Jack Kubinec

LayerZero recently introduced a bridge token allowing users to move Lido’s $5.5 billion wrapped staked ether (wstETH) token between Ethereum, Avalanche, BNB, and Scroll.&nbsp;



There was one small problem, however: LayerZero apparently didn’t wait for Lido DAO’s permission before deployment.



LayerZero’s announcement of its omnichain fungible token (OFT) before a DAO vote led some Lido DAO members to feel that the DAO is being strong-armed into approval. While Lido DAO’s power has been <a href="https://blockworks.co/news/lido-centralization-debate-ethereum">a subject of concern lately</a>, one member says the DAO has limited leverage to prevent situations like this one.



LayerZero <a href="https://twitter.com/LayerZero_Labs/status/1717224879869907065">announced</a> its wstETH standard on Wednesday, and Binance’s BNB chain followed with an <a href="https://x.com/BNBCHAIN/status/1717360402009321581?s=20">announcement</a> of its own.&nbsp;



Hart Lambur, a Lido seed investor, said the combined marketing push gave a wrongful sense of Lido’s approval.



“It looks like it&#8217;s the official Lido bridge to go to those chains,” Lambur said, “But it&#8217;s not been approved or okayed by Lido at all. It hasn&#8217;t been audited. The security risks haven’t been debated.”&nbsp;



Lambur added that Lido <a href="https://blockworks.co/tag/lido-dao">DAO</a> has no real recourse other than a potential lawsuit to stop <a href="https://blockworks.co/tag/layerzero">LayerZero</a> from deploying its OFT as Lido-approved. 



“The OFT Standard has been reviewed extensively by independent security and risk managers. All audits are publicly accessible in the technical documentation,” LayerZero Labs said in a statement shared with Blockworks.



At around the same time that the announcement posts went up, LayerZero made a <a href="https://research.lido.fi/t/wsteth-on-avalanche-bnb-and-scroll-and-ownership-acceptance-by-lido-dao/5749/14">proposal</a> on Lido DAO’s forum saying it had created the wstETH bridge and would like the product to be formally endorsed by Lido DAO. DAO members expressed immediate skepticism.



“By unilaterally deploying a bridge and marketing it in an official-seeming way, it feels like you are trying to pressure the DAO into accepting your proposal,” Hasu, the strategy lead at Flashbots, said.&nbsp;



In a statement <a href="https://research.lido.fi/t/wsteth-on-avalanche-and-bnb-and-ownership-acceptance-by-lido-dao/5749/22">posted</a> to Lido’s forum Thursday afternoon, LayerZero said it had asked Stargate, the protocol the wstETH bridge was built on, to remove bridging into Scroll. The statement added that LayerZero has been “engaging with the Lido Core team, community members and independent security teams for several months now on this specific permissionless deployment.”



Multiple forum posters advocated waiting a week before sending the proposal to a Snapshot vote, while others expressed concerns with the security of the OFT.



Lambur said that while a worst-case scenario may be unlikely, the real danger lies in LayerZero and BNB Chain advertising an OFT standard not audited by Lido DAO, since the two companies’ marketing could draw significant investment.



“Let&#8217;s just say…we have a billion dollars in this standard, and then there&#8217;s an exploit and then there&#8217;s unlimited minting of this thing that people sell, [causing] pandemonium and panic. Everybody&#8217;s selling stETH and trying to withdraw their ETH from Lido,” Lambur said. “That disaster scenario, I’m not saying that’s likely, but it’s not impossible.”



<a href="https://blockworks.co/price/wsteth">wstETH</a> is the 13th-largest crypto token by market capitalization, <a href="https://blockworks.co/price/wsteth">according</a> to Blockworks Research.&nbsp;



Around $34.5 million in wstETH changed hands in the 24 hours following LayerZero’s announcement, a negligible change from the day prior.



Updated Oct. 27, 2023 at 4:51 pm ET: Added statement from LayerZero to clarify comment about audits for the OFT Standard.



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LayerZero’s wstETH bridge deployment draws Lido DAO ire

Ben Strack

An ETP giving investors exposure to the largest liquid staking provider is the first of its kind, and comes after the market capitalization of liquid staking governance tokens has surged following Ethereum’s Shapella upgrade.&nbsp;



The 21Shares Lido DAO ETP — with underlying asset LDO — is listed on the BX Swiss exchange and is set to become available on Euronext Paris on Wednesday, the company revealed Monday.



The $1.6 billion market cap of Lido DAO (LDO) accounts for about half the market cap of <a href="https://www.coingecko.com/en/categories/liquid-staking-governance-tokens">all</a> liquid staking governance tokens. Rocket pool (RPL) sits behind LDO with a market cap of $800 million. 



LDO’s price is down nearly 22% in the past seven days.&nbsp;



Lido users who stake their assets receive an equal amount of staked tokens, called stTokens, that accrue rewards.&nbsp;



These tokens can be traded on the secondary market and used within DeFi applications — a process known as liquid staking. This allows users to tap into staking benefits without lock-up periods or high minimum amounts.



Lido is responsible for $12.6 billion in total value locked, according to Defi Llama <a href="https://defillama.com/protocol/lido">data</a> — roughly two-thirds of the <a href="https://defillama.com/categories">combined</a> $18.4 billion total value locked across liquid staking.



The market cap of Lido staked ether (stETH) has grown roughly 95% year over year from $6.47 billion in June 2022, according to Arthur Krause, 21Shares’ director of ETP product.



“Despite the well-known crypto winter, very often the most innovative opportunities appear during challenging times, and the emergence of liquid staking is a good example,” Krause told Blockworks in an email.



Liquid staking governance token performance helped DeFi’s market capitalization jump by nearly $30 billion, or 65%, in the first quarter, according to a CoinGecko <a href="https://www.coingecko.com/research/publications/2023-q1-crypto-report">report</a> published last month.



Liquid staking governance tokens saw a 210.9% increase in market cap during the first three months of 2023 — a quarter in which <a href="https://blockworks.co/news/shapella-upgrade-brings-ethereum-closer-to-long-awaited-withdrawals">Ethereum’s Shapella upgrade</a> took place. The liquid staking category surpassed lending protocols to become the third-largest in DeFi.



There is currently about 24.7 million ETH <a href="https://etherscan.io/address/0x00000000219ab540356cbb839cbe05303d7705fa#analytics">deposited</a> in the beacon smart contract — a roughly 25% jump since May 1.



Lido has the largest percentage of ETH staked with roughly 32% share, according to a June 9 research note by Compass Point Research &amp; Trading analysts Chase White and Joe Flynn. Centralized exchanges, led by Coinbase, cumulatively contribute about 24% of the number of ETH staked.



The successful Shanghai hard fork and the de-risking of staking could drive “significant growth and adoption” of staking-as-a-service solutions and the overall liquid staking market, the analysts added.



“We expect that the staking [total addressable market] is set to expand considerably in the months post withdrawals, and expect that over time the percentage of ETH supply that is staked will move from ~19% to +30-40%, more inline with other [proof-of-stake] chains,” White and Flynn wrote.



Though the Lido DAO ETP is the first of its kind, 21Shares has launched products offering exposure to other DAO tokens, such as the 21Shares Aave ETP (AAVE) and the 21Shares Uniswap ETP (AUNI). 



The company has also brought to market a Staking Basket Index ETP (<a href="https://21shares.com/product/STAKE">STAKE</a>) and its Stacks Staking ETP (<a href="https://21shares.com/product/ASTX">ASTX</a>) in January and April, respectively.



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21Shares debuts Lido-focused ETP amid liquid staking surge

Sebastian Sinclair

Ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>) is witnessing its highest levels of staking activity following a critical update earlier this year.



The network’s <a href="https://blockworks.co/tag/ethereum-merge" target="_blank" rel="noreferrer noopener">transition to Proof-of-Stake</a> (PoS) late last year, coupled with Ethereum&#8217;s &#8220;Shapella&#8221; network upgrade in April, which enabled withdrawals of staked ETH as well as rewards, has led demand for new validators to reach its highest level in two and a half years.



Previously, users could stake their ETH to the Beacon Chain as early as December 2020, but it wasn’t until Shapella was fully implemented that it became possible to withdraw.



As a result, over 1 million ETH was withdrawn shortly after the upgrade, sparking temporary concerns as to whether demand would simply rush to the exit indefinitely and cause the price of ETH to dip.



Yet, this rush has been balanced by an influx of eager validators waiting for activation, indicating a sustained demand for Ethereum staking, an analysis by <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-208#new_tab" target="_blank" rel="noreferrer noopener">Coin Metrics</a> shows.



“The entry queue has reached its highest level since the Beacon Chain’s genesis in December 2020, with a total of 64,000 validators eagerly waiting to participate,” Coin Metrics said.



In contrast, there are effectively <a href="https://beaconcha.in/validators#exiting" target="_blank" rel="noreferrer noopener">zero validators</a> wishing to withdraw, that are stuck in the queue. That’s a <a href="https://blockworks.co/news/ethereum-validators-withdraw-620m-eth">stark contrast</a> to withdrawal queues just last month, which stood at roughly 17,500.



The surge of new validators has helped drive the active validator count to a new high of nearly 584,000, <a href="https://beaconcha.in/" target="_blank" rel="noreferrer noopener">data shows</a>. This number has more than made up for the transient decrease in complete withdrawals that occurred when withdrawals were initially introduced.



As the number of active validators approaches the 589,000 mark, an internal protocol parameter, known as the Churn Limit, will rise, allowing for the daily activation of an extra 225 validators.&nbsp;



However, even with this increased pace, individuals or staking pools spinning up new validators to join the queue today would still need just over a month to become active, Coin Metrics noted.



<h2 class="wp-block-heading">Liquid staking tokens predicted to fuel staking value</h2>



A budding narrative in the decentralized finance (DeFi) world underscores the escalating demand for Liquid Staking Tokens (LSTs).&nbsp;



These tokens, representative of staked assets, bring a new level of liquidity to the traditionally <a href="https://figment.io/assessing-staking-risks-illiquidity-and-price-volatility/" target="_blank" rel="noreferrer noopener">illiquid PoS model</a> by allowing staked assets to participate in DeFi applications while still contributing to the network&#8217;s security. 



They provide a bridge between staking and DeFi by offering liquid tokens that represent staked ETH, allowing holders to freely interact with DeFi protocols while still earning staking rewards.&nbsp;



The growing prominence of LSTs within DeFi is intricately linked to Ethereum&#8217;s staking ecosystem. Behind every LST, there is a staking operation, providing the required security and validation for the Ethereum network.&nbsp;



Some of the established decentralized players are jockeying for market share, such as Lido DAO (<a href="https://blockworks.co/price/ldo" target="_blank" rel="noreferrer noopener">LDO</a>), Frax (<a href="https://blockworks.co/price/FXS" target="_blank" rel="noreferrer noopener">FXS</a>) and Rocket Pool (<a href="https://blockworks.co/price/RPL" target="_blank" rel="noreferrer noopener">RPL</a>), alongside centralized staking providers such as Coinbase, and a slew of others, with new offerings cropping up regularly post-Shapella.



In essence, <a href="https://blockworks.co/news/liquid-staking-derivatives-tvl">the explosion of LSTs within DeFi</a> implies a parallel increase in Ethereum staking activity. As the role of LSTs becomes more integral to DeFi&#8217;s future, it may inadvertently fuel the demand for ETH, Blockworks was <a href="https://blockworks.co/news/liquid-staking-derivatives-shanghai-upgrade">previously told</a>.



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Ethereum Staking Demand Skyrockets Following Network Upgrade

Bessie Liu

Update: The vote flipped overnight, and Lido DAO governance is currently choosing to return the funds.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Lido DAO governance is voting on whether to return funds that ended up in its execution layer rewards vault following a SushiSwap attack that resulted in a $3.3 million breach last month.&nbsp;



The majority of the lost funds were traced back to Michael Patryn (or Omar Dhanani), otherwise known by his pseudonym, Sifu, an alleged serial scammer who had co-founded QuadrigaCX — which is now <a href="https://www.millerthomson.com/en/quadrigacx/">bankