The staking provider will offer its users to directly bridge their wrapped stETH to the popular L2 networks and reduce gas fees.

Lido, the leading liquid staking provider, has announced that it will support the wrapped version of its staked ether (stETH) token on Ethereum layer 2 networks Optimism and Arbitrum.

The staking provider, which currently represents almost 29% of all staked ETH, said on Twitter that users are now able to directly bridge their wrapped stETH tokens (wstETH) to the popular L2 networks while “preserving the unique properties of stETH in the process”.

Optimism and Arbitrum are among the most popular layer 2 scaling solutions. The two protocols use optimistic rollups to substantially reduce gas fees by processing transactions in bundles on separate chains and then sending them to the mainnet to be added to the ledger.

According to DefiLlama, the protocols have almost $2 billion of total value locked in their networks.

But they’re not the first L2 protocols Lido has integrated with. The staking provider’s wstETH is also supported on zkSync, the zkrollup-based network that is preparing to release the first zkEVM on mainnet this month. Aztec, a layer 2 privacy protocol, has also integrated with Lido.

What is staked ether (stETH)?

Lido’s stETH, which has a market cap of almost $5 billion, is a liquid token that represents an equivalent amount of ETH that has been staked. Unlike direct staking, users can stake any amount of ETH and receive rewards daily.

stETH has become an increasingly popular asset among DeFi enthusiasts because of the diverse investment opportunities it presents. 

For example, users can take stETH and deposit it on Aave for additional yield or even use it as collateral to mint the stablecoin DAI on MakerDAO. This means that instead of the baseline staking APY of 4%, users can amplify their staking returns by two, three, or even more times.

Stakers can also wrap their stETH tokens. wstETH offers the same benefits as stETH but the tokens differ in how they reflect accrued staking rewards. While stETH balance increases periodically, wstETH balance is constant and increases in value eventually (in the form of more stETH).

On the Flipside

Token bridges are risky. Multiple bridging services have been exploited for millions of dollars in the past. Lido represents 29% of all staked ETH. Though the protocol is decentralized, some are worried it’s becoming too crowded.

Why You Should Care

Lido is the largest liquid staking provider in the market. The expansion to Optimism and Arbitrum will allow stakers to significantly reduce gas fees associated with staking.

Read more about Lido’s dominance in the staking market: Is PoS Ethereum More Centralized? Two Platforms Add 42% of Ethereum (ETH) Blocks Post-Merge

Read about the SEC’s probe into Coinbase’s staking business: The SEC Opens Probe into Coinbase’s Crypto Yield and Staking Products

Adoption, Altcoin News, zz_index, zz_popular, zz_top, ZZZ Native, Ethereum (ETH), Lido DAO (LDO)Read More

You might also be interested in reading Libertex crypto exchange head Vyacheslav Taran dies in helicopter crash in France.