Lido Finance, a liquid staking protocol, has employed a safety measure to control the staking rate after recording over 150,000 ETH staked in one day. The protocol announced this development via Twitter.
As per the announcement, Lido was concerned about the safety of its platform and intends to prevent such a massive inflow from continuing. Therefore, it decided to activate a safety feature called Staking Rate Limit to check the number of stakes and mitigate possible side effects.
Lido Finance Introduces Staking Rate Limit To Address Potential High Inflow Side Effects
Lido Finance is a crypto liquid staking platform that allows users to stake Ethereum without locking their tokens. The protocol issues a liquid variant of ETH called staked ETH (stETH) to users who stake their Ethereum. This enables users to earn daily staking rewards while holding their tokens in Lido wallets.
Lido has been providing this service since December 2020, a few weeks after Ethereum 2.0 Beacon Chain went live. However, as per the recent announcement, the platform has never anticipated the amount of ETH staked in a single day that occurred last week. As such, Lido has become increasingly concerned about the safety of its platform should there be a repeat of such an occurrence.
In a state guide, Lido explained the safety feature working mechanism, including the aim of activating it. According to Lido, the safety feature will limit the amount of staked Ethereum (stETH) users can mint during high inflows. This measure would prevent potential issues, like reward dilution, that might arise from high inflows.
The safety valve limits the amount of staked ETH users can mint based on their 24-hour deposit, keeping the refill capacity at 6,200 ETH per hour. Therefore, the amount of stake ETH users can mint at a time is reduced based on recent deposits. Lido Finance noted that the replenishing capacity will now be block-by-block.
It means users can only submit a limited amount of Ether to Lido staking Smart Contracts within a 24-hour interval. Also, the firm noted that the Staking Rate Limit would apply to all users who might intend to mint stETH despite their approach.
Ethereum Witnesses Surge In Stake ETH Volume Ahead Of Shanghai Upgrade
Meanwhile, on-chain analytics firm Lookonchain made a remarkable observation. Lookonchain shared a screenshot showing that the 150,100 ETH staked in a single day might have come from a single user.
According to the screenshot, the user made three consecutive deposits of 50,000 ETH each and another of 100 Ether, making it 150,100 ETH.
Information on Lido Finance’s website shows the protocol now has over $9 billion in Ether token staked. That is a significant increase from the $5.9 billion reported on January 2 when Lido Finance overtook MakerDAO and AAVE, whose staking volume was $5.89 billion and $3.7 billion, respectively.
The move from Lido Finance comes as Ethereum records a surge in staking volume amid heightened anticipation for the upcoming Shapella upgrade. The Shanghai/Capella upgrade, which would see the release of staked ETH locked on the Beacon Chain, would go live in March.
Given user speculations about a possible surge in Ether price after the upgrade, people might rush to stake their tokens in preparation for the launch. This is the most probable reason behind the sudden surge in staked Ether volumes on staking protocols.
Ethereum developers claim one of the improvement proposals, EIP-4895, that would follow Shapella would unlock staked ETH. It would allow users to withdraw their Staked Ether and earn and accrue rewards, which may cause increased liquidity in the cryptocurrency market.
Featured image from Pixabay and chart from Tradingview.com
Source: https://bitcoinist.com/lido-finance-adds-a-safety-feature/