continues with no issues observed since re-onlining began. 

Oct 12 05:31 UTC

Final 100 validators brought back online. Performance monitoring continues with no issues observed.

Oct 12 06:00

Launchnodes and Lido DAO contributors work together on lost rewards calculations for the day and estimated total impact of slashing and downtime until the slashed validators are exited.

Oct 12 09:48 UTC

Launchnodes submit compensation transaction for day’s rewards reduction

Oct 12, 11:02 UTC

Tweets posted with status update (all offline validators back up, estimated slashing penalties calculated, Launchnodes has compensated stakers for daily rewards reduction) https://twitter.com/LidoFinance/status/1712423359340818926

Oct 13 07:30 UTC

Root cause analysis concluded by Launchnodes.

 

Action Items

  • Enable Web3signer slashing database (already confirmed as done).
  • Launchnodes to work on plan for setting up infra anew on baremetal using updated risk mitigation processes.
  • Launchnodes to communicate plan and updated risk mitigation and anti-slashing processes to Lido DAO community.
  • Launchnodes to proceed with shutdown of interim infra and bringing up validators on baremetal infra.

 

Appendix A

Launchnodes Incident Report

 

Timeline & Root Cause

Timeline

October 11th

14:34 UTC

System Outages at DC1

Launchnodes’ internal monitoring systems raised alerts that core components of Launchnodes’ infrastructure in their DC1 ‘bare metal’ Data Centre environment were sporadically down.

Launchnodes had already noticed intermittent connectivity issues through its monitoring dashboard and was investigating.  Initially this was believed to be due to activation of multiple new nodes in DC1.

Investigation of Connectivity Outage

Further investigation showed that Launchnodes’ node clusters were inaccessible, due to a failure of DC1’s Virtual Private Connection.

Access to Launchnodes’ servers was possible, however access to nodes clusters was not.  Nodes connectivity was intermittent, with missed attestations noted on some nodes.

Escalation to Data Centre Provider

Tickets were raised immediately with DC1 support to restore connectivity, including evidence of the problem from logs, and ping tests to different servers.

October 11th

15:35 UTC

EL-CL Services Down

Further alerts were generated, notifying Launchnodes that key Execution Layer-Consensus Layer services were down.

October 11th

15:41 UTC

Lido DAO Notifications

Lido DAO members confirmed Launchnodes’ monitoring of Validators being offline.  Launchnodes explained the ongoing DC1 connectivity issues.

October 11th

15:45 UTC

Decision to Failover to Backup Data Centre

After investigating the outage and with no imminent resolution expected at DC1, Launchnodes’ team decided to fail over to a 2nd ‘cold standby’ data centre, DC2.

Detaching Besu storage at DC1

Launchnodes have bare metal servers that constitute an independent Kubes cluster in DC1.  On that cluster the Besu service is running.  The Besu storage is local on that server, and is used by the Besu service.

As the Kubes clusters were inaccessible at DC1, but access to the server remained possible, Launchnodes elected to move the Besu storage, to detach it from the Besu service.

This was carried out to prevent validators from attesting, even if the connectivity to the nodes was restored, as the EL-CL pair would not function without synchronisation with the latest head.

Preparing for Failover to Backup Data Centre, DC2

Launchnodes began preparing to enliven its ‘cold standby’ backup environment, in the expectation that the nodes at the primary site were rendered permanently offline.

Begin Provisioning Failover Nodes with Existing Web3 Signer

Launchnodes runs web3 signers remotely from its node infrastructure.  This is an architectural choice, as this enables the Web3 signer to act as a ‘kill switch’ in the event of needing to stop Validator nodes from attesting when connectivity is erratic or nodes are inaccessible.

Nodes at the failover Data Centre DC2 were configured to utilize the existing Web3 signer, already loaded with keys.  

Launchnodes started the services for Pre-synced Beacon and Geth nodes, and began to bring node clusters online in the failover Data Centre.

October 11th

15:55 UTC

Notification of Slashing 

Launchnodes’ monitoring systems detected a slashing event on 2 Validators.

This was immediately confirmed by the Lido team through alert messages from Lido DAO contributors.

Slashing took place on 18 further validators.

Lido DAO contributors request that all nodes be deactivated to avoid further issues.

October 11th 

16:02 UTC

Disabling of Nodes

Launchnodes completed deactivating all of its node infrastructure, by manually stopping all Validator services at DC1, and advised by Lido DAO contributors.

October 11th

16:04 UTC

Root Cause Analysis

Launchnodes began investigating root cause of the slashing incident.  Node infrastructure at DC1 remained inaccessible.

October 11th

16:16

Lido Communications

Launchnodes reviewed and agreed the accuracy of Lido’s proposed tweets about the incident.

October 11th

18:52 UTC

Staking Limit Reset

Launchnodes resets its “vetted keys”, to prevent further stake being allocated.

October 11th

17:37 UTC

Launchnodes Pledge to Lido Stakers

Launchnodes tweets, “Launchnodes will reimburse all losses incurred to Lido.”

October 11th

20:00 UTC

Plan to Restore Service

Launchnodes prepared a step-by-step plan to safely and securely restore service to the ‘cold standby’ Validators in DC2.

This involved fully decommissioning the original nodes at DC1, destroying the servers and the web3 signer instance.

October 11th

22:28 UTC

Failover Nodes and Web3 Signer Instance Ready

Launchnodes completed setup and syncing of the Execution and Consensus layer node infrastructure.

A fresh Web3 signer instance was configured, with keys loaded from secure backup.  Web3signer slashing db was also enabled.

October 11th

22:52 UTC

Validators Online

Validator nodes were brought back online, with a measured, cautious approach proposed by Launchnodes and agreed by Lido DAO contributors.

Keys were steadily loaded on the web3signer, with care to exclude keys for validators that had already been slashed.

10, 90, 400, 500, 500, 500, 500, 100 validators were brought back online in batches, with careful monitoring of performance at each stage.

October 11th

Ongoing

Monitoring

Launchnodes continued to monitor node performance throughout the night.

October 12th

06:00 UTC

Impact Assessment

Lido DAO contributors and Launchnodes review the impact of the slashing.

October 12th

06:40 UTC

Making stETH Stakers Whole

Launchnodes commits to ensuring that there is no negative financial impact to any Lido staker as a result of this incident.

Offers to disburse the calculated rewards impact for the first day to the Lido protocol Execution Layer Rewards `Vault before the rebasing scheduled for 12:00 UTC.

October 12th

09:48 UTC

Compensation Submitted

Launchnodes transfers a compensation transaction of 25.663 ETH to the Lido EL Rewards Vault, with an agreement that any further losses resulting from this incident would also be compensated.

October 12th

Ongoing

Infrastructure Review and Optimisation

Launchnodes reviews its infrastructure and processes, in order to implement guaranteed safeguards against future slashing incidents.

 

Root Cause

The root cause was Launchnodes failure to transition across to its ‘cold standby’ Data Centre, DC2 in an optimal way.

 

This resulted in nodes being active across 2 different Data Centres simultaneously – a scenario that should not have occurred.

 

Several actions could have preventing nodes from being slashed, including:

  • Destroying the DC1 node cluster before failing over to DC2.
  • Destroying the web3 signer before failing over to DC2.

 

Appendix B

Slashed validators

 

Slashed Validators

Slashed by

Reason

Slot

Epoch

964922

890138

Attestation Violation

7517976

234936

964396

890138

Attestation Violation

7517976

234936

964371

574681

Attestation Violation

7517975

234936

964360

574681

Attestation Violation

7517975

234936

964104

189894

Attestation Violation

7517974

234936

963910

189894

Attestation Violation

7517974

234936

963894

742440

Attestation Violation

7517973

234936

963841

742440

Attestation Violation

7517973

234936

963820

175591

Attestation Violation

7517972

234936

963578

175591

Attestation Violation

7517972

234936

963574

284709

Attestation Violation

7517971

234936

963403

284709

Attestation Violation

7517971

234936

965141

535608

Attestation Violation

7517970

234936

963975

535608

Attestation Violation

7517970

234936

963781

418448

Attestation Violation

7517969

234936

963358

418448

Attestation Violation

7517969

234936

963194

281420

Attestation Violation

7517968

234936

963275

281420

Attestation Violation

7517968

234936

962852

940614

Attestation Violation

7517967

234936

962807

940614

Attestation Violation

7517967

234936

Bringing Staked ETH to Cosmos

https://blog.lido.fi/bringing-staked-eth-to-cosmos/

Liquid staking with Lido goes Interchain 🪐

Bringing Staked ETH to Cosmos

The wstETH bridge to Cosmos is now live! Lido’s staked ETH is now available for use as liquidity through the Cosmos ecosystem.

 

Developed in collaboration with Neutron and Axelar, the wstETH Cosmos bridge brings Lido’s staked ETH to the Interchain ecosystem, further expanding the liquidity and stability of staked Ethereum.

