Last Updated on May 16, 2023 by Bitfinsider
Lido Finance, Ethereum’s largest liquid staking technology, has upgraded to version 2 – a crucial change that allows users to withdraw ether from the site.
The upgrade to version 2 was approved by an on-chain vote after community members deliberated on the idea. The governance vote number 156, which was launched on May 12, was validated on the Aragon platform today.
The vote to approve the update was completed at 1:15 p.m. ET today. The change comes on the heels of last month’s Shapella hard fork, which allowed staking validators to withdraw ether. Due to repeated security audits, Lido needs an extra month to permit withdrawals.
The fundamental feature of Lido V2 is the ability for liquid staking users — holders of staked ether (stETH) — to withdraw from Lido at a 1:1 ratio. This advancement simplifies the mechanism by which anyone can enter and depart Ethereum’s liquid staking.
Staked ether is a Lido Finance-provided ether (ETH) derivative. When users deposit ETH, the protocol rewards them with staked ether (stETH), a token that unlocks the underlying capital, allowing it to be used as collateral in other DeFi ventures. Currently, over 6.1 million ether (ETH) worth around $12 billion is staked on Ethereum using Lido.
stETH holders can now request a withdrawal starting today. Following the submission of the requests, an oracle will determine which Lido operators require exit validator nodes to fulfill the request. Lido operators will then submit a validator exit request to an Ethereum mainnet consensus node. stETH holders can claim their ETH after the specified validators have exited.
“The Lido V2 launch represents an architectural evolution of the Lido protocol, ushering in both the ability for stETH holders to natively unstake their stETH in-protocol for ETH,” stated Isidoros Passadis, Lido DAO contributor and Master of Validators. “A full-fledged staking product must include simple, accessible, and timely withdrawals.”
Initially, Lido would aid with the processing of faster individual withdrawals from a “withdrawals vault” containing ETH. With the Lido V2 upgrade, about 270,000 ETH ($490 million) will be promptly available in the vault to satisfy withdrawal requests, avoiding a lengthy process of departing validators.
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