Lido (LDO) Establishes ‘Overwhelming Dominance’ in Ethereum Liquid Staking Ecosystem: Glassnode

July 6, 2023 The Daily Hodl

Lido, Rocket Pool team members argue over decentralization

July 4, 2023 Coin Telegraph

A Lido team member claimed Rocket Pool is not really governed by its DAO, but Rocket Pool community members pushed back, claiming the protocol is becoming more decentralized.

A team member for Lido has accused competitor Rocket Pool of being too centralized in a July 4 social media post. Both Lido and Rocket Pool are liquid staking protocols that allow users to delegate their cryptocurrency to validators and receive derivative tokens in exchange.

According to the post from Lido's community staking lead Dmitry Gusakov, the Rocket Pool contracts are controlled by the Rocket Pool team, allowing the team to change any parameters and call any method. This means that Rocket Pool developers can increase the inflation rate to an arbitrarily large percentage or increase fees to up to 100%.

Gusakov claimed this vulnerability does not exist in Lido’s contracts, as in Lido, these actions are “fully controlled by [decentralized autonomous organization] LidoDAO.”

Rocket Pool Grants Management Committee member Waq responded to the accusation, stating that the vulnerability was already known to the team and will be fixed in the future. Waq accused the Lido team of trying to take credit for discovering an issue that was already known.

Here we go again with the "brand new" discoveries of @Rocket_Pool being super malicious again Not a single word of how the community has been working for over a year on fixing this and the progress we're making. Once we fix this, they'll rush to take the credit like always.
— Waq | Rocket Fuel (@waqwaqattack) July 4, 2023

According to Gusakov's post, the RocketStorage contract at Ethereum address 0x1d8f8f00cfa6758d7bE78336684788Fb0ee0Fa46 contains a parameter called “guardian.” Many functions in Rocket Pool contracts are also labeled as “onlyGuardian,” meaning they can only be called by the account listed in this parameter, which is currently set to the RocketPool deployer account at 0x0cCF14983364A7735d369879603930Afe10df21e.

Actions that can be performed by the “guardian” include changing the “RPL InflationIntervalRate” and the “ETH DepositFee,” implying that the team can increase the inflation rate of the Rocket Pool governance token (RPL) or remove users’ deposits by setting the fee to 100%, Gusakov stated.

Content creator Chris Blec shared the post, claiming that it proves “‘pDAO is not a DAO” or that RPL token-holders are not actually in control of Rocket Pool’s governance.

In response, RocketPool community advocate Jasper.lens stated that the community is already aware of this centralization issue, which will be patched in the upcoming Saturn upgrade. According to Jasper, the centralization occurred during a period when voting systems for Rocket Pool’s DAO were still being designed and tested. The team decided to not allow the DAO to practice on-chain voting in the initial testing phase. However, testing has now been completed, and the upcoming Saturn upgrade “is all about patching the decentralization holes.”

In a comment agreeing with Jasper.lens’ post, Waq claimed that the Rocket Pool community “has been working for over a year on fixing this” and predicted the Lido team would “rush to take the credit like always” once the problem is fixed.

Liquid staking protocols have been growing in popularity over the past few months. On May 1, blockchain analytics platform DefiLlama stated that these protocols have surpassed decentralized exchanges as the top DeFi category in terms of total value locked. On May 30, Tenet partnered with LayerZero to implement liquid staking on more blockchains in the future.

AWS went down in the US, but Ethereum kept humming

June 14, 2023 Coin Telegraph

Amazon Web Services

Ethereum hummed along through the latest AWS outage but one commentator said its reliance on Lido for staking could cause issues in the future.

Amazon Web Services (AWS) suffered a minor outage but there was no impact on Ethereum network nodes which largely rely on Amazon’s hosting.

On June 13, the cloud service provider went down temporarily for around three hours. At 12:08 PM PDT, the company first reported it was “investigating increased error rates and latencies” in parts of the United States.

Many mainstream news organizations such as the Associated Press were affected and unable to publish articles.

Ethereum advocate Evan Van Ness observed the outage noting that the Ethereum network was not affected.

AWS is down

Ethereum is humming along unaffected

Bitcoin maxis hardest hit pic.twitter.com/9YGBXRC4CL
— Evan Van Ness (@evan_van_ness) June 13, 2023

According to Ethernodes, 64.5% of the Ethereum network is reliant on Amazon hosting providers.

*Distribution of Ethereum nodes from web service providers. Source: Ethernodes*

Van Ness added the impact may have been more significant if the outage was in Europe due to the amount of Ether (ETH) staked on Lido, which is currently around 7.1 million or 35% of the total:

“I imagine there would be some effect if AWS went down in Europe given how much of Lido is in the cloud.”

