Can pledged ETH still participate in DeFi? Lido plans to provide such services in the Ethereum 2.0 era


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Lido is trying to provide the “best of both worlds” service: users who use Lido to pledge ETH on Ethereum will receive bETH tokens, and bETH is DeFi compatible.

Written by: Alexander Behrens
Translation: Lu Jiangfei

Lido, a new staking service provider, stated that they hope to provide DeFi users with a “best of both worlds” service: while staking on the Ethereum 2.0 network, they can continue to use existing opportunities to participate in the DeFi agreement to earn short-term returns.

Content overview

  1. The early ETH pledged on the Ethereum 2.0 network will be locked on the new chain for a period of time;
  2. Lido is a pledge service whose goal is to help users maintain liquidity while contributing to the Ethereum 2.0 equity proof blockchain;
  3. Lido ultimately hopes to eliminate the conflict between building Ethereum 2.0 and earning DeFi rewards.

Soon, Ethereum users will have to make a difficult choice:

  • Either pledge ETH tokens on the Ethereum 2.0 blockchain to protect the network until Ethereum 2.0 initiates the transaction, which may take months (or even several years). Moreover, the pledged ETH (which can only be pledged in multiples of 32 ETH) cannot be moved/traded, which means that market liquidity will be affected;
  • Either put ETH tokens into DeFi to earn income.

But now, Ethereum users may have a “best of both worlds” option: Lido.

Can pledged ETH still participate in DeFi? Lido plans to provide such services in the Ethereum 2.0 era

Lido is an Ethereum 2.0 staking solution that attempts to solve the above problems. It has been supported by many leading staking service providers in the industry. This solution not only makes staking ETH more liquid, but also allows users to participate in any amount The pledge of ETH tokens is not subject to the “32 ETH multiple” restriction.

Chain Wen Note: Ethereum 2.0 validators need to deposit at least 32 ETH into the official deposit contract to download and run the Ethereum 2.0 client software.

Through the “phased rollout” model, Ethereum is gradually transitioning from the current proof-of-work network to the ETH 2.0 network based on the proof-of-stake consensus. Starting from stage 0, the Ethereum blockchain will lock the ETH tokens pledged by users until the next stage is released. For DeFi users, this “lock-in” method may be an unacceptable choice, because they need ETH to pledge in the DeFi protocol based on the Ethereum 1.0 blockchain, which usually provides a higher return on investment.

When using Lido to pledge ETH on the Ethereum beacon chain, the user will receive bETH tokens, which in a 1:1 manner represents the ETH tokens pledged by the user on the Ethereum beacon chain, effectively acting as It is a bridge between Ethereum 2.0 pledge reward and Ethereum 1.0.

As the pledged ETH tokens generate equity rewards in Ethereum 2.0, the user’s ETH balance on the beacon chain will also increase, so the bETH token balance will be updated accordingly every day to ensure that users can pay without delay On Ethereum 1.0, the same pledge reward value as on Ethereum 2.0 can be obtained.

For users, the way to use bETH is exactly the same as all the ways to use ETH, such as sales, consumption, etc., but more importantly-bETH is compatible with DeFi, because the token can be used as a pledge of tokens on the chain Therefore, users can continue to use the DeFi protocol even if their ETH has been pledged on Ethereum 2.0. This means that users using Lido’s bETH tokens can still promote loan generation and other financial activities by locking in value, thereby generating returns.

Not only that, for those users who don’t have enough ETH tokens, Lido can also help them “combine orders” with other users to meet the Ethereum 2.0 minimum pledge requirement of 32 ETH-this feature is actually very practical, because Many small investors now finally have the opportunity to contribute to the protection of the Ethereum network.

If Ethereum 2.0 is successfully put into production and the ETH transaction on the blockchain is activated, users can also seamlessly exchange bETH back to ETH. From this perspective, bETH will not only be an important basic element in the DeFi industry in the future, but also likely to become the basic building block of the Ethereum “Currency Lego” stack.

Can pledged ETH still participate in DeFi? Lido plans to provide such services in the Ethereum 2.0 era

At this stage, Lido is under development. The project leader is the P2P Validator team, including P2P Validator CEO Jordan Fish and CTO Vasiliy Shapovalov. It is expected that more details on the project schedule and testnet products will be released in a few weeks.

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