Detailed explanation of Lido V2 proposal: Support cancellation of pledge ETH, introduction of new modular architecture design
Original title: "Introducing Lido V2—Next Step In Decentralization"
Compilation of the original text: The Way of DeFi
Compilation of the original text: The Way of DeFi
On February 7th, Lido officially released the Lido V2 proposal, which is the largest upgrade of the protocol so far, which will allow stakers to unstake their ETH from Lido, while the new modular architecture brought by the Staking Router The design will also enable further decentralization of the Lido validator ecosystem.
Technical contributors to the Lido protocol have proposed Lido V2 — the largest upgrade to the Lido protocol to date and a step change on the path to further decentralization.
The two main points of this upgrade are:
Staking Router: Thanks to the new modular architecture design, anyone can develop on-ramps for new node operators, from independent stakers to DAOs and Distributed Validator Technology (DVT) clusters. Together, they will create a more diverse ecosystem of validators.
Withdrawals: This comprehensive Ethereum Lido protocol upgrade will allow stETH holders to withdraw ETH from Lido at a 1:1 ratio, achieving a key milestone for true entry and exit into the Ethereum staking ecosystem.
The purpose of Lido is to provide users with an alternative to centralized staking platforms, such as exchanges, while eliminating the technical and financial challenges of running a separate node. From the beginning to the end, the Lido protocol has insisted on providing its users with the highest standards of security and usability.
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next major upgrade
In the next few months, Ethereum will complete the Shanghai/Cappella hard fork upgrade. The upgrade enables withdrawals for all Ethereum stakers staked since the token chain launch.
The implementation of withdrawals achieves Lido's core goal of allowing users to stake and unstake freely. Given this freedom, this market will thrive on platforms that offer the best experience, security track record, and broader composability in the DeFi ecosystem.
The emergence of staking routers and module-based validator set infrastructure will facilitate the development of the entire Lido on Ethereum as well as external third-party contributors.
The Lido protocol was an early adopter of liquid staking, initially using only BLS-based 0x00 withdrawal certificates (WC). As soon as the smart contract based WC became available, the Lido protocol immediately switched to the more secure 0x01 WC. Currently, a small percentage of validators (about 12%) are still using the 0x00 WC governed by the 6-of-11 threshold scheme.
To mitigate the risks associated with distributed custodians, these credentials can be rotated to smart contract-based credentials through a ceremony. During this ceremony, participants will sign a rotation message, which will be broadcast to the consensus layer network.
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What is a Staking Router?
Staking Router is a major protocol upgrade that moves operator registries to a more modular and composable architecture.
The Staking Router will serve as the core of Lido's vision: as a platform where stakers, developers, and node operators can collaborate frictionlessly to drive the future of decentralized Ethereum together.
Ethereum should be a reliable neutral home for applications and their users. Ethereum Lido's mission is to provide a secure and accessible staking platform and contribute to the overall decentralization of Ethereum.
overview
overview
The Staking Router is a controller contract that allows Lido to evolve into a scalable protocol through a modular infrastructure. This will work by essentially treating the various modules as pools of validators that can serve as potential supply for the protocol. Each module will be responsible for managing an internal operator registry, storing validator keys, and distributing stake and rewards among operators participating in that module.
Each module can include various types of node operators, from community stakeholders to professional or emerging staking organizations, to DAOs, who can run validators independently or collaboratively through infrastructure such as DVT. Additionally, node operators will be able to participate through several modules. In addition to product features, it could allow keys to be stored at L2 or off-chain, reducing protocol costs and increasing the potential number of node operators.
A modular architecture will facilitate faster experimentation with various node operator configurations. This will reduce some technical hurdles while speeding up the iterative process of expanding the set of node operators.
The Staking Router is poised to benefit various stakeholders using Lido, including:
Stakers: They benefit from a more diverse and secure set of node operators, as their deposits will be distributed across more independent entities, reducing the risk of network downtime and increasing Ethereum's resilience.
Node Operators: Through the new module, other types of node operators, such as independent stakers, small groups, DAOs, and professional node operators, will be able to increase their access to the Lido protocol.
Developers: Users will be able to propose and implement modules using different combinations of node operators and with various competing features such as coverage options and fee structures, and apply to join the Staking Router's module set.
Staking Router architecturally shifts the Lido protocol towards an aggregator strategy, incorporates a more diverse set of validators, and opens up the possibility for different approaches, technologies, and greater overall flexibility throughout the protocol.
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The future direction of the pledge module
Currently, Lido uses a single NodeOperatorsRegistry contract, a registry of curated node operators controlled by the DAO.
The Staking Router proposal would allow for the introduction of additional modules to support a more diverse operator base by utilizing mechanisms such as DVT, bonding, and reputation scoring to bring permissionless access to the node operator set.
