Lido has been at the forefront of Ethereum staking, offering a secure and efficient platform for users to stake their ETH and earn rewards. With the Lido V2 mainnet upgrade, the protocol takes a major step forward, addressing key challenges and paving the way for a more robust and decentralized ecosystem.
We’ve distilled everything you need to know about the upgrade - and why it’s so significant in the ETH staking ecosystem.
Lido V2 brings two vital components to the Lido protocol: withdrawals and the staking router.
Benefits
Impact on Ethereum Staking
The Lido V2 upgrade positively impacts the Ethereum staking landscape:
Following the successful on-chain vote and the launch of Lido V2 on the Ethereum mainnet, the market responded with enthusiasm. Following the announcement, the Lido DAO token (LDO) experienced a 10% price rally , reflecting the market's recognition of the significance of the upgrade and its potential impact on Ethereum staking.
Lido’s V2 mainnet marks a significant milestone for the Lido protocol and Ethereum staking as a whole. With the introduction of in-protocol ETH withdrawals and the innovative staking router, it empowers users, promotes decentralization, and strengthens the overall Ethereum ecosystem. As institutional interest in staking continues to grow, Lido's advancements align perfectly with this trend.
For more insights on the exponential growth of institutional interest in staking and Ethereum, check out our recent blog: https://chorus.one/articles/beyond-shapella-a-look-at-the-growing-appeal-of-eth-staking
You can now stake ETH with a few simple clicks using OPUS, Chorus One’s bespoke staking solution. Choose the amount you’d like to stake, earn rewards, and retain full control over your nodes throughout the entire process. Read more about all the features OPUS offers here, and to get a free demo visit: https://chorus.one/institutional-staking
About Chorus One
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 40+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
Since We Last Spoke…
Last year, we introduced OPUS, a staking dashboard and API designed to expedite institutional staking activities. We are proud to announce that OPUS is now live and running! In this article, we delve into what OPUS is, why we built it, and how it benefits our customers.
Diving Deeper
Over the past five years, we have developed extensive expertise in staking through conducting in-depth research on numerous emerging and existing PoS networks, as well as working closely with institutions interested in introducing staking services into their product lines.
Through our experience, we noticed a significant gap in the ecosystem - the absence of a simple, ready-to-use interface that streamlines the staking process and enables institutions to enjoy the benefits of higher rewards, increased efficiency, reduced costs, and unparalleled flexibility. That's why we built OPUS, a hassle-free API that allows users to stake digital assets across multiple chains on a single platform and earn the highest possible rewards while retaining complete control over their funds. Institutions can choose to stake their own assets using OPUS or provide staking services to their customers, creating a new opportunity for revenue generation.
OPUS’ Features
Institutions' needs can vary widely, and setting up staking operations often requires specific technical capabilities. After months of research, we developed OPUS to offer a range of customizable features that cater to all.
Highest Rewards and Tracking
Staking is one of the easiest and least risky ways to earn rewards on your cryptoassets. However, tracking rewards across multiple networks can be a cumbersome process.
To combat this, OPUS features an intuitive, user-friendly interface that enables users to track real-time rewards data for multiple assets on a single dashboard. Additionally, OPUS offers the highest staking rewards, which include network emissions, transaction fees, and MEV (maximal extractable value).
With just a few clicks, users can earn rewards and download detailed reports on their staking rewards at any time, while retaining unparalleled transparency and control over their assets.
Exclusive Research and Network Expertise
As a leading staking provider, we recognize that every network has its specific staking needs. Therefore, we offer customized solutions to simplify the process for our clients. We closely collaborate with networks during their early stages, providing expert advice on tokenomics, staking, and best practices. This collaboration helps our clients achieve faster time-to-market, infinite scalability, and enables staking on multiple networks with minimal setup time.
We also provide institutional customers a dedicated account manager who provides updates and support to ensure a seamless staking experience. Additionally, we offer free access to ALPHA, our on-demand research and consulting service, to all our customers.
