Lido V2 Upgrade: Anticipating Benefits, Risks, and Impact on Ethereum Staking Demand

Intricate blockchain scene, Ethereum staking, glowing nodes, anticipatory atmosphere, subdued but hopeful light, staking router central figure, users surrounding, mix of warm and cool tones, blend of realism and impressionism, air of collaboration and innovation, booming staking demand growth, hints of caution balanced with progress.

The much-awaited Lido V2 upgrade could soon be live, contingent upon the result of an on-chain vote set to go live on Friday. As a popular Ethereum liquid staking solution, Lido’s V2 upgrade is expected to offer benefits such as withdrawals for ether (ETH) and the introduction of a staking router to simplify the crypto on-ramp for users. The staking router makes it easier to run individual staking nodes on the network.

Currently, over 6.5 million ETH is staked with Lido; however, it is locked and can only be withdrawn from the network following the V2 upgrade. Withdrawal requests can be submitted immediately after the upgrade, with finalization anticipated the subsequent day, according to Eugene Mamin of the Lido development team. To streamline the validator exit process and fulfill withdrawal requests, Lido will use a withdrawal vault. An estimated 270,000 ETH is currently stored in the vault.

LDO holders have shown overwhelming support for the V2 upgrade plan in an initial snapshot vote, with almost 100% of the 52 million voters in favor. The V2 smart contract code has also undergone a series of security audits by nine independent auditors, addressing issues relating to withdrawals, claims, oracle reports, safety, consistency, and NFT withdrawal.

Following the Shapella upgrade, staking yields have remained high, as indicated in a report by Staked, a non-custodial staking provider, and Kraken subsidiary. There has also been a significant increase in ETH staking demand post-upgrade. Comparing the beginning of May to the week before the Shapella upgrade, ETH deposits grew fourfold. In March, $600,000 worth of ETH was staked, increasing to $750,000 in ETH only six days later.

Staking demand is predicted to continue to increase in the next year to a year and a half, from around 15% today to over 20%-35%, according to Staked. Meanwhile, web3 startups such as the Lisk Foundation seek more opportunities to maintain “a sustainable long-term yield” by moving their bitcoin into ether. Although there are plans to stake ETH in the future, this move will not happen immediately, tweeted Lisk’s co-founder Max Kordek.

Despite the pros of the V2 upgrade, it is essential to pay attention to the possible risks and limitations. Nevertheless, it presents an exciting shift in the crypto landscape as it aims to simplify on-ramps and enhance the staking experience.

Source: Blockworks

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