 

➡️ To bridge your wstETH to Cosmos: Neutron bridge app

➡️ For tutorials and instructions: Lido Help Centre

 

The aim of the wstETH Cosmos bridge is to extend the role of staked ETH across complementary ecosystems whilst helping to build out a flourishing (and unified) Cosmos-based DeFi hub. Furthermore, the bridge functions as an innovative foundational layer for the development of in-flight staking as well as cross-chain governance capabilities.

 

Bringing Staked ETH to Cosmos

 

Having already established a strong presence across the likes of Optimism, Arbitrum and Polygon, this expansion to Cosmos marks the first true cross-ecosystem jump for wstETH and is a significant jump towards unifying and expanding the Ethereum and Cosmos DeFi ecosystems.

 

About Cosmos

Cosmos, built around the ATOM token, was launched in 2019 as a project aiming to address blockchain interoperability and scalability challenges.

 

As a Proof-of-Stake (PoS) pioneer, Cosmos centred around the Inter-Blockchain Communication (IBC) protocol, allowing different blockchains to communicate and co-exist.

 

The Role of Staked ETH in Cosmos

At its core, this bridge aims to make staked ETH from Ethereum accessible and usable within the Cosmos network, fostering interchain liquidity.

 

Lido’s wstETH will aim to strengthen and further develop the Cosmos DeFi ecosystem through acting as an integral liquidity pillar for a number of exciting Cosmos dApps including Astroport, Osmosis, Mars and more.

 

To facilitate this, both Axelar and Neutron have committed 1% of their respective token supply to incentivise liquidity across key Cosmos dApps. More info will be shared on incentivised integrations shortly.

 

What’s Next?

The wstETH Cosmos bridge represents a significant step towards a more interconnected blockchain landscape.

 

As wstETH finds its place within the Cosmos ecosystem, it not only strengthens the surrounding DeFi applications, but also contributes to a broader vision of more interoperable blockchain networks.

 

Lido Grants – Funding & Exploration of ZK-Proof Trustless Oracles

https://blog.lido.fi/grants-exploration-zkproof-trustless-oracles/

  • Lido DAO (via Lido Ecosystem Grants Organisation) is funding a number of initiatives aimed at reducing possible oracle attack vectors through the use of supplementary trustless zk-proof TVL oracles.
  • LEGO council accepted proposals for funding from both =nil; Foundation and Metacraft Labs to explore an additional sanity and correctness check using zkLLVM technology for the  TVL accounting oracle. The grants are aimed at building trustless accounting technology and would, if implemented, function as additional oracle checks rather than complete replacements for current accounting oracles.
  • Supporting a trustless oracle solution resonates with a key goal of the Lido DAO: reducing dependence on trust within the community and bolstering the decentralization of the protocol, a principle exemplified by the Lido Scorecard.

Lido Grants - Funding & Exploration of ZK-Proof Trustless Oracles

 

What’s the idea?

In short, the aim is to report Lido’s total value locked plus active and exited validator counts to a dedicated Execution Layer contract (in a verifiable and trustless manner using zero-knowledge proofs).

 

The current reliance on trusted oracles inevitably introduces additional security risks to the Lido protocol as well as economic overhead to the DAO.

 

Firstly, the reliance on trusted oracles in liquid staking protocols poses some risk. These oracles have the power to influence token prices within the protocols, potentially favoring certain users and shifting profits disproportionately. This centralized control contradicts the fundamental principles of decentralization and trustlessness that underpin blockchain technology.

 

Secondly, the oracles in question control a substantial amount of funds within the protocol. To ensure their continued participation and prevent potential defection, it is essential to provide them with adequate compensation.

 

The proposed zero-knowledge circuits offer a versatile solution that could supplement centralized oracles, providing a fixed-cost approach through proof validation on-chain. This approach has the potential to bolster the security, decentralization, and economic efficiency of the TVL oracle accounting process, and could be expanded to more oracles in the future.

 

How is a trustless solution more secure than a consensus-based one?

A trustless solution guarantees the correctness of the oracle report by verifying a zkProof and anchoring the report and proof to the blockchain state. This eliminates the need to trust the oracle operator or other involved parties. As long as the report passes all checks, it is considered legitimate, even if the sender is compromised.

 

Solution 1 – =nil; Foundation

Lido protocol users stake their ETH, receive stETH liquid tokens, and enjoy the rewards generated by their ETH assets while validators from the Lido node network perform their duties.

 

These rewards are distributed to stETH holders based on the regular accounting report, which contains crucial information such as total value locked in staking, active/exited validator counts, withdrawal and rewards balances, and more.

 

The ZK check verifies that the computations performed on the data are correct.

 

The proof includes the expected algorithm encoded in the circuit compiled by zkLLVM, with additional witness data to allow for checking if the oracle utilized the correct data. This ensures that the correct computation was performed on the correct data.

 

Lido Grants - Funding & Exploration of ZK-Proof Trustless Oracles

 

The solution involves three main components: the contract, the oracle, and the proof producer.

  • Contract: The contract receives the report and additional witness from the oracle, and orders zkProofs directly from the EVM via the Proof Market EVM Endpoint. It performs necessary checks, such as verifying the zkProof with the zkLLVM verifier contract and comparing the Beacon Block hash against the expected value. If all checks pass, the contract stores the report for future retrieval; otherwise, it rejects the report.
  • Oracle: The oracle obtains necessary information from the Consensus and Execution layers, computes the report (including total locked value and validator counts), and produces additional data required for proof generation.
  • Proof Producer: The proof producer selected with an algorithm from the distributed network of provers on Proof Market takes the input from the oracle and runs it through a ZK circuit compiled with the use of zkLLVM, generating a zkProof. This circuit replicates the computations performed by the oracle, creating a verifiable trail of operations.

 

Of particular note, the zkLLVM-based TVL zkOracle (aptly named Lido Validators’ Balance zkOracle) focuses on verifying the key part of the accounting report – the total value locked (TVL) It does this by automating in-EVM historical data access and leveraging zkLLVM( with the ultimate goal beinga higher level of security for Lido Protocol oracle accounting).

 

To facilitate this process, Proof Market EVM endpoint, a recently released gateway interface, enables provable computations composability for all EVM applications. This allows proofs for Lido’s zkOracle computations to be ordered directly from the EVM via Proof Market on Ethereum meaning there is no direct hardware cost to the Lido protocol side.

 

The zkProofs generated by the decentralised network of proof generators on Proof Market will be submitted directly to the Lido Ethereum application for final verification.

 

Video Demo + Extra Reading

The demo below showcases end-to-end operation of zkLLVM-based oracle+contract computing total value locked (TVL) and active and exited validators in a controlled environment.

 

 

Implementation and a source code

=nil;’s solution is fully functional, delivered under open source MIT licence and can be deployed or tried out from following repositories:

 

Solution 2 – DendrETH

The DendrETH project from Metacraft Labs promised two distinct technical avenues.

 

The first leverages a fixed set of withdrawal credentials within a liquid staking protocol. This approach requires no adjustments to the smart contracts overseeing deposits, and permits DendrETH’s zero-knowledge circuits to identify validators linked to  specified withdrawal credentials seamlessly.

 

The second approach involves a Merkle Accumulator for a Validator Set. This caters to liquid staking protocols with multiple operator dynamics. Here, smart contracts governing deposits are modified to monitor operator-specific validator sets. This is achieved through a binary SHA256 Merkle tree (in order to facilitate efficient proofs for specific operators).

 

The ultimate goal remains a practical iterative computation, striving to merge updates with as little latency as possible.

 

Importantly, there is a chance gas costs could remain constant under this approach (i.e. not affected by Ethereum validator set size), although the jury is still out on whether this is practically possible. Verification is, though, yet to be designed and implemented.

 

All components of the system will be fully open source (GPLv3). MetaCraft Labs will strive to provide comprehensive guides for operating instances of our proof generators and relay nodes, as well as easy-to-use packages for most operating systems (i.e. docker images).

Next Steps

By supporting fundamental initiatives focused on decentralization and trust reduction within the oracle accounting process, LEGO showcases a mutual commitment to addressing the challenges posed by centralized oracle accounting.

 

These grants underscore a collaborative effort to alleviate the trust burden associated with this process, presenting a promising avenue toward resolving these concerns and the greater decentralization and security of the Lido Protocol.

 

It should be noted that ZK technology is still in its infancy and requires additional experimentation, testing and auditing before feasibly moving to a fully operational ‘stand-alone’ status.

 

If the utilisation of zk-proof technology proves efficient, secure and beneficial for the operation of Lido Protocol oracle accounting, there is potential to gradually roll out broader functionality throughout the oracle set moving forward.

 

Improvements to the Lido protocol continue to push the boundaries of trust-minimization, ensuring the utmost security and reliability for its users, shaping a future where trustless data access and verification is the norm, not the exception.

Guide: Providing Liquidity on Uniswap

https://blog.lido.fi/providing-liquidity-on-uniswap/

Guide: Providing Liquidity on Uniswap

Uniswap is an automated market maker that allows for quick and efficient on-chain token swaps on Ethereum. Built around a set of smart contracts, Uniswap creates a system for peer-to-peer market making opening up for permissionless trading across Ethereum.

 

In addition to swaps, Uniswap has been revolutionary through allowing users to earn rewards by providing liquidity to liquidity pools.

 

In this guide we’ll walk you through how to provide liquidity on Uniswap using Lido’s wstETH, covering the following topics:

  • Why Provide Liquidity on Uniswap?
  • Guide: Providing wstETH Liquidity on Uniswap
  • FAQ

 

Why Provide Liquidity on Uniswap?

Uniswap plays the role of regular exchange or trading platform, allowing for users to swap in and out of different tokens. However, Uniswap replaces the centralised order book with an Automated Market Maker (AMM) built around liquidity pools to determine token pricing. These liquidity pools are created by LPs – liquidity providers – who earn LP tokens in exchange for providing liquidity to the pools.

 

Guide: Providing Liquidity on Uniswap

 

When you provide liquidity to a certain token pool on Uniswap you receive a share of the trading fees generated by the pool.

 

Despite the possibility of added income from LP’ing, it does not come without risks and the value of your LP position can ultimately be worth less than you put in. To get a thorough understanding of the risks of LP’ing, check out the following article: Uniswap: A Good Deal for Liquidity Providers?

 

Guide: Providing wstETH Liquidity on Uniswap

Due to complexities associated with the rebasing nature of Lido’s stETH, Uniswap uses wstETH – the wrapped version of stETH. As such, Lido users can add liquidity to the wstETH/ETH pool on Uniswap.

 

Step 1: Get wstETH

Before you start, you need to make sure you have wstETH in your Ethereum wallet. To wrap your ETH or stETH to wstETH, visit stake.lido.fi/wrap.

 

Guide: Providing Liquidity on Uniswap

 

Step 2: Choose the token pair, or pool, to add liquidity to

As stated above, you can choose any token pool to add liquidity to, with the wstETH/ETH pool being the largest TVL pool for Lido users. You can head to info.uniswap.org/#/pools for an overview of all Uniswap pools.

 

The wstETH/ETH pool can be found here.

 

Step 3: Select the fee tier

The next step is to select the fee tier – 0.01%, 0.05%, 0.3% or 1%. This allows you to choose margins depending on expected volatility. With more correlated token pairs, like wstETH and ETH, a low fee tier is the most common choice. For more information on this, check out the Uniswap Docs.

 

Guide: Providing Liquidity on Uniswap

 

Step 4: Select the price range

Next up you can choose the price range to add liquidity to. You can choose the entire price range, or choose to add liquidity to a specific price range. If the token price moves out of your chosen price range, you will not earn fees on trades.

 

Guide: Providing Liquidity on Uniswap

 

Step 5: Choose amount of tokens to add as liquidity

Choose the amount of tokens to add to the pool, adding a balance between the two tokens. Once you choose how wstETH to add, the amount of ETH needing to be added will automatically be shown.

 

Guide: Providing Liquidity on Uniswap

 

Step 6: Preview and Add

Last step is to review your configuration and add it. This will require the approval of a transaction using your chosen wallet. Uniswap will automatically calculate your share of the pool and provide you with LP (Liquidity Provider) tokens representing your share.

 

Once the transaction is confirmed, you are now a liquidity provider on Uniswap and you’ll start earning a portion of the trading fees. You can review your position on app.uniswap.org/pools.

 

 

Providing liquidity on Uniswap is a great way to earn rewards while contributing to the liquidity and efficiency of the underlying market. As stated above, this does not come without risk and it’s important that you fully understand the underlying risks before committing to this.

 

Frequently Asked Questions

What is wstETH?

wstETH is a wrapped version of Lido’s stETH which is more DeFi compatible. To learn more about wstETH, check out our explainer here: What is wstETH

 

Why am I using wstETH and not regular stETH?

Due to complexities surrounding the rebasing of Lido’s stETH, a number of DeFi protocols have chosen to add wstETH. wstETH is non-rebasing, and network rewards are reflected through an increasing price of wstETH as opposed to daily rebases.

 

Is it safe to provide liquidity on Uniswap?

Providing liquidity on Uniswap is a common DeFi activity but does not come without risks. For more information on the risks of providing liquidity on Uniswap, check out: Uniswap: A Good Deal for Liquidity Providers?

 

How do I withdraw my liquidity from Uniswap?

You can withdraw your liquidity at any time by going to the Uniswap pool and selecting the “Remove Liquidity” option.

 

What returns can I expect from providing liquidity?

Your returns depend on the trading volume of the pool. You’ll earn a share of the trading fees proportional to your liquidity share.

Lido Monthly Report: July 2023

https://blog.lido.fi/lido-monthly-report-july-2023/

Lido Monthly Report: July 2023

Welcome to the July edition of the Lido Monthly Report, a comprehensive source for insights on all of the latest developments. This report reviews another month of noteworthy metrics, new collaborations, and ongoing developments that highlight the overall performance and progress of the protocol.

 


 

Protocol Performance

In this section, you will find key metrics that offer valuable insights into the overall performance of the protocol over the month of July.

 

Lido Monthly Report: July 2023

 

Additional Notes

  • Total TVL surpassed $15M during July, a level not seen since May 2022. However, the recent decline in the price of ETH caused it to dip below this noteworthy threshold.
  • Despite the activation of ETH withdrawals earlier this year, the protocol has consistently experienced large monthly net inflows of ETH deposits. As a result of this continuous growth, the protocol appears poised to surpass 8M staked ETH next month.
  • The remarkable adoption of the protocol is evident with over 10,000 new stakers opting to use it for the first time. This surge represents more than a 50% increase from last month, further reflecting the protocol’s impressive growth and market demand.
  • July incentives included approximately 40 wstETH that were directed to Optimism and stablecoin liquidity venues.

 


 

Treasury Composition

In this section, you will find an overview of the changes in the Lido DAO Treasury over the month of July, emphasising its commitment to transparency.

 

Lido Monthly Report: July 2023

 

Additional Notes

  • This Treasury Composition excludes LDO holdings.
  • Following Lido DAO’s decision to convert its Treasury ETH holdings to stETH in June, the stETH holdings have continued to increase throughout July.

 


 

stETH Performance

In this section, you will find key metrics that offer valuable insights into the overall performance of the ETH liquid staking token over the month of July.

 

Lido Monthly Report: July 2023

 

Additional Notes

  • It is important to note that these metrics also include wstETH – the wrapped, non-rebasing version of stETH.
  • Despite the Curve Finance exploit this past week not affecting the stETH-ETH pool, many liquidity providers chose to prudently withdraw their stETH holdings until the matter is resolved.
  • Lending protocols continue to receive an abundance of stETH inflows, as many market participants want to back their loans with LST collateral.
  • The demand for wstETH on L2s continued to surge last month, with Arbitrum and Optimism bridges experiencing increases of 16.58% and 10.23% in wstETH deposits, respectively.

 


 

Governance

In this section, you will find an overview of the noteworthy proposals that emerged from the Research Forum and their progression through the voting process on Snapshot and Aragon.

Despite several vibrant discussions within the Research Forum, it’s important to note that there were no proposals that reached the Aragon stage during the month of July. As per the governance voting schedule, the next Aragon vote is only set for 8 August.

 

Snapshot

Among the various Research Forum proposals considered and deliberated upon during the past month, only one proposal was subjected to a Snapshot vote.

  1. Ethereum Node Operator Shortlist: details

In June 2023, following the successful Lido V2 launch, the Lido Node Operator Subgovernance Group (LNOSG) proposed expanding the Lido Ethereum Node Operator in a fifth round – referred to as Wave 5.

As noted in the proposal, the onboarding round for Wave 5 would occur in 2 stages:

  • In Stage 1, the LNOSG reviewed and evaluated 14 applications from strong return applicants, resulting in 2 of these applicants being shortlisted: Launchnodes & SenseiNode.
  • In Stage 2, currently scheduled for the end of August/early September, the evaluation process will continue to shortlist additional Node Operators for inclusion in the Lido on Ethereum protocol.

Stage 1 was rounded up as the LNOSG recommended Launchnodes and SenseiNode for inclusion in the Node Operator Set for Ethereum, which the DAO voted to accept in the snapshot vote which ended July 27th.

Proposal Outcome: Successful ✅

 


 

Community

In this section you will find key community calls, with a special focus on the Node Operator Community Calls, where Lido DAO promotes engagement and discussions within the growing community.