“Partnering with us means gaining access to a team of seasoned industry professionals who are dedicated to helping you navigate the ever-evolving landscape of staking.” - Felix Lutsch, Chief Commercial Officer, Chorus One
Guaranteed Exit Strategy
We understand that risk management is a top priority for our clients, and that they must have faith in us as a staking provider to prevent penalties that could result in severe consequences. We take this responsibility seriously and have implemented several industry-leading measures to safeguard our customers in the unlikely event of a slashing occurrence. In fact, we’re proud to say that Chorus One has never been subject to a slashing penalty in our history.
To protect customers from downtime/slashing risks, we have implemented various measures, including:
Proactive Key Management Solutions
We use Hashicorp Vault, a secure and dependable storage solution, to encrypt all keys both during transit and at rest. Access to the keys is carefully regulated through meticulously configured Vault Policies, guaranteeing that only authorized validator pods and organizations can access them. Moreover, our Signer strictly adheres to security protocols to ensure that private keys are only accessible during the load process.
Higher Flexibility
We prioritize decentralization and strive to create efficient products that benefit everyone in the long run. Our culture is built on collaboration, innovation, and excellence, which means that we work closely with clients and partners to deliver transformative staking solutions that drive success in the Web3 space. We value user feedback and will continuously improve OPUS to better meet the staking needs of our clients.
Governance
At Chorus One, we take governance seriously. As one of the most active validators on Cosmos and other networks, we prioritize network integrity through on-chain participation. To provide utmost transparency, we will showcase our governance proposals on the OPUS dashboard for all our customers to see.
Getting Started with OPUS
Getting started with staking ETH through OPUS is extremely easy and usually consists of the following steps:
Our customer support (staking@chorus.one) team will be available to guide you throughout the entire process, which should not exceed 2 days.
Here's an informative walkthrough of OPUS in action:
OPUS is a highly customizable solution, allowing users to tailor their staking strategies to their specific needs and preferences. Whether you're a seasoned investor looking to optimize your staking rewards, or a new entrant to the space looking to get started, OPUS has all the tools and resources you need to successfully participate in staking and earn the highest rewards.
“We’re thrilled to launch OPUS - the universal API that’s pioneering the staking experience across multiple chains. With OPUS, our customers enjoy seamless integration and simplified staking processes, saving valuable time to market. Moreover, our technology brings well-structured rewards data right to your fingertips, enabling every user to maximise their earning potential” - Meher Roy, Co-Founder and Chief Technology Officer, Chorus One
To learn more about OPUS or book a demo, contact staking@chorus.one
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 40+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
The second chapter of our Q1 2023 Quarterly Insights comprehensively examines the evolution of shared security in PoS networks. It delves into the various strategies employed by different networks to implement shared security, shedding light on the incentives and risks involved. This article distills the key takeaways from our research, offering a succinct summary of the various approaches to shared security.
What is shared security?
Shared security is a form of improving the safety of a blockchain by using resources from other blockchains. It works similarly to merge mining in PoW networks, where miners use one blockchain to mine another.
To make this concept work, there needs to be at least one blockchain providing security and another one using it. The system must allow for penalties if either blockchain misbehaves, usually by reducing their stake.
Use Cases
There are two key motivations behind the concept:
Different approaches to shared security
Rollups
Rollups, or ‘Layer 2s’ are shared security solutions that take execution off the main chain to scale computation and memory while keeping settlement on the Layer 1 chain.
Essentially, Rollups democratize execution by offering a fully compatible environment for easy application deployment and value transfer, but lower transaction cost. They guarantee security through smart contracts deployed on the Layer 1 to store transaction data, monitor state updates, and track user deposits.
There are two types of rollups: Optimistic and Zero-knowledge (ZK)
*A State Transitions is a change in the overall state of the network, which can occur when a user sends a transaction that updates the state of their account or interacts with a smart contract that changes the state of the network.
Eigenlayer
EigenLayer is a protocol built on Ethereum that allows users who hold ETH or ETH liquid staking tokens to restake their tokens and earn additional rewards. Restaking involves users giving their tokens to a service, which uses the tokens to secure its own network and other networks.
