stETH Listing Proposal

New Markets
1

Background:

Lido was announced in November 2020. The testnet was released in late November.

Lido staking went live on December 18th after the withdrawal key ceremony ended. Chorus One, Staking Facilities, Certus One, Argent, Banteg (yearn.finance), Alex Svanevik (Nansen), Anton Bukov (1inch), Michael Egorov (Curve/Nucypher), Rune Christensen (MakerDAO), Will Harborne (DeversiFi) and Mustafa Al-Bassam (LazyLedger) came together over a four-day event to generate threshold signatures for Lido’s withdrawal keys in a secure environment on air-gapped machines. Lido will move over to a fully non-custodial solution in the near future.

The Lido DAO manages the liquid staking protocol by deciding on key parameters (e.g. setting fees, assigning node operators and oracles).

Overview:

The Lido Protocol, built on Ethereum 2.0’s beacon chain, allows users to earn staking rewards on the beacon chain without locking Ether or maintaining staking infrastructure.

Lido allows users to deposit ETH and receive stETH. The deposited ETH is then pooled and staked with node operators selected by the Lido DAO. stETH represents the user’s staked ETH balance of the beacon chain along with staking rewards accrued or penalties inflicted on validators in the beacon chain. When transactions are enabled on the beacon chain, stETH can be redeemed for unstaked ETH and accumulated rewards.

Unlike beacon chain ETH, stETH can be freely transferred and traded.

Relevant Links:

stETH Liquidity and Volumes:

  • stETH’s fully diluted marketcap stands at $267MM
  • stETH primarily trades on Curve Finance with the stETH/ETH pool holding $339MM of liquidity currently. Utilization remains low at 0.21% with $750k in 24 hour volume
  • 70.5% of stETH is held in the Curve stETH/ETH pool

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Considerations:

  • stETH has become one of the largest and most liquid ETH 2.0 staking platforms. Adding stETH to Compound would enable ETH 2.0 stakers to borrow against their stake. With the growth of ETH 2.0 staking, stETH can drive new borrow volume to Compound. On the lending side, stETH holders can earn a yield on their idle deposits
  • Lido has been live for more than 2.5 months with no major bugs or slashing events
  • stETH is not traded on any major centralized exchanges. The oracle would likely need to reference Curve, given the platform is the primary venue for stETH price discovery
  • Compared to ETH, stETH carries additional risk including Lido smart contract risk, liquidity considerations, and ETH 2.0 slashing risks
  • Lido has partnered with Unslashed to offer slashing cover

Next steps:

We welcome any community feedback on this proposal including the oracle implementation and risk parameters.

6 Likes
2

Would love to see this implemented!

3

i think this is worth reconsidering. my biggest question is what happens in the worst case where validators dont honor Lido withdrawals and steal the money? assuming they just get kicked out of the validator group, but is there any way to mitigate potential losses?

1 Like
4

They technically can not honor withdrawals, at least with the current spec*, but can’t steal the funds (they can essentially do a griefing attack but nothing beyond that).

Given that the validator set is whitelisted by the DAO and all of them are very good at their job with a superb reputation and a lot in stake on other networks, a griefing attack makes no sense for them.

* there are proposals to introduce forceful validator key rotation, e.g. Adding PoS validator key changes - Casper - Ethereum Research)

1 Like
5

We are actually on it, would love your help and collaboration here

6

This should be taken into consideration:

A quote from a Coindesk article today… “* A rogue developer withdrew $500K worth of governance token SGT from decentralized Eth 2.0 staking service SharedStake. TAKEAWAY: A vulnerability in the timelock code that was meant to release SGT tokens gradually over time was exploited by one of the developers of SharedStake. The SGT tokens were subsequently dumped on the market, and the price of the tokens fell 96% from $1.60 to under $0.03. Furthermore, users have been advised to stop using and to exit the platform’s staking services because it remains unclear if the withdrawal keys for some 16,000 ETH, worth roughly $32 million, have also been compromised in the process. This is a developing story.”(Article, The Defiant)

7

Thank you. We are taking LDO holders into consideration as they collectively control stETH.

1 Like