 

NOCC Call #8

The latest Node Operator Community Call covered several important topics:

 

  • Lido DAO contributors shared an update on Wave 5, stating the mainnet onboarding for the successful Stage 1 applicants is scheduled for mid-August. Looking ahead to Stage 2, the LNSOG plans to evaluate 114 applicants over the next five weeks and aims to finalize a shortlist of 7-9 Node Operators by the last week of August.
  • A presentation on the Community Staking risk analysis took place, in which potential risks and vulnerabilities associated with validators were explored to bolster network security. In response, the community proposed the Reputation & Reimbursement mechanism, which aims to reward trustworthy Node Operators. Additionally, they introduced the Bonding Model, allowing community Node Operators to bond ETH as collateral for stability. These proactive safeguards demonstrate Lido DAO’s commitment to further enhance the network’s security.
  • A presentation by Nethermind emphasized the importance of client diversity. It highlighted how by promoting multiple client implementations, Ethereum gains resilience to implementation bugs and ensures explicit identification of consensus issues through halting finalization. This approach fosters code and decision decentralization, contributing to a more secure and decentralized Ethereum network.
  • Ethereum researcher Justin Drake provided a detailed explanation of the MEV burn concept and highlighted its significant importance. The concept aims to address and mitigate MEV (Maximum Extractable Value) spikes by introducing a mechanism to smooth and redistribute the impact, potentially enhancing the overall stability and fairness of the Ethereum network.

 

For more details, see below for the full call:

 


 

Collaborations

In this section, you will find all the exciting collaborations that have been established in the past month, as leading companies and protocols integrated with the Lido protocol, further expanding the reach and impact of its liquid staking tokens.

 

Integrations

  • Crypto app Wirex started supporting wstETH, allowing for buying, exchanging and borrowing of the token on its platform.
  • OKX officially listed stETH on its exchange, allowing for millions of its users to easily access the liquid staking token.
  • BitDAO has proposed to allocate 40k ETH from its treasury to stETH, which could foster a vibrant LST ecosystem within the Mantle network. Note: the Snapshot vote for this proposal is set to close on 5 August.
  • A successful integration with BitKeep Wallet now provides its users with a convenient way to earn staking rewards directly from their own wallets.
  • Layer3’s third Quest showcased the effortless liquid staking of ETH through Phantom wallet, underscoring the Lido protocol’s user-friendly integration with one of Solana’s most popular wallets.

 


 

Extra

1. The Lido Ecosystem Grants Organization (LEGO) provided an informative round-up Q2 of 2023.

 

2. Lido DAO contributor Isidoros Passadis featured on the Bell Curve podcast to discuss Distributed Validator Technology (DVT) and how it’s being implemented in the Staking Router.

 

3. Leading fixed yield protocol Pendle Finance continues to achieve ever-increasing TVL figures, primarily driven by the growth of its stETH pools.

 

4. The collaboration between Lido DAO contributors and Obol Network members resulted in a second successful round of DVT-testing.

 


 

Looking Ahead – August 2023

  • The Ethereum Node Operators Wave 5 update revealed that successful Stage 1 applicants will undergo onboarding in mid-August, while the LNOSG is diligently working towards finalizing a shortlist of 7-9 Node Operators for Stage 2 by the last week of August.
  • Lido DAO contributors have started working on the first Community Staking module for the Staking Router. This is a very exciting endeavour, so be sure to follow Lido DAO on Twitter to keep updated with the latest developments here.
  • The Snapshot vote for the BitDAO / Mantle proposal is reaching its conclusion on 5 August, and if successful, will lead to the allocation of 40k ETH from BitDAO’s treasury to stETH in the coming weeks.
  • Mark your calendars for Lido DAO’s 9th Node Operator Community Call, tentatively scheduled for the final week of August. Building on the momentum of the previous call with special guests like Justin Drake, this upcoming event promises to be equally insightful, making it a must-attend for all interested participants.
  • Finally, looking back, ETHCC in Paris was an exceptional event for Lido DAO, with valuable interactions at the Lido booth and insightful interviews and talks with contributors. The success of this experience has already ignited excitement for ETHCC 24, where Lido DAO anticipates even greater opportunities.

 


 

Conclusion

As the second edition of the Lido Monthly Report concludes, Lido DAO reflects on another month of achievements and advancements. Exciting updates lie ahead, and the community eagerly looks forward to sharing more milestones on this journey. Stay tuned for further progress as Lido DAO continues to lead the way in liquid staking.

 

Resources

Additions to Ethereum Node Operator Set – Wave 5 (Stage 1)

https://blog.lido.fi/expanding-lidos-ethereum-node-operator-set/

Additions to Ethereum Node Operator Set - Wave 5 (Stage 1)

During July 2023, the Lido DAO voted to accept two new Ethereum node operators to join the Lido on Ethereum Node Operator set.

 

The Snapshot vote to onboard Launchnodes and SenseiNode reflects the Stage 1 shortlist that the Lido Node Operator Subgovernance Group (LNOSG) suggested to the DAO following the Stage 1 evaluation meeting.

 

A total of 116 applications were submitted across the two stages of the Lido on Ethereum Wave 5 Onboarding round.

 

During Stage 1, 14 return-applicants that had previously received high scores by the LNOSG evaluation committee re-applied and were evaluated. The LNOSG suggested that two Node Operators be onboarded during Stage 1 to further diversify stake inflows to the protocol, and to consider the remainder of the Stage 1 candidates during the Stage 2 evaluation.

 

The Stage 2 evaluation process is ongoing through the month of August, with another LNOSG evaluation meeting scheduled for the final week of the month. During the first evaluation meeting, the committee discussed onboarding between 7 – 9 new Node Operators across the entire Wave 5 Onboarding round. It is important to note that the LNOSG only suggests the shortlist to the DAO, which has final say to accept, modify, or deny any suggestion the LNOSG presents.

 

Stage 1 Candidates

The two new Node Operators currently participating in the onboarding process will both contribute to the decentralization and distribution of validators of the Lido protocol across a number of factors. Based on their applications these Node Operators are expected to utilize minority Execution Layer and Consensus Layer clients, operate validators out of under-represented geos (Latin America and Africa), and operate their infrastructure out of local data centers.

 

These Node Operators are currently operating through the Lido Node Operator Registry on the Goerli testnet to appropriately configure their infrastructure setups for a mainnet deployment. To learn more about the onboarding process, visit the Node Operators section of the Lido docs.

 

Launchnodes

Launchnodes provides an orchestration layer that enables enterprises and individuals to solo stake Ethereum at scale, on infrastructure that they own. Founded in 2020, Launchnodes has helped businesses and organizations to run secure, resilient solo staking architectures on bare metal and public cloud. The team consists of experienced builders and engineers, operating globally.

Working with UNICEF (to pay for school internet connectivity) and Save The Children (funding tablets for refugee camps), Launchnodes has established working examples of Impact Staking initiatives. This involves using staking returns to fund long term social impact in developing countries. A percentage of Launchnodes’ profits will be donated to Impact Staking initiatives.

Launchnodes will continue to support decentralization across the Ethereum network and Lido ecosystem through its promotion of minority clients and under served geographic locations in Africa and Asia.

– Jaydeep Korde, CEO

 

SenseiNode

SenseiNode is the first blockchain infrastructure provider in Latin America, facilitating access to blockchain services with industry-level availability to organizations around the world.

SenseiNode deploys and manages nodes on leading PoS protocols, relying on distributed infrastructure in local, regional and global hosting providers, increasing decentralization across multiple jurisdictions.

We’re thrilled to join Lido. We believe that our diversified infrastructure and presence across multiple jurisdictions will increase Lido’s decentralization, improving the ecosystem resiliency.

– Pablo Larguia, CEO

 

Next Steps

Should the on-chain Aragon vote planned for August 8th – 11th pass successfully, both Node Operators would be able to operate mainnet validators as a part of the Lido on Ethereum Node Operator set by the end of August.

 

Node Operators that have applied for the onboarding round should expect to hear back regarding next steps and updates regarding the Stage 2 evaluation process over the coming weeks. The Stage 2 shortlist is expected to be posted to the Lido Research Forum onboarding thread during the final week of August.

Post Mortem: Delayed Oracle Report (April 8, 2023)

https://blog.lido.fi/post-mortem-delayed-oracle-report/

Intro

Post Mortem: Delayed Oracle Report (April 8, 2023)

On 8th of April 2023 the Oracle report finalisation had been made 6 hours later than usual ~12pm UTC. The delay had been caused by the occurence of an edge-case with a report slot being missed on the Consensus Layer, preventing the software from collecting the data.

 

The urgent fix for the said edge-case had been prepared by the Lido Contributors, allowing the Oracle holders to finalize the report after the software upgrade. No user tokens had ever been at risk, and the offchain code for the Oracle for the now-running Lido V2 upgrade works with said edge-case correctly.

