Liquid staking protocol Lido Finance has hit the big red button to activate a security feature of the protocol called “Stake Rate Limit” after more than 150,000 Ether was staked with the protocol in a single day.
Lido is a liquid staking solution for digital assets, in this case, allowing users to stake Ether (ETH) without needing to have their tokens locked up. When a user deposits Ether, Lido issues them a liquid variant of ETH, known as staked ETH (stETH), which awards users rewards for each day the tokens are held in their wallets.
The Lido protocol has recorded its highest daily participation flow so far with more than 150,000 ETH staked.
Upon reaching this number, a curious (but important) security feature of the protocol called Staking Rate Limit was activated.
Is that how it works pic.twitter.com/ngBtWz7q18
—Lido (@LidoFinance) February 25, 2023
According to the February 25 tweet of the liquid staking protocol, the “dynamic mechanism” was activated after the daily staking limit of 150,000 Ether was reached.
in a related guide, Lido explained that the “safety valve” is intended to limit the amount of staked ether (stETH) that can be minted during times of large inflows, which is intended to address potential negative side effects such as dilution. of rewards.
“This means that it is only possible to send so much ether to the Lido staking contracts within a 24-hour timeframe,” he explained.
The mechanic works by limiting the amount that can be minted based on deposits in the last 24 hours, replenishing capacity at the rate of 6,200 Ethereum (ETH) per hour.
“It works by decreasing the total amount of stETH that can be minted at any given time based on recent deposits, and then replenishes this capacity block by block,” Lido said.
Lido noted that the staking rate cap mechanism would affect “all parties that may attempt to mint stETH, regardless of approach.”
Eagle-eyed on-chain analyst Lookonchain shared a screenshot supposedly showing that the 150,100 ETH may have come from a single user, with three deposits of 50,000 each, and one of 100.
According To the Lido Finance website, as of February 27, more than $8.9 billion ETH has been staked with the protocol, a significant increase from the $5.8 billion reported on January 2.
Related: SEC Crypto Betting Crackdown Has Uncertain Consequences For DeFi: Lido Finance
The latest Lido development comes as Ether betting volumes have reportedly continued to rise as the Shanghai update nears. The Ethereum Shanghai Update or “Ethereum Shanghai Fork” is due in mid-March, raising speculation about what might happen to the ETH price.
One of the five planned upgrades, EIP-4895, is expected to unlock staked ETH and allow withdrawals, which could lead to increased liquidity in the crypto market.
$25 billion of ETH has been staked since the Beacon Chain launched and ETH staking was introduced in December 2020.