Ethereum has previously been criticized for centralization due to its reliance on infrastructure provider Infura which provides network nodes to companies and organizations. Many of these companies, and liquid staking platform Lido, rely heavily on AWS for cloud hosting services

Around 20 minutes after the discovery of the problem AWS said the root cause of the issue was connected to a service called AWS Lambda, which lets customers run code for different types of applications.

Over three hours after AWS went down the company reported that “the issue has been resolved and all AWS Services are operating normally,” at 3.37 PM PDT.

According to hosting platform Kinsta, among cloud hosting providers, AWS has the dominant market share of 34%.

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May 19, 2023 The Daily Hodl

Anchorage Digital opens up DeFi voting for custody clients

May 17, 2023 Coin Telegraph

Anchorage Digital Bank

Anchorage joins AAVE, Lido and BitDAO in adopting the off-chain voting platform Snapshot.

Institutional clients of crypto custody firm Anchorage Digital can now voice their concerns on proposals for tokens they hold without paying hefty gas fees.

According to a May 16 statement, Anchorage will integrate off-chain, gasless multi-governance client Snapshot to allow its “token-holding community users” to vote on governance proposals with their tokens, without incurring any gas fees.

Anchorage Digital is pleased to announce that clients can now participate in Snapshot voting using their Anchorage Digital address. Our WalletConnect integration enables:

+ Voting from within qualified custody with no movement of funds
+ Secure off-chain governance for… pic.twitter.com/VYZ5pIwyl1
— Anchorage Digital (@Anchorage) May 16, 2023

It said all voting will take place within Anchorage’s custody with no movement of funds.

Snapshot is used by decentralizeprotocols like AAVE (AAVE), Lido (LDO), and BitDAO. It records the voting off-chain — meaning transactions are not publicly recorded on the blockchain.

The advantage of this approach is “convenience,” according to Anchorage:

“The tradeoff for such convenience comes in the form of on-chain guarantees; Snapshot voting is free because votes are counted off-chain and thus do not require gas payments. The responsibility to enforce the decision is typically entrusted to a multisig that the protocol team operates.”

Anchorage said it currently supports “over 60 ERC-20 tokens,” with plans to enable support for all applicable future ERC-20 tokens.

It was announced in October 2022 that Anchorage had extended its operations to Asia with five new institutional partners including Bitkub, DreamTrade and FBG Capital. It stated Asia’s consumers “have adopted crypto with enthusiasm.”

Snapshot has recently been employed to collect votes from AAVE and LDO token holders regarding each of the protocol’s latest upgrade or governance proposals.

[Aave Snapshot] [ARFC] Aave V2 Interest Rate Curve Changes (2023-04-21) https://t.co/MQwcd5NVBt @indexcoop @SnapshotLabs pic.twitter.com/GrS1OkkHNs
— mel. (@emjicy) May 2, 2023

The voting system also proved beneficial for AAVE users who mistakenly sent their tokens to the wrong address.

In July 2022, LidoDAO, the governance body that controls Lido Finance, a liquid staking solution for proof-of-stake cryptocurrencies, conducted a Snapshot vote on sending 1% of LDO’s token supply to DragonFly Capital for $14.5 million which was rejected by token holders.

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Celsius adds over 428K stETH to Lido’s lengthening withdrawal queue

May 17, 2023 Coin Telegraph

Celsius

The bankrupt crypto lender wants its huge stash of staked Ether back, but it could be in for a wait.

Bankrupt crypto lending firm Celsius is anxious to get its staked Ether (ETH) stash back from liquid staking platform Lido which enabled withdrawals this week.

Celsius initiated the process of withdrawing its Lido Staked ETH (stETH) from the protocol. According to transaction data it has requested the withdrawal of 428,084 stETH in batches of 1,000.

The stash is valued at approximately $784.7 million at current prices. The move follows a transaction of a similar amount of stETH on May 15 in preparation for withdrawal.

Once the withdrawal process is complete, Celsius will receive the equivalent in Ethereum and the stETH tokens will be burnt by Lido.

According to Dune Analytics, the cumulative amount of stETH in the withdrawal queue is 442,000 from 141 requests. It is valued at around $808 million though Celsius is responsible for the majority of it. The total amount already processed is 629 ETH, according to Dune.

*Lido withdrawal requests between May 15 and 17. Source:* *Nansen.ai*

On May 16, Lido stated it had enough ETH in its buffers to absorb the requests.

At time of writing the Lido protocol has ≈440,000 ETH available in the protocol buffers.

There could be large withdrawals this week. If so, some will be absorbed by this surplus.https://t.co/7MfbTuDAFx https://t.co/uOOBqsMv5C https://t.co/onrBa7bMhf
— Lido (@LidoFinance) May 16, 2023

However, larger numbers of Ether withdrawal requests from Lido will have an impact on the network withdrawal queue — which is a dynamic process. Lido is the largest staking provider with a market share of almost 30% so Celsius could be in for a long wait to get its ETH back if requests increase.

Research analyst at 21Shares, Tom Wan, suggested that if unstaking requests exceeded 10% it could cause a larger number of validator exits. This would potentially lead to longer queues for withdrawals.

The capital may be used as part of Celsius restructuring efforts or to partly repay some of its $4.7 billion debts to creditors.

In late February, the crypto lender converted 22,962 wrapped Bitcoin (WBTC) into Bitcoin (BTC) in a transaction valued at approximately $540 million at the time.

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Celsius moves $781M in stETH just as Lido withdrawals open

May 16, 2023 Coin Telegraph

Celsius

The bankrupt crypto lender has been moving its massive stash of staked Ethereum.

It appears that embattled crypto lender Celsius is wasting no time in shifting its Ethereum staking tokens from liquid staking platform Lido, which has just enabled withdrawals.

On May 15, a transaction was identified on Celsius wallets for 428,015 stETH (Lido staked Ether) to the Lido staked Ethereum wallet. The whopping stash was worth $781 million at the time of transfer, which some believe is in preparation for withdrawal.

On-chain data points to Celsius performing a test withdrawal of 0.1 stETH a few hours later.

*Celsius stETH transfer. Source:* *Etherscan*

According to Bitcoin pioneer and Celsius creditor Simon Dixon, Celsius could be “lining up for staking directly without Lido in the middle.” It could also be loan collateral for Celsius restructuring plans, he added.

428k #Celsius $stETH on the move - likely lining up for staking directly without #LIDO in the middle. That’s the loan collateral proposed for NewCo. Should get an update during court hearing this week - 17th May - No court approval needed for this it seems https://t.co/pwT4fR1Qjt https://t.co/4tdSsMegA8
— Simon Dixon (@SimonDixonTwitt) May 15, 2023

Blockchain intelligence firm Arkham Intelligence highlighted that Celsius transferred 40,928 ETH last week to a smart contract called “Figment ETH2 Beacon Depositor 1”. This was then moved to the Ethereum Beacon Chain deposit contract on May 12, according to Etherscan.

Lido, which takes a 10% staking commission, enabled withdrawals on May 15 with a protocol upgrade to V2.

“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.”

Lido currently accounts for 29% of all staked Ether (ETH) — 6.27 million ETH valued at around $11.3 billion.

Meanwhile, there is 54,046 ETH currently in the withdrawal queue, and this doesn’t include the Celsius stash yet, according to on-chain analytics firm Nansen.

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$500K worth of stETH redeemed in 3 hours as Lido enables withdrawals

May 15, 2023 Coin Telegraph

Coin Telegraph

Ethereum was upgraded to allow withdrawals on April 13, but Lido had not previously integrated with the new feature.

The Lido liquid staking protocol has enabled Ether (ETH) withdrawals for the first time, according to May 15 data from Parsec Finance. Over 260 Lido Staked Ether (stETH) was redeemed for its underlying Ether in the first three hours, worth about $500,000.

stETH withdrawals dashboard:
- individual & aggregate withdrawal requests.
- current withdrawal queue.
- stETH large balance changes.https://t.co/HxZc2Izfax @parsec_finance @wilburforce_ pic.twitter.com/2ZBZWzcrTZ
— mhonkasalo.lens (@mhonkasalo) May 15, 2023

Lido is a liquid staking derivatives (LSD) protocol that allows ETH holders to stake their coins with participating validators and earn additional ETH as a reward. When users stake their ETH with Lido, they receive stETH in return. As users earn ETH from staking, their stETH increases in quantity to reflect the additional rewards.

However, before the April 13 Shapella upgrade, Ethereum did not allow validators to withdraw their Ether held in the staking contract. Even after Shapella, Lido users couldn’t withdraw their ETH because Lido's software did not have a withdrawal function. But on May 15, the Lido decentralized autonomous organization voted to upgrade Lido to version 2, allowing withdrawals for the first time.

Data from Parsec shows that it took about an hour for stakers to realize that they could now withdraw. The first hour of withdrawals produced around 4 ETH ($7,308) worth of redemptions of stETH. But the following hour, redemptions swelled to approximately 227 ETH ($414,956). The pace of redemptions fell the following hour to around 44 ETH ($80,388). Over $500,000 worth of ETH was withdrawn in the first three hours of withdrawals being enabled.

