Liquid staking protocol Lido Finance recorded its highest daily inflows ever on Saturday, triggering “a curious (but important)” safety measure.
In an announcement on Feb. 25, Lido said that the 150,000 ETH worth of daily inflows had resulted in the activation of the Staking Rate Limit.
This protocol safety feature, called the Staking Rate Limit, is a dynamic mechanism to respond to large inflows of stake and address possible side-effects such as rewards dilution, without needing to pause stake deposits explicitly.
— Lido (@LidoFinance) February 25, 2023
The feature works by decreasing the amount of staked ETH (stETH) that can be minted over a 24-hour period, replenishing the capacity on a block-by-block basis. The rate of recovery will be around 6,200 ETH per minute, meaning the most users will not be affected, explained Lido.
Lido’s surge in ETH deposits was likely influenced by a gargantuan deposit made by Tron founder Justin Sun earlier in the day. Sun desposited 200,100 ETH worth $320 million over the course of 30 hours.
He currently staked 200,100 $ETH ($320M).
— Lookonchain (@lookonchain) February 26, 2023
The current rate of 4.8% interest for stETH means that Sun will receive around 26 stETH on a daily basis.
At the time of writing, Lido had $9.12 billion in Total Value Locked (TVL), representing a 9.2% increase over the last month. In fact, last month, Lido surpassed DeFi giant Maker to become the largest protocol by TVL.
Ahead of Ethereum’s widely anticipated Shanghai upgrade, that will finally make validator withdrawals a reality, Lido has planned its own protocol upgrade that will let its users withdraw stETH at a 1:1 ratio.
Lido then sources the ETH needed to fulfil the withdrawal request, locking the ETH that it sources and burning the corresponding stETH.
Once the withdrawal request has been fulfilled, you can claim your ETH at any time by burning your NFT.
— Lido (@LidoFinance) February 22, 2023
These withdrawals would be processed in two to seven days, under Lido’s default “Turbo Mode” for requests, with the best case scenario being one that is processed within a few hours. The protocol also has a “Bunker Mode” option to facilitate withdrawals in a more orderly fashion – something that will be particularly useful for those concerned with mass validator slashing events.