 

Why Did It Happen?

To generate the report, the oracle code must coordinate the gathering of data from CL (Consensus Layer) and EL (Execution Layer) nodes. Specifically, the Oracle requires information about the EL block corresponding to a particular CL slot.

 

However, on April 8th, 2023, the particular “report slot” had been missed, thus no EL block was present related to slot. The offchain oracle was not equipped to handle this edge-case, so the report couldn’t have been collected.

 

Post Mortem: Delayed Oracle Report (April 8, 2023)

 

How Did We Fix It?

On the same day Lido Contributors have released an update for the offchain Oracle including the fix for the said edge-case. Oracle holders checked the release code and updated offchain Oracles. The updated code now appropriately addresses situations where slots are missed.

 

In such cases, the code iterates backwards through the slots until it identifies a slot that had been successfully validated. The said edge-case handler is implemented in the currently running offchain Oracle for Lido V2.

 

Incident Recap

(All times in UTC, 08 Apr 2023)

 

  • 12:41: alert in tg groups on Oracle report overdue by 15m.
  • 12:47: incident zoom call gathered, debugging started.
  • 13:00: diagnosed the issue with missed slot & no code for handling it; started preparing the fix.
  • 13:11: sent heads-up and started gathering Oracle members quorum for updating.
  • 13:29: gathered pre-commitments from 5 Oracles.
  • 13:44: tweets on delayed report sent.
  • 16:17: build ready, tested & shared with Oracles.
  • 16:43: last tx for the report is in, report finalised.
  • 21:09: tweets on successful report are sent.

 

Useful Links

Lido V2 Mainnet Launch

https://blog.lido.fi/lido-v2-launch/

V2 Upgrade / Ethereum Withdrawals are Live

Lido V2 Mainnet Launch

Following a successful on-chain vote, Lido V2 is officially live on Ethereum mainnet.

 

As the most important upgrade to the Lido protocol to date, Lido V2 significantly improves the Ethereum staking experience whilst pushing the Lido protocol further down the road towards increased protocol decentralization.

 

Lido V2 introduces two major components, with the most user-facing aspect being Ethereum withdrawals. This allows Ethereum stakers with Lido to directly unstake ETH through the protocol.

 

To try out Ethereum withdrawals on Lido, visit stake.lido.fi/withdrawals. For additional information on the withdrawal process, visit the Lido Help Centre.

 

What is Lido V2?

The Lido V2 upgrade brings a host of exciting new features to the platform with two key focal points:

 

  • Withdrawals: The Lido on Ethereum protocol upgrade allows Lido on Ethereum stakers to burn their stETH and exit the protocol at a 1:1 ratio, achieving a key milestone of an open on/off ramp into the Ethereum staking ecosystem.
  • Staking Router: The new modular architectural design allows for the development of on-ramps for new Node Operators, ranging from solo stakers to DAOs and Distributed Validator Technology (DVT) clusters. This will create a more diverse validator ecosystem.

 

The upgrade implemented several other changes, with the most notable being a significant rewrite of the Oracle smart contract and off-chain daemon software. This was required to support the withdrawals functionality and enable an order of magnitude more Node Operators.

 

For more information on Lido V2, check out Introducing Lido V2.

 

Ethereum Withdrawals With Lido

Most notably, Lido V2 adds functionality for in-protocol ETH withdrawals.

 

As an extension of the recent Ethereum Shapella Upgrade, withdrawals streamline the Lido staking experience and allow users to unstake their ETH directly from the Lido protocol.

 

This lowers a number of previous inconveniences surrounding the Lido on Ethereum staking experience and allows for a more efficient use of Lido’s staked ETH throughout the Ethereum DeFi ecosystem.

 

For additional information on the Ethereum withdrawal process, see below:

 

V2 Security

To ensure confidence, Lido V2 underwent multiple security audits, including Sigma Prime auditing the updated dc4bc version, ChainSecurity auditing the Staking Router code, and audits by Oxorio, Statemind, HEXENS, MixBytes(), and Certora.

 

This protocol upgrade made Lido on Ethereum feature-complete by allowing stETH to Ether withdrawals and opened up opportunities for experimentation and collaboration with the Staking Router architecture.

 

 

What’s Next?

We’re thrilled to share the progress of Lido V2 with our community, and we look forward to seeing how these new features will enhance the staking experience for our users.

 

As always, we remain committed to providing a secure and reliable protocol for staking ETH, and we’re excited to continue building on this foundation in the months and years to come.

 

To learn more about the V2 upgrade and its features, check out our Introduction to V2, which provides a detailed overview of the V2 protocol changes.

 

For any questions, stop by the Lido Discord.

 

Documentation

Ethereum Withdrawals: Overview & FAQ

https://blog.lido.fi/ethereum-withdrawals-overview-faq/

Ethereum Withdrawals: Overview & FAQ

Ethereum withdrawals are almost here 🏝️

 

With the launch of Lido V2 quickly approaching (scheduled for Monday May 15th), Ethereum stakers with Lido will soon have direct, in-protocol stETH:ETH withdrawals allowing for seamless unstaking of stETH and wstETH.

 

Made possible through the recent Ethereum Shapella Upgrade, withdrawals will work to streamline the Lido on Ethereum staking experience and minimize a number of uncertainties surrounding the staking experience.

 

Below we answer some of the most important questions related to Ethereum withdrawals with Lido. In case of any other questions, stop by the Lido Telegram!

 

 

Ethereum Withdrawals – Frequently Asked Questions

 

What are Ethereum withdrawals?

Withdrawals allow users to unstake their stETH/wstETH. In return, stETH holders receive ETH at a 1:1 ratio in most cases while wstETH ones receive ETH based on the wstETH/stETH ratio when they unstake.

 

How does the withdrawal process work?

The withdrawal process is simple and has two steps:

  1. Request: Lock your stETH/wstETH by issuing a withdrawal request. ETH is sourced to fulfill the request, and then locked stETH is burned, which marks the withdrawal request as claimable. Under normal circumstances, this can take anywhere between 1-5 days.
  2. Claim: Claim your ETH after the withdrawal request has been processed.

 

How do I withdraw?

Press the ‘Request’ tab, choose an amount of stETH/wstETH to withdraw, then press ‘Request withdrawal’. Confirm the transaction using your wallet and press ‘Claim’ on the ‘Claim’ tab once it is ready.

 

Can I transform my stETH/wstETH to ETH?

Yes. You can transform your wstETH to ETH using the ‘Request’ and ‘Claim’ tabs. Note that, under the hood, wstETH will unwrap to stETH first, so your request will be denominated in stETH.

 

When I try to withdraw wstETH, why do I see the stETH amount in my request?

When you request to withdraw wstETH, it is automatically unwrapped into stETH, which then gets transformed into ETH (this is the step that takes time). The main withdrawal period is when stETH is transformed into ETH. That’s why you see the amount pending denominated in stETH.

 

How long does it take to withdraw?

Under normal circumstances, the stETH/wstETH withdrawal period can take anywhere between 1-5 days. After that, you can claim your ETH using the ‘Claim’ tab. See here for more insights into the Ethereum withdrawal speeds using Lido.

 

What are the factors affecting the withdrawal time?

  • The amount of stETH in the queue.
  • Performance of the validator poolside.
  • Exit queue on the Beacon chain.
  • Demand for staking and unstaking.

 

What is the Lido NFT?

Each withdrawal request is represented by an NFT: the NFT is automatically minted for you when you send a request. You will need to add it to your wallet to be able to monitor the request status. When the request is ready for the claim, the NFT’s image will be updated.

 

For a full Ethereum Withdrawal FAQ, please refer to the Ethereum Withdrawals collection on help.lido.fi.

 

Staking Ethereum Using Lido

Ethereum staking lets you contribute to the long-term security and decentralization of the Ethereum network, bringing you daily staking rewards in the process. Join a global community of stakers and put your ETH to work.

 

With one-click staking, daily rewards and industry-leading fees, Lido provides the most popular staking experience in the industry.

 

Visit lido.fi/ethereum to get started 🏝️

Just How Fast Are Ethereum Withdrawals Using The Lido Protocol?

https://blog.lido.fi/just-how-fast-are-ethereum-withdrawals-using-the-lido-protocol/

TL;DR

Just How Fast Are Ethereum Withdrawals Using The Lido Protocol?

The Lido protocol should allow for faster withdrawals for most stakers under most conditions. This is made possible by the Lido protocol buffer, the use of which is prioritised for withdrawal requests (provided there is enough ETH in the buffer to fulfil them).

 

In particular, assuming current network size, no exit queue on the Beacon chain, and no serious incidents on the network:

 

  • For most stakers who use Lido (i.e those who hold less than 1000 stETH), most withdrawal requests should take less than 1 day to complete (compared to 2-6 days for a standard Ethereum withdrawal) assuming there is enough ETH in the Lido protocol buffer to service the withdrawal requests. If there isn’t, then a Lido withdrawal request can take slightly longer than a standard Ethereum withdrawal (between 3-8 days).

