One of the most popular DeFi liquidity staking protocols, Lido Finance, announced the activation of the Staking Rate Limit.
The Staking Rate Limit was implemented as a precaution after an increase in ETH deposits.As of February 25, Lido Finance reported that there were more than 150,000 ETH staked.
While this is good news for Ethereum, the smart contracting network, it also raises the possibility that Lido will ask users to refrain from making additional stake deposits.
The rise of ETH on Lido Finance and the liquidity staking protocol in general may be due to further factors. In contrast to validators, who operate Ethereum nodes, consumers can deposit any amount above 0.01 ETH and receive rewards for their stake.
Validators must also ensure that their node meets system standards, such as maintaining close to 100% uptime reliability, in addition to locking 32 ETH.
Moreover, nodes must not engage in harmful transaction confirmation behavior. They risk losing their shareholding if they do so. Lido Finance is a platform for common liquidity staking that gives retail users who might be interested in staking ETH but can’t afford to buy 32 ETH an option.
The amount of stETH, a derivative of ETH that users stake in the platform, will, however, be reduced by the protocol when the Staking Rate Limit is activated. This will replenish on a block-by-block basis and be dynamic.
The community has been told by Lido Finance that most users won’t be impacted by this limit. Entities that attempt to mint stETH in large quantities or when capacity is low will be affected.
In this regard, the protocol urges users to either attempt minting lesser quantities or wait for the network capacity to restock if they have difficulties.
ETH deposits increase ahead of the Shanghai Upgrade
On February 26, Lido Finance had $8.96 billion in total value locked, of which 8.88 billion was in ETH. It surpassed MakerDAO and Curve to become the biggest DeFi protocol by TVL as a result. In the meantime, the official Beacon Chain deposit contract has $27,5 billion in ETH locked up.
Shanghai will be live on Ethereum by the end of Q1 2023. After this hard split, ETH holders will be able to withdraw their funds from the Beacon Chain, which went live on December 1, 2020.