However, by doing so, users take on the risk of being slashed if they act maliciously according to the rules set out in the service's slashing contract.
EigenLayer uses the slashing contract to determine whether a user has acted maliciously and to slash their tokens accordingly. The protocol is currently on testnet and has recently raised $50 million in a Series A funding round led by Blockchain Capital, with participation from Coinbase Ventures and Polychain Capital.
ICS: replicated and mesh security
Replicated security, a system that first went live on the Cosmos Hub in March 2023 as the initial version of the Interchain Security protocol (“ICS”), allows other Cosmos chains to apply to get the entire security of the Cosmos Hub validator set.
In other words, by participating in ICS, a consumer chain can leverage the security of the Cosmos Hub validator set to ensure that its own blockchain is secure. This is done by having the validators of the Cosmos Hub also run the code of the consumer chain, and being subject to slashing for any downtime or fraudulent behavior.
However, there are some challenges with this approach, such as scaling issues and the potential for poor performance if the validator set of a consumer chain secured by multiple providers grows too large.
To address these challenges, a new approach called Mesh Security was proposed by Sunny Aggarwal, the CEO of Osmosis. Mesh Security allows for delegators on the provider chains to re-delegate their tokens to validators on the consumer chain's own validator set, without any additional overhead. This means that operators who already run nodes for both the provider and consumer chain can be delegated more voting power on the consumer chain, resulting in an approach that is similar to what EigenLayer is proposing for Ethereum.
Babylon
Babylon is a project that aims to improve the security of Cosmos zones and other PoS chains by using the security of Bitcoin. It is made up of three components:
Babylon operates by receiving streams of transaction data checkpoints from multiple PoS chains and then combines these checkpoints into a single stream which is posted to Bitcoin. To achieve this, it uses the IBC (Inter-Blockchain Communication) protocol to trigger a transaction sent to the miners. This transaction is added to the Bitcoin ledger, effectively timestamping the events occurring in other blockchains through a process known as ‘checkpointing’.
Currently, Babylon is on testnet, and 13 Cosmos zones are experimenting with it.
Overall, shared security aims to improve decentralization of applications and increase the cost of corruption of lower value networks. However, despite its advantages, shared security also carries inherent risks. It can compromise decentralization, opening doors to higher levels of contagiousness during stress scenarios. Additionally, it may introduce risks to smart contract implementations, as users may lose their tokens due to factors outside of the base protocol layer.
Read the full, in-depth analysis of shared security at https://chorus.one/reports-research/quarterly-network-insights-q1-2023 .
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 40+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
The Shapella Upgrade was completed in April, marking a significant event for both Ethereum and the entire crypto industry. This upgrade combined changes to both the Execution Layer (Shanghai upgrade) and Consensus Layer (Capella upgrade), allowing for the withdrawal of staked ETH and any accumulated staking rewards.
Shapella was a major stride towards greater flexibility and accessibility in staking on the Ethereum network. With the ability to withdraw staked ETH and rewards, the pivotal event galvanized institutional interest in the second-largest cryptocurrency by market value.
In this article, we’ll explore how the Shapella upgrade has sparked increasing interest in ETH staking among institutional investors, and why this trend is expected to continue.
A look back…
Let’s start by examining how we arrived at the current situation and why withdrawals were not enabled during the Ethereum transition from Proof-of-Work (PoW) to a Proof-of-Stake (PoS) consensus mechanism.
The Ethereum network transitioned from Proof-of-Work (PoW) to Proof-of-Stake (PoS) consensus mechanism in two stages, starting with the launch of the Beacon Chain, followed by the Merge. During this time, staking withdrawals were not enabled to ensure network security and reduce the risk of failure. Validators were able to exit, but customers could not unstake their staked ETH.
Despite knowing they would be unable to withdraw their ETH for some time, the initial network participants contributed millions of ETH to secure the Ethereum PoS network.
To ensure the upgrade went smoothly, it was implemented without any downtime. And the focus was solely on making this transition as seamlessly as possible. As a result, no other features or changes were added at that time. The goal was to minimize the chances of anything going wrong and to keep the Ethereum network running smoothly for all its users. ETH withdrawals were not enabled, until Shapella.
Why Institutions hesitated to stake ETH before Shapella
Prior to Shapella, staking ETH involved significant risks due to uncertainty surrounding withdrawals. This made institutions hesitant to stake their assets, as they needed quick access to them if necessary.
In fact, despite ranking second in market cap, only 15% of the total ETH supply was staked, a remarkably lower percentage than other tokens such as Solana, which has over 70% of its total supply staked.
Another reason for the lack of institutional participation in ETH staking was the general unclear regulatory stance regarding digital assets globally.
For instance, in late 2021, the SEC sent Kraken, one of the largest US exchanges, a Wells notice regarding its staking services. According to the SEC, Kraken's staking service constituted a security offering and required registration with the Commission. Kraken disagreed with the SEC's position and argued that staking fell outside its jurisdiction and was not a security offering. Despite its stance, Kraken suspended its staking services for US customers due to concerns over the regulatory environment and uncertainty surrounding the SEC's position on staking.
As a result, institutions feared that what happened to Kraken would apply to all staking providers, although Kraken's situation was a one-off and would not affect someone who staked their assets through a trusted non-custodial staking provider like Chorus One.
Here's why a situation like this is unlikely to happen to a non- custodial staking provider or validator like Chorus One:
The Silver Lining: Why ETH staking is more appealing to Institutions post-Upgrade
Since Shapella, the level of staking is on an upwards trajectory, despite shaky grounds.
The amount of ETH being staked has been steadily increasing, with large amounts of capital being locked up to earn 4 to 5% yields in ETH.
Source: Dune Analytics
Approximately 655k ETH ($1.2M) has been deposited since the upgrade, with the ‘largest weekly token inflow in ether staking’s nearly two-and-a-half-year history’ seen just two weeks following Shapella. The surge was largely driven by enterprise-grade staking providers and institutional investors seeking to reinvest their rewards following withdrawal.
At the time of writing, there are approximately 19M staked ETH, and deposits continue to surpass withdrawals.
The growing amount of staked ETH is a promising indicator for the adoption and security of Ethereum. Now that yields are available, institutional investors are likely to be even more interested in staking ETH. In fact, there has already been a strong influx of institutional interest in ETH futures following the upgrade, indicating positive staking momentum among larger investors who are looking to increase their revenue.
Additionally, the first week of May 2023 saw a surge in staked ETH deposits as investors raced to stake their tokens with validators. According to Nansen, over 200,000 ETH was deposited into the network, marking the first time since Shapella that deposits outpaced withdrawals. This recent surge has resulted in over 19 million ETH being locked for staking, which accounts for about 15% of the total circulating supply of ether.
Shapella benefits institutions by providing them with the opportunity to get liquidity on their staked ETH and earn a yield of 4% or more while participating in securing the network. It essentially derisks staking, which increases the intrinsic value of the asset and makes Ethereum even more attractive to institutions. This reduction in perceived risks associated with staking makes it more likely for risk-averse holders to consider staking, which could bring more institutional investors to Ethereum staking.
In conclusion, the Shapella upgrade sparked significant positive changes to the Ethereum network - particularly in terms of staking - and paved a secure way for institutions to get involved in supporting the growth of the network.
As a leading staking provider, Chorus One is dedicated to making the staking process easier, secure, and compliant for our customers. Our multi-chain staking solution, OPUS, is safe, secure, and compliant, making it easy for institutions to start staking with a few simple clicks. Learn more about OPUS here and contact us at staking@chorus.one to learn more about how we can help you get started.
Chorus One is one of the biggest institutional staking providers globally operating infrastructure for 40+ Proof-of-Stake networks including Ethereum, Cosmos, Solana, Avalanche, and Near amongst others. Since 2018, we have been at the forefront of the PoS industry and now offer easy enterprise-grade staking solutions, industry-leading research, and also invest in some of the most cutting-edge protocols through Chorus Ventures. We are a team of over 50 passionate individuals spread throughout the globe who believe in the transformative power of blockchain technology.
