Liquid staking protocol Lido Finance activates a protocol security feature called "staking rate limit" after surpassing 150,000 Ether, The protocol was staked within a day.
Lido is a liquid staking solution for digital assets that allows users to stake Ether without locking up tokens. When users deposit Ether, Lido issues them a liquid variant of Ether called Staked Ether (stETH), allowing users to earn staking rewards for each day they hold tokens in their wallets.
According to a tweet from Liquid Staking Protocol on Feb. 25, a “dynamic mechanism” was activated after reaching a daily staking limit of 150,000 Ether. In a related guide, Lido explained that the "safety valve" is designed to limit the amount of staked Ether that can be minted during periods of high inflow, and is designed to address any potential negative effects such as reward dilution.
“This means that only so much ether can be submitted to the Lido staking contract in a 24-hour period,” it explained. The mechanism works by replenishing capacity at a rate of 6,200 ETH per hour based on deposits in the past 24 hours limiting the amount that can be minted.
“It works by reducing the total amount of stETH that can be minted at any one time based on recent deposits, and then replenishing that capacity block by block,” Lido said. Lido noted that the collateralization rate limit mechanism will affect “all parties that might attempt to mint stETH, regardless of the method.” According to reports, Hawkeye on-chain analyst Lookonchain shared a screenshot showing that the 150,100 ETH may have come from a single user, with three deposits of 50,000 each and one deposit of 100. According to Lido Finance’s website, the protocol had more than $8.9 billion in ETH collateralized as of Feb. 27, up from the $5.8 billion it reported on Jan. 2.
Lido’s latest developments come as reported Ethereum staking volumes continue to rise as the Shanghai upgrade looms. The Ethereum Shanghai upgrade will take place in mid-March, sparking speculation about possible changes in the price of ether. One of five planned upgrades, EIP-4895, is expected to unlock staked ETH and allow withdrawals, which could increase liquidity in the crypto market.
Since the launch of the token chain in December 2020 and the introduction of ETH staking, there has been $25 billion in ETH staked.