Community Module: Bonded permissionless node operators have an optional mechanism to effectively reduce deposit requirements based on reputation (e.g. based on successful performance).
Going forward, some of these modules may include:
- DVT module: DVT enabled validators (with optional bindings), such as Obol's Distributed Validator Set or SSV nodes.
- Off-chain or L2 modules: Reduce gas costs by pushing storage of validator keys to off-chain or L2 solutions.
To extend this, there can be many modules of the same type (or modules with overlapping types, e.g. DVT+Community) running on the same stake set. Each module will be able to express a specific purpose or theme through the types of operators they use to generate validators to add to the pool.
withdraw money
withdraw money
Withdrawals will enable users to unstake their stETH and receive staked ETH at a 1:1 ratio.
Since withdrawals are a fundamental feature of liquid staking, we strive to make an optimal design that balances user experience and speed of operation with the security of the protocol.
Due to the inherent complexity of the Ethereum network design, where the functions of the consensus layer and the execution layer are somewhat separated, the withdrawal mechanism proposed to be added to the Lido protocol design will have two modes: Turbo mode and Bunker mode.
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turbo mode
This is the default mode to use unless a catastrophic event or unforeseen situation affects the Ethereum network. In Turbo mode, withdrawal requests are quickly fulfilled using all available ETH from user deposits and rewards. The length of time to exit the network is indeterminate; however, in the best case, withdrawal requests can be processed within hours without validators exiting.
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bunker mode
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Claimant Overview
Due to the asynchronous nature of Ethereum withdrawals, withdrawals are suggested through a Request/Claim process.
Request: The user locks stETH as a withdrawal request. Execution: The protocol acquires ETH to fulfill the withdrawal request, locks these ETH, destroys the locked stETH, and marks the withdrawal request as claimable. Claim: Users can claim their ETH at any time.
Execution time is also uncertain. Expect a few hours at best, most requests should be under a week in most cases. However, in a worst-case scenario, it could be much longer.
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A secure method for protocol upgrades
The code for this proposed upgrade to Lido V2 has undergone its most rigorous scrutiny to date, with seven different independent audits in total.
Safety is paramount and countless hours are spent on internal and external testing.
In line with the recently announced audit policy, we have worked with multiple audit service providers to conduct a diverse and thorough security assessment of all upgrade-related codebases. Some of them are long-term partners, while others will be contributing to Lido security for the first time.
Find a full list of confirmed audit service providers below:
Sigma Prime will review the updated dc 4 bc version designed for the 0x00 -> 0x01 withdrawal credential rotation ceremony.
ChainSecurity will be among the first auditors to scrutinize the Staking Router code in January. ChainSecurity's work will be used to identify potential weaknesses in new critical protocol parts before they are incorporated into the final protocol upgrade code.
Oxorio will conduct an audit of the protocol enabling the Ethereum withdrawals codebase in February-March.
Statemind will conduct an audit of the protocol enabling the Ethereum withdrawals codebase in February-March.
HEXENS will be auditing the protocol enabling the Ethereum withdrawals codebase in February-March.
The MixBytes () Camp Security Audit Competition for Protocol Smart Contracts is scheduled for February-March.
Certora will be the final contributor to protocol upgrade security, providing full protocol auditing and formal verification in February-March.
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release details
The following is a rough schedule, not final, and subject to change.
Early February:
Code freezes and security audits begin.
End of February:
Signal snapshot voting on upgrades to pre-commit "upgrade parameters" and overall design support for the DAO.
Early March:
Goerli testnet launched. Complete testing of all code (on-chain and off-chain), Oracle & NO automation.
March/April:
Withdrawal credential rotation ceremony (0x00 -> 0x01). Protocol upgrade before hard fork. Mainnet contract deployment. Aragon on protocol upgrades. The planned Shanghai/Capella hard fork.
Lido V2 opens up the development ecosystem to external contributors from all corners of the Ethereum ecosystem.
The rollout of Staking Router's modular features will come over time, initially prioritizing community and DVT-based modules.
Soon, community developers, project teams, and researchers will be able to contribute directly to Lido by proposing a Staking Router module that will be vetted by the DAO.
in conclusion
in conclusion
As described here, the mission of the Lido Protocol is to make staking simple and secure, while maintaining the decentralization and censorship resistance of Ethereum.
In this context, the Staking Router is a key milestone towards the goal of growing the best validator set for Ethereum — one that doesn’t compromise on quality, security, or decentralization.
Over the past two years, the Lido protocol has grown in stature, becoming an integral part of the Ethereum ecosystem and the entire DeFi space. To date, over 100,000 unique staker addresses have deposited over 4,815,040 ETH into the Lido protocol, underscoring the massive success of the goal of democratizing access to staking.
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