Lido launches layer-2 Ethereum staking and LDO rewards

One of the biggest Merge staking providers, Lido Finance has launched on two layer-2 networks Arbitrum and Optimism, a move it says further improves accessibility to Ethereum staking while reducing gas fees.

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 Oct. 7.

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.

Industry leaders such as Coinbase CFO 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.

The first phase of its layer-2 rollout enables the bridging of Lido’s wrapped stETH (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 keeps a fixed balance of stETH for use in DeFi applications that require a constant balance mechanism.

Additionally, Lido is allocating 150,000 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.

Lido is now on L2 ️ Bridge your staked ETH to Layer 2 protocols at the click of a button to benefit from lower gas fees and exciting DeFi opportunities.

— Lido (@LidoFinance) October 6, 2022

According to its website, Lido has $7.4 billion worth of staked ETH representing around 5.5 million tokens or roughly 40% of the total staked. It was also reported that stETH lost its peg to ETH earlier this year as the crypto contagion started to spread, but recovery was swift.

Related: 64% of staked ETH controlled by 5 entities — Nansen

The layer-2 networks it has chosen to deploy to 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 and Optimism has a 30% share and a $1.45 billion TVL according to L2beat.