 

  • Lido withdrawal requests in the range of 1000 to 5000 ETH are also likely to be completed relatively quickly (≈ 2 days) compared to standard Ethereum withdrawals (2-6 days): for example, the expected processing time for a request of 5000 stETH is 2 days – though this can take longer (between 5-9 days) if there is a shortage of ETH in the protocol buffer. Alternatively, it should be possible to swap such an amount in the ETH-stETH Curve pool for a small discount (less than 0.12% as long as the pool is balanced).

 

  • Lido withdrawal requests greater than 5000 ETH and up to 100,000 ETH are expected to take between 4-10 days to complete (compared to 4-8 days under a standard Ethereum withdrawal). Alternatively, it should be possible to swap an amount of this size in a balanced Curve pool for a discount of between 0.12% (for amounts closer to 5000 ETH) and 2% (for amounts closer to 100,000 ETH).

 

  • Lido withdrawal requests greater than 100,000 ETH are expected to take two weeks to complete.

 

N.B. All the time estimates given above are conditional on there being no exit queue, and no major slashing events or other unforeseen tail-risk scenarios. Withdrawal time could be delayed if there are changes to the assumptions.

 

Some other important points worth highlighting:

 

  • Expedited withdrawals are made possible by the Lido protocol buffer, the use of which is prioritised for withdrawal requests (provided that there is enough ETH in the buffer to fulfil them). Based on the history of ETH staked using Lido, Execution Layer rewards, and our current estimate of Consensus Layer rewards, we estimate that there is a ~97% probability that the protocol buffer has more than 1000 ETH on any given day (when there is no demand for withdrawals). This means there is a very high probability that total daily withdrawal requests of less than 1000 ETH can be fulfilled within a day. For comparison, the normal Ethereum withdrawal process can take anywhere between 2 and 6 days (assuming no exit queue and no incidents with an exiting validator).

 

  • If there is an especially large Beacon chain exit queue, the Lido protocol buffer can result in significant time savings, even for relatively large withdrawals (up to 15,000 ETH). For example, if the exit queue is on the order of 56k validators (or approximately 10% of the current network size), the Lido protocol can shorten the time to withdrawal completion by approximately 1 month  (compared to a standard Ethereum withdrawal).

 

  • In contrast to vanilla staking, a post-withdrawal slashing shouldn’t affect the time to withdrawal: since the Lido protocol allows stakers to receive tokens routed directly from either another validator or the protocol buffer, the staker does not need to wait the 36 days associated with a slashing delay.

 

  • Chaotic tail-risk scenarios, such as a mass slashing event, can trigger an emergency mode in the protocol called “bunker mode” which has the effect of temporarily postponing withdrawals. If the Lido protocol is in bunker mode, withdrawal requests are delayed until the consequences of the incident that caused it to enter this state are resolved (withdrawal delays can last anywhere between 1 and 36 days while the Lido protocol is in bunker mode).

 

  • Quasi-instantaneous exits are possible via exchange (although there is an inevitable time-money tradeoff): Assuming enough liquidity, a staker using Lido always has two other options to exit from stETH that are quasi-instantaneous: they can either swap stETH for ETH on a DEX / CEX, or sell the NFT received when a withdrawal request was submitted. Although in both cases, a discount is expected.

 

Withdrawing without using Lido

In order to withdraw funds from the Beacon chain, three main steps need to be taken:

  1. A staker broadcasts an exit message to send a validator to the exit queue.
  2. The validator in question receives a withdrawable epoch (and continues performing its validator duties until that epoch is reached).
  3. The validator’s balance is transferred via inclusion in a block (after it has been sweeped).

 

The breakdown of time between the exit message being sent and the tokens being transferred, is as follows:

Withdrawal delay + Sweeping time (Base case)

 

There are two additional factors that can lengthen the exiting process: exit queue and post-withdrawal slashing.

 

When there is an exit queue, one has to add an exit queue delay:

Withdrawal delay + Sweeping time + Exit queue delay (Exit queue case)

 

While exiting, there is also a chance (albeit small) that a validator gets slashed. If this happens, the withdrawal time will also include a slashing delay:

Withdrawal delay + Sweeping time + Slashing delay (Slashing case)

 

The worst case scenario (from a withdrawal time perspective) implies an exiting validator getting slashed while stuck in an exit queue:

Withdrawal delay  + Sweeping time + Exit queue delay  + Slashing delay (Worst case)

 

Exit time with no exit queue and no slashing (Base case)

Let’s first consider the optimistic case (no exit queue and no slashing).

 

Once the exit message is registered, a withdrawable epoch is assigned. This period is determined by MIN_VALIDATOR_WITHDRAWABILITY_DELAY with MAX_SEED_LOOKAHEAD. In total it sums to 261 epochs, or ~ 27.8 hours.

 

When a withdrawable epoch is reached, a validator becomes eligible for withdrawal, and its balance can be included in the next available block (a maximum of 16 withdrawals can be processed in a single block).

 

The actual block where this happens depends on the sweeping time, which in turn depends on the total network size and the relative position of the validator index in the queue. To put things in context, the Median time estimate for sweeping (under current network size) is 2.4 days, while the time estimate for processing all validators (maximum waiting time) is 4.8 days.

 

Summing up withdrawal delay and sweeping time for the current network size (~563k validators) a withdrawal takes (Base case):

 

~ 1.7 days: for extremely lucky validators (10th percentile) during sweeping.

 

~ 3.6 days: for the average validator (50th percentile ) during sweeping.

 

~ 6 days: for unlucky validators (the last to be processed) during sweeping.

 

Note that the above estimates apply for a single validator. If your withdrawal request is big enough to send a significant number of validators to exit, it will create an exit queue, which will result in a longer processing time. Under the current network size, the maximum rate of exit is 75 validators/hour (that’s the same as 2,400 ETH/hour; 1,800 validators/day, or 57,600 ETH/day).

 

To put the exit queue processing time in context, exiting one validator from the Beacon chain takes on average 3.6 days (and not more than 6 days under normal conditions), while each additional 10,000 ETH adds ~0.17 days.

 

As noted above, as the network size fluctuates, the estimated time to withdrawal also changes. Here’s a summary table that takes into account three network size scenarios:

 

Time (days) to exit under 3 network size scenarios with no exit queue:

Standard exit

Current network

Current network + 50%

Current network – 50%

Validators to exit

Min

Median

Max

Min

Median

Max

Min

Median

Max

1

1.65

3.60

6.05

1.89

4.82

8.49

1.40

2.38

3.60

+ per each 1000 validators

0.56

0.37

1.11

+ per each 10,000 ETH

0.17

0.12

0.35

100

1.71

3.66

6.10

1.93

4.86

8.53

1.52

2.49

3.71

1000

2.20

4.16

6.60

2.27

5.20

8.86

2.52

3.49

4.71

10000

7.20

9.16

11.60

5.60

8.53

12.19

12.52

13.49

14.71

 

Exit time with exit queue

In case of an exit queue, the waiting time is defined by the network size and how long the queue is. In particular, the exit speed is rate limited to preserve the stability of the Ethereum network.

 

By design, only 1 in every 65k validators can exit each epoch. For the current mainnet network size this means the practical rate limit is 8 validators per epoch, or 1.8k validators per day.

 

In general, the waiting time in an exit queue increases by 0.31 days for every 0.1% of validators in the queue. So, if 1% of validators (5.6k validators, or 180k ETH at current size) are in the queue it can take around 3 additional days for a validator at the back of the queue to exit, whereas if 10% of validators (56k validators, or 1.8M ETH) are already in the queue exiting can take closer to a month.

Adding a withdrawal delay and sweeping time on top of these estimates, when the exit queue is ~10% of the current network size, a withdrawal takes (Exit queue case):

 

~ 32.9 days: for extremely lucky validators (10th percentile) during sweeping.

 

~ 34.9 days: for the average validator (50th percentile ) during sweeping.

 

~ 37.3 days: for unlucky validators (the last to be processed) during sweeping.

 

As noted above, as the network size fluctuates, this estimated time will also change. Here’s a summary table that takes into account three network size scenarios:

 

Time (days) to exit under 3 network size scenarios with 10% exit queue

Exit queue of 10%

Current network

Current network + 50%

Current network – 50%

Validators to exit

Min

Median

Max

Min

Median

Max

Min

Median

Max

1

32.92

34.87

37.31

33.16

36.09

39.75

32.67

33.65

34.87

100

32.97

34.93

37.37

33.20

36.13

39.79

32.78

33.76

34.98

1000

33.47

35.42

37.87

33.53

36.46

40.13

33.78

34.76

35.98

10000

38.47

40.42

42.87

36.87

39.80

43.46

43.78

44.76

45.98

 

Exit time with slashing

While exiting, a validator performs its duties and remains at risk of slashing. If a slashing happens, the slashing delay is defined by EPOCHS_PER_SLAHINGS_VECTOR = 2^13 epochs, or ~ 36 days.

