Lido Finance Implements Staking Rate Limit Feature

The sudden influx of staked ETH caused a potential security risk for the Lido Finance network, leading to the activation of the staking rate limit. The safety feature addressed potential harmful effects, such as rewards dilution, that could result from high inflows. Lido Finance is a solution for digital assets that allows users to stake Ether without locking their tokens.

The dynamic mechanism limits the amount of staked Ether minted during high inflows, replenishing capacity at 6,200 ETH per hour. Regardless of approach, the staking rate limit mechanism affects all parties who may try to stamp stETH. Lido Finance states that upon depositing Ether, they issue users a liquid variant of ETH, known as staked Ether (teeth). Users receive staking rewards for each day they hold the tokens in their wallets.

An on-chain analyst noticed that the 150,100 ETH may have originated from a single user, through four separate deposits. The protocol has seen significant growth, with over $8.9 billion in ETH staked as of Feb 27, compared to $5.8 billion at the beginning of the year.

H2: Ethereum Shanghai Upgrade Leads to Increased Staking Volumes

As the Shanghai upgrade approaches, there has been a reported increase in Ethereum staking activity, which coincides with the recent activation of a safety feature by Lido Finance. The Ethereum Shanghai upgrade, expected to unlock staked ETH and allow withdrawals, is due mid-March. One of the five planned upgrades, EIP-4895, could lead to increased liquidity in the crypto market.

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Since the launch of the Beacon Chain in Dec 2020, stalkers have staked $25 billion worth of ETH. As the demand for staking services continues to rise, it remains to be seen how Lido Finance and other staking protocols will handle high inflows.

The author’s views are for reference only and shall not constitute investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.

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