*ETH withdrawals on Lido. Source: Parsec*

Liquid staking solutions have gained in popularity since the Shapella upgrade. On May 1, liquid staking became the top decentralized finance category in terms of total value locked, surpassing even decentralized exchanges, according to DeFiLlama. However, there are still some legal questions around liquid staking in the United States, as the Securities and Exchange Commission has recently stated that it may see staking providers as securities issuers.

New Cosmos chain will use liquid staking tokens from other networks for security

May 3, 2023 Coin Telegraph

ANKR

Staked ETH, BNB, ATOM, SOL and MATIC will be usable on Tenet as “restakes” to gain further rewards.

A new Cosmos-based blockchain called “Tenet'' will use liquid staking coins from other networks to secure its transactions, potentially allowing the new network to inherit the security of older ones, according to a May 3 announcement from the developers.

The network is currently available as a testnet and will launch a mainnet version as soon as testing is complete. This comes after liquid staking has recently become the largest decentralized finance (DeFi) protocol category.

Liquid staking protocols such as Lido, Rocket Pool and Ankr allow users to stake their coins with a network of validators and receive rewards without having to run their own nodes. These protocols also provide users with tokens called “liquid staking derivatives,” or LSDs, redeemable for the underlying deposits and rewards.

According to the announcement, Tenet will allow users to “restake” these LSDs to earn additional rewards on its network. And it will provide users with tokens that represent the LSDs themselves. The team calls these third-order tokens “liquid liquid staking derivatives,” or LLSDs. LLSDs will be usable in lending apps and decentralized exchanges throughout the Tenet network, the announcement said.

The team expects there to be two core benefits to using LSDs instead of a native coin to secure the network. First, it “ensures the long-term security of the Tenet chain by leveraging the joint security of each [layer 1] ecosystem it services.” Second, it should “bring additional liquidity and yield opportunities to LSDs.”

At launch, the protocol is expected to allow liquid staking derivatives of Ether (ETH), BNB (BNB), Cosmos (ATOM), Solana (SOL) and Polygon (MATIC) to be restaked on Tenet.

The new network is being developed by former executives of Ankr and Blockdaemon and is advised by members of the Lido, Ankr and OpenAI teams.

Liquid staking protocols have existed since 2020 when Lido was first launched. They grew in popularity in 2022 and early 2023 as the Ethereum network implemented a move to proof-of-stake and began to allow staking withdrawals. On May 1, crypto analytics platform DefiLlama announced that liquid staking had become the top category of DeFi apps when measured by total value locked.

Some experts have argued that liquid staking may grow in the future as a result of the Ethereum Shanghai upgrade.

Liquid staking solutions now have more TVL than DEXs: DefiLlama

May 1, 2023 Coin Telegraph

Coin Telegraph

From April 13 to May 1, TVL on decentralized exchanges declined by $1.66 billion while it increased on liquid staking protocols by $280 million.

Liquid staking solutions such as Lido and Rocket Pool now have more total value locked (TVL) than decentralized exchanges (DEXs), making them the top category of DeFi protocols, according to data from crypto analytics platform DefiLlama.

For the first time, the Liquid Staking category has surpassed DEXes in total value locked, making it the leading category in DeFi by TVL dominance pic.twitter.com/HQ0Ug8UweR
— DefiLlama.com (@DefiLlama) April 26, 2023

TVL is a metric that measures the dollar value of all cryptocurrencies locked within a protocol’s smart contracts.

Liquid staking protocols have just recently taken the top spot. On April 13, there was only $17.19 billion of crypto locked in liquid staking contracts, compared to $18.89 billion in DEXs, according to archived information. However, DEXs have experienced a $1.66 billion decline to $17.2 billion, while liquid staking solutions have experienced a $280 million increase to $17.47 billion, giving them the top spot.

Liquid staking protocols are staking pools that stake crypto on behalf of users. These protocols also issue tokens to users that represent the person's deposited crypto. Because these tokens can be used in DeFi apps, liquid staking protocols allow users to both simultaneously stake their coins and use them in other applications.

According to DefiLlama’s May 1 data, Lido (stETH) is still the top staking protocol with $11.54 billion of cryptocurrency locked inside its contracts. Coinbase Wrapped Staked Ether (CBETH) is a distant second with $2.19 billion locked, and Rocket Pool (rETH) is third with $1.46 billion. The remaining protocols have less than $1 billion of TVL each but add up to $2.22 billion collectively.

Lido was the first liquid staking protocol, and it launched in 2020. Liquid staking has become more popular as Ethereum moved to proof-of-stake and allowed withdrawals.

Lido

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