 

On top of this we always have to factor a withdrawal delay and the sweeping time, in addition to a potential exit queue delay. In summary, for the current network size an exit for a slashed validator is expected to take:

 

~ 38 – 42 days when there is no exit queue (Slashing case)

 

~ 38 – 74 days when the exit queue is 10% of the network (Worst case)

 

Putting the above estimates together

Here’s a summary table for exiting a validator that covers all the above scenarios:

 

Time to exit without Lido (days)

No exit queue

10% exit queue

Validator not slashed

min: 1.7

median: 3.6

max: 6

min: 32.9

median: 34.9

max: 37.3

Validator slashed

min: 38

median: 40

max: 42.4

min: 38

median: 55.6

max: 73.7

 

In sum, at current network size the expected delay for a vanilla withdrawal under normal conditions is 3.6 days. This increases to up to 35 days when the exit queue is 10% of the network, and up to 40 days if the validator in question is slashed after signing the withdrawal message. Under a worst case scenario (validator is slashed and there is an exit queue of 10%) it can take more than 2 months to completely exit and withdraw funds.

 

A good rule of thumb to keep in mind for a vanilla Ethereum withdrawal is the following: the median time to exit, assuming no exit queue, is 3.6 days. Add 3 days to this estimate for every 1% of validators in the exit queue. Add 36 days if your validator gets slashed. If you’d like to learn more about withdrawals, see here for Danny Ryan’s excellent Withdrawals FAQ.

 

Withdrawing using Lido

The Lido protocol adds pooling mechanics to the vanilla withdrawal process described in the previous section. In particular, the Lido protocol buffer should allow for faster exits for most stakers under most conditions.

 

To withdraw funds from the Lido staking pool, the steps are as follows:

  1. A staker submits a withdrawal request.
  2. Lido Oracle registers the request and puts it in the Lido withdrawal queue: Lido handles withdrawal requests on a first-come-first-served basis.
  3. Lido Oracle decides on the protocol mode (turbo/bunker).

 

4a. If the Lido protocol is in turbo mode:

  • ETH in the protocol buffer is used to fulfil the requests.
  • If the ETH amount is not enough to fulfil all the requests, Lido Oracle registers validators for exit.
  • Vanilla exit from the Beacon chain: Lido broadcasts an exit message, each validator gets a withdrawable epoch, after the epoch is reached a validator goes through the sweeping process and funds arrive in Lido Vault.
  • Lido Oracle reports back and funds become eligible for claiming.

 

4b. If the Lido protocol is in bunker mode:

  • The withdrawal requests are delayed until the consequences of the incident that caused “bunker mode” are resolved, for more details see here.

 

In sum, for a staker using Lido there are three possible outcomes depending on the network demand for staking/unstaking and the Lido protocol mode:

  1. Expedited exit via the Lido protocol buffer: exit can be quickly serviced by new demand.
  2. Standard exit via network broadcast: exit messages for validators are broadcast to the Ethereum network.
  3. Delayed exit due to “bunker mode”.

 

1. Expedited exit (via protocol buffer)

By design, the Lido protocol accumulates ETH, while the off-chain oracle decides on partitioning between completing withdrawals and forwarding staking deposits.

 

The Lido protocol accumulates ETH from three sources:

  • Newly staked ETH.
  • Withdrawals (full withdrawal when a validator is sent to exit as well as partial, or skimmed rewards).
  • Execution Layer rewards.

 

ETH from the buffer outflows as follows:

  • The protocol first finalizes the withdrawals requests and allows stakers to redeem their stETH directly from the buffer (no validator exits needed).
  • Any remaining ETH is sent to the Beacon chain, spawning new validators.

 

Just How Fast Are Ethereum Withdrawals Using The Lido Protocol?

 

Based on the history of ETH staked via Lido, Execution Layer rewards, and our current estimate of Consensus Layer rewards, we conclude that there is a ~97% probability that the protocol buffer has more than 1000 ETH on any given day, a ~40% probability that the buffer exceeds 5,000 ETH, and a ~15% chance that it contains more than 10,000 ETH  (when there is no demand for withdrawals).

 

Importantly, if the requested withdrawal amount is more than the current buffer size it can still be finalized using the inflows that arrive in subsequent days.

 

Just How Fast Are Ethereum Withdrawals Using The Lido Protocol?

 

Of particular note, there are important scenarios under which the protocol buffer can be used to shorten the waiting time (compared to vanilla staking) significantly: for example, from a standard waiting time of 33-37 days (when the exit queue is 10% of the current network size) to 3-5 days (for Lido withdrawal requests within the range of 15,000 ETH).

 

The protocol buffer can also be used to expedite an exit when an exiting validator is slashed post withdrawal request. Notably this can save a Lido staker up to a month of waiting time compared to vanilla staking!

 

We can estimate the expected inflows into the buffer as follows:

Estimated waiting time (days) for accumulating funds in the protocol buffer

Probability

Amount that will arrive in the protocol buffer, ETH

15,000

25,000

50,000

100,000

Low  (25% chance)

2

4

8

16

Median (50% chance)

3

5

9

18

High  (75% chance)

4

6

11

20

 

How much time does it take to withdraw via the protocol buffer?

 

There is a moving 24h window from 1200 PM UTC – X on day T-1 to 1200 PM UTC – X on day T, where X is currently set to 23 epochs (~2.5h). The requests submitted within this window are processed at 1200 PM UTC on day T.

 

For example, suppose day T = ‘2023-06-01’ and there are 5 withdrawal requests:

  • WR1 submitted at ‘2023-05-31 11:00:00’
  • WR2 submitted at ‘2023-05-31 13:00:00’
  • WR3 submitted at ‘2023-06-01 09:00:00’
  • WR4 submitted at ‘2023-06-01 11:00:00’
  • WR5 submitted at ‘2023-06-01 13:00:00’

 

WR1-3 will be processed on ‘2023-06-01 12:00:00’ (day T), while WR4-5 will be processed a day later on ‘2023-06-02 12:00:00’ (day T+1).

 

In sum, if there is low withdrawal demand and the withdrawal amount is not large (less than 1000 ETH), the protocol buffer can be used to expedite exits. This can take anywhere between 2.5 hours and 26.5 hours depending on when the withdrawal request is made.

 

2. Standard exit (via network broadcast)

In the case that the ETH in the protocol buffer is not enough to fulfil all current withdrawal requests, Lido Oracle sends validators to exit the standard way (vanilla Ethereum withdrawal). The Lido protocol adds to this process a time window for registering a request and an operations delay connected with the validators’ ejection times.

 

As already mentioned, the time window for registering a request can take anywhere between 2.5 hours and 26.5 hours. The operations delay takes between 4 and 24 hours. So, in total, a non-expedited exit via the Lido protocol adds between 6.5 and 50.5 hours to the vanilla withdrawal time.

 

3. Delayed exit due to bunker mode

Bunker mode is a mechanism that protects Lido users who are unstaking during rare but potentially highly adverse network conditions. It is a Protocol mode that is activated when the Consensus Layer penalties might be big enough to have a significant impact on the Protocol’s rewards.

 

During bunker mode, withdrawal requests are paused until the negative events are resolved:

  • For incidents that result in prolonged downtime spanning across tens/hundreds of thousands of validators, the expected delay is 1 day, with a maximum delay of 7 days.
  • For mass slashing events, the expected delay is expected to be 18 days with a maximum delay of 36 days.

 

Taking into account that bunker mode is only triggered in response to chaotic tail-risk events, it should rarely, if ever, be activated (a backwards analysis shows there have been no incidents so far that would have triggered bunker mode). Examples of tail-risk scenarios that could trigger bunker mode include: the 4 biggest Lido Node operators simultaneously going offline for an entire day, a technical issue in a validator client that triggers more than 500 continuous slashings, or simultaneous and widespread outages at AWS, GCP, and Hetzner.

 

More details on this as well as how withdrawal requests are finalized when the Protocol is in bunker mode can be found here.

