Lido Finance, one of the biggest Merge staking providers, has launched on two layer-2 networks, Arbitrum and Optimism, a move it says further improves accessibility to Ethereum staking while reducing gas fees.
It has been reported that the plan to expand to L2 was first unveiled in July when the team acknowledged that several layer-2 networks had “demonstrated economic activity,” with the new deployment to L2 networks Arbitrum and Optimism launched on October 7.
However, Lido provides liquid staking, which allows more flexibility for stakers as they can withdraw their funds at any time as opposed to staking Ethereum directly and having it locked up.
The report said that industry leaders such as Coinbase chief financial officer Alesia Haas have previously commented that institutional staking will not take off unless the issue of asset lockup can be solved. Lido provides this flexible or liquid staking option which is why it has grown in popularity.
Likewise, the first phase of its layer-2 rollout enables the bridging of Lido’s Wrapped Staked Ether (wstETH) token to the two networks. stETH is the Ethereum liquid staking token that Lido issues in proportion to Staked ETH and its wrapped version keep a fixed balance of stETH for use in decentralized finance (DeFi) applications that require a constant balance mechanism.
Lido is allocating 150,000 Lido DAO (LDO) tokens in rewards per month from launch day for wstETH bridged across each network. The initiative aims to build wstETH liquidity for farming incentives on DeFi partners including Balancer, Curve, and Kyber Network.
According to its website, Lido has $7.4 billion worth of staked ETH representing around 5.5 million tokens or around 40% of the total staked. It was also reported that stETH lost its peg to Ether earlier this year as the crypto contagion started to spread, but recovery was swift.
Thus, the layer-2 networks it has chosen to deploy first have an 80% market share between them. Arbitrum is the leader with a 51% market share and $2.42 billion in total value locked (TVL) and Optimism has a 30% share and a $1.45 billion TVL.