Lido, a liquid staking protocol, is preparing to introduce staking reward withdrawals and an improved staking architecture after the upcoming Lido V2 update.
Two of the highlights of the update include the introduction of the new Staking Router and the enabling of withdrawals for Ethereum (ETH) stakers.
The Staking Router features a modular architectural design that allows on-ramp development for new node operators, including solitary stackers, decentralized autonomous organizations (DAOs) and distributed validation technology clusters. The latter is a protocol that allows sharing the functions of the validators on multiple nodes.
The Staking Router is expected to allow Lido to become an extensible protocol due to its modular design. The validation modules will be treated as a set of validator groups that can act as a supply for the protocol. The modules will manage an internal registry, store validation keys and distribute bets and rewards among the operators.
The ability to withdraw liquid betting rewards allows stETH holders to withdraw funds from Lido in a ratio of 1:1 in ETH. An overview of the update shared with Cointelegraph highlights that the withdrawal feature also mitigates risks in the secondary market, which is tentatively expected to become operational after the Ethereum update in Shanghai.
Users who wish to withdraw ETH will have to go through a request and complaint process. To initiate the withdrawal, a request will result in users blocking ETH. The protocol supplies ETH to fulfill the request, blocks ETH and burns the blocked stETH, then marks the request as collectable and the user can retrieve his ETH.
The roadmap foresees the development between February and April 2023, when the code will be tested on Goerli Testnet before a procedure to replace the retirement credentials and the actual upgrade.
Credential substitution is required due to a discrepancy between Lido protocol validators using BLS-based 0x00 signatures and those using the latest smart contract-based 0x01 signatures.
Lido intends to replace credentials with smart contract-based signatures through a DAO procedure, in which participants will sign a message that will then be transmitted to the consensus layer network.
As previously reported, the upcoming update of Shanghai Ethereum has resulted in Lido Finance becoming the largest decentralized finance protocol, with more than $8 billion staked on its platform until 2023.
Alejandro O. Asharabed Trucido
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