 

Summary table of the above three scenarios

Time to withdraw (days) via Lido (for 1 validator)

No exit queue

Exit queue of 10%

Exit via protocol buffer

min: 0.1

median: 0.6

max: 1.1

min: 0.1

median: 0.6

max: 1.1

Exit via sending validators to exit (No slashing/Small slashing event)

min: 2.3

median: 4.7

max: 8.1

min: 4

median: 20-36

max: 39

Mass slashing events

min: 1.6

median: 22.9

max: 44.6

min: 4.8

median: 57

max: 76

 

Summary table: withdrawing without Lido vs withdrawing with Lido

Time to withdraw (days)  Vanilla Ethereum staker (green)  Lido Ethereum staker (blue) (for 1 validator)

No exit queue

Exit queue of 10%

No slashing

min: 2 0.1

median: 4 1-5

max: 6 8.1

min: 33 0.1

median: 35 20-36

max: 37 39

Validator is slashed

min: 38 2.3

median: 40 5

max: 42 45

min: 38 4

median: 56 20-36

max: 74 76

 

On quasi-instantaneous exits

If the time to exit is considered too long, a staker using Lido has two other options available to them:

  1. Instantly exit via swapping stETH on a DEX or CEX.
  2. Instantly exit via selling the NFT received when the withdrawal request was submitted.

 

1. Instantly Exit via swapping stETH on a DEX or CEX

Today, the main stETH liquidity reserves are concentrated in the Curve stETH/ETH pool. Detailed stats on the pool can be found here.

 

If the stETH/ETH rate ≥ 1, the stETH can be swapped for a premium (minus a swap fee). If stETH/ETH rate < 1, the stETH can be swapped at a discount (minus a swap fee).

 

The amount of ETH available for swapping and the associated premium/discount depend on the liquidity reserves and their balance in the relevant pool.

 

For example, at time of writing, there exists 476k stETH and 431k ETH in the Curve pool, which gives a stETH:ETH rate of 0.99714. We assume that when withdrawals go live, the incentives for the pool will be reduced and, as a result, that liquidity reserves will go down. We’ve run several simulations for different sized pools and have found that amounts in the range of 50k-100k stETH can be swapped under every pool size scenario, at a discount of between 0.4 – 0.9% for swaps of size 50k, and between 0.8 – 2.1% for swaps of size 100k.

 

Note that very large swap amounts (more than 100k stETH) can face lack of liquidity reserves or provoke a cascade liquidation in the pool and high discounts of 2% or more. As a result, we recommend withdrawing via standard exit for amounts greater than 100k stETH.

 

Just How Fast Are Ethereum Withdrawals Using The Lido Protocol?

Just How Fast Are Ethereum Withdrawals Using The Lido Protocol?

 

2. Exit via selling NFT

When a withdrawal request is submitted, a staker receives an NFT, which gives them rights over claiming the withdrawal once it has been processed. The expectation is that this can then be sold on a secondary market (possibly for a discount).

 

Summary

The main takeaway is that there is a time-money type of trade-off for exiting from stETH to ETH.

 

At the end of the day, there are three possible paths:

  1. Instantaneous exit via swaps on AMM and CEXes.
  2. Expedited exit via the Lido protocol buffer (assuming there is enough ETH to service the request).
  3. Standard exit via vanilla Ethereum withdrawal.

 

While stakers can always choose the first path, if they choose to withdraw using Lido the Oracle will pick between the second and third paths. Which path is ultimately chosen depends on four predominant factors: the amount to withdraw, the stETH/ETH rate, the performance of validators, and the net staking demand in the context of the Beacon chain state.

 

There is no simple answer that applies to all stakers under every scenario.

 

Here are some guidelines in table form:

How to exit from stETH

stETH (amount to withdraw)

Exiting via Lido protocol

Exiting via Curve swaps

Exiting via standard Ethereum withdrawal

Lido users (%)

Time (days)

Discount, %

Time (days)

Discount (%)

Time (days)

Discount (%)

Protocol buffer

Withdrawals

< 1,000

0.6 – 1.1

4.7 – 8.1

~0

txn time

0.04 – 0.06

3.6 – 6

~0

98.98

1,000 – 5,000

0.6 – 2.1

4.7 – 8.2

~0

txn time

0.05 – 0.12

3.6 – 6.1

~0

0.66

5,000 – 10,000

2.1 – 4

4.8 – 8.3

~0

txn time

0.07 – 0.2

3.7 – 6.2

~0

0.15

10,000 – 50,000

3 – 11

4.9 – 9

~0

txn time

0.11 – 0.89

3.8 – 6.9

~0

0.16

50,000 – 100,000

9 – 20

5.6 – 9.9

~0

txn time

0.38 – 2.08

4.5 – 7.8

~0

0.03

100,000 – 150,000

18 – 30

6.4 – 10.7

~0

txn time

0.74 – 4.54

5.3 – 8.6

~0

0.01

150,000 – 200,000

27 – 40

7.3 – 11.6

~0

txn time

1.15 – 11.39

6.2 – 9.5

~0

0.00

> 200,000

> 40

> 12

~0

txn time

> 10

~0

0.01

First choice

Second choice

No objective preference (time-money tradeoff)

Not-recommended

 

N.B these guidelines assume normal conditions. All ranges given are median-max. In the case of high demand for withdrawals, the exit queue will add 3 days of delay for every 1% of the network that is in the queue (e.g. 10% of the network attempting to exit at the same time leads to a month of delay).

 

In the case of a chaotic tail-risk scenario (e.g. mass slashing) you will also need to add up to 36 days to the above time estimates for exiting via the Lido protocol. See the TL;DR at the start of this post for our best attempt at a useful synthesis.

Ethereum Shapella – Overview & Frequently Asked Questions (FAQ)

https://blog.lido.fi/ethereum-shapella-overview-faq/

Ethereum Shapella - Overview & Frequently Asked Questions (FAQ)

The Ethereum community will reach another major milestone after the Merge this week with the activation of the Shapella upgrade, scheduled for 22:27 UTC on April 12th, 2023.

 

In this article we will explain the Shapella upgrade, its improvements for the network, as well as the impact it will have on stakers using Lido.

 

What is the Ethereum Shapella upgrade?

The Shapella upgrade is the next planned upgrade for Ethereum, incorporating two separate changes – Shanghai for the Execution Layer (EL) and Capella for the Consensus Layer (CL) respectively.

 

The most important feature to be delivered is that of withdrawals, proposed in EIP-4895. Through the enabling of Beacon Chain withdrawals, the upgrade will allow validators to withdraw their staked ETH, some of which has been locked since the Beacon chain’s introduction in 2020. Importantly, this significantly reduces the technical risk of staking for users with the completion of the end-to-end staking flow that allows for unstaking.

 

The upgrade is also expected to reduce gas fees in certain instances and improve the network’s scalability through the implementation of the following EIPs:

  • EIP-3651: Proposes lowering gas costs when the payments (e.g. MEV-related payments) to COINBASE addresses take place.
  • EIP-3855: Aims to lower gas costs for developers by introducing the PUSH0 instruction.
  • EIP-3860: Introduces a maximum size limit for initcode with a fair charge system.
  • EIP-6049: Deprecates the SELFDESTRUCT opcode and shows a warning when it is used.

 

Ethereum Shapella - Overview & Frequently Asked Questions (FAQ)

 

What does Shapella mean for stakers?

The Lido DAO is eagerly anticipating the launch of Shapella, and contributors are fully dedicated to supporting the incoming upgrade for stakers using the Lido protocol. Most importantly, this means introducing a simple withdrawal flow to enable users to effortlessly unstake their staked ETH (stETH).

 

Withdrawals are a fundamental component of a liquid staking protocol and will significantly enhance the experience for Ethereum stakers using Lido.

 

1. As a Lido Ethereum staker, do I need to do anything?

Short answer – no. Your stETH will remain unchanged and you will continue to earn staking rewards before, during and after the Shapella upgrade.

 

2. When does Shapella go live?

The Shapella upgrade is expected to go live on April 12th at around 22.27 UTC, specifically on Ethereum epoch 194048.

 

3. When will Ethereum withdrawal functionality be enabled on Lido

Ethereum withdrawals using Lido are expected to go live in May following completion of testing and audits. In the meantime, stakers can as always use secondary markets like Curve to effectively stake/unstake their ETH.

 

4. Do I have to withdraw after the Shapella upgrade?

No. Withdrawal functionality can be used by those who want to unstake. If you want to continue to support the Ethereum network – and earn daily rewards in the process – there is no need to withdraw.

 

5. Why would I care about withdrawals?

Ethereum withdrawals are a significant milestone allowing users to stake and unstake at will – thus making for a more user-friendly staking experience.

 

The possibility to withdraw Lido stETH on mainnet is expected in May with the Lido V2 deployment, pending completed audits and testing. Lido stETH withdrawal functionality has been deployed on Goerli testnet for a few weeks now and is in the process of being tested. You’re invited to grab some goerliETH and go to stake.testnet.fi/withdrawals to test it for yourself!

 

Lido DAO contributors came together to discuss this, amongst many other things, on a recent Twitter Space dedicated to withdrawals. In case you missed it, check it out here:

 

To stay up to date as Shapella and Ethereum withdrawals approach, keep an eye on the Lido Twitter where we will continue to update stakers on new developments.

 

Happy staking 🏝️