Lido Announces stETH Layer-2 Compatibility as LDO Explodes 160% Weekly

The development team behind Lido announced plans to expand the support for its staked Ether (stETH) across the growing layer 2 ecosystem to allow stakers to enjoy lower fees and access to a new suite of DeFi applications to increase yields.

Lido’s Layer 2 Expansion

Lido will begin by supporting wstETH bridging and staking on Layer 2 networks. wstETH is essentially the wrapped, non-rebasing version of its stETH. The main goal is to enable the staking of Ether held by users on L2 networks directly from that L2 without the need to bridge their assets back to the Ethereum mainnet and benefit from the reduced network and protocol fees.

Lido will only support wstETH for its initial deployment citing reasons such as simplified bridge contracts and ease of integration, both with bridges and general DeFi space.

Detailing the expansion, Lido said,

“We believe that in the future a large portion (if not a majority) of economic activity and transaction volume will migrate to both general use and purpose-specific Layer 2 networks. Each of these networks will benefit from or need staking solutions to support their users’ economic activities and ensure that all users of Ethereum ecosystem networks have the ability to participate in securing Ethereum.”

The team also announced integration with ZK-Rollup projects Aztec and zkSync through Argent.

Details about deployment and timelines have not been released yet. But before expanding to other “sufficiently proven” layer 2 networks with “demonstrated economic activity,” Lido plans to start with Optimism and Arbitrum.

LDO Explodes Triple Digits

Along with most other cryptocurrencies, Lido’s native token plummeted hard recently and slumped below $0.6 just until a week ago. However, similar to some other L2 connected to the Ethereum ecosystem, it started to gain value quite rapidly.

It exploded by more than 200% in the following days to over $1.75 yesterday, a multi-month high. Despite retracing slightly since then, LDO is still over 160% up weekly. Its market cap has neared $500 million, and it has found a place among the top 80 largest digital assets by that metric.

Centralization Debate

Lido has been a subject of centralization concerns recently. With the Ethereum Merge in the making, staking on the Beacon Chain intensified. During mid-March and April, 75% of new stakers on the Beacon chain who joined have done so via the staking project. Lido contributed a major portion of 31% of the $35 billion equivalent in staked assets sparking the centralization debate.

The premier liquid staking solution acknowledged the concerns. A month later, a proposal to impose a cap on Lido’s maximum stake was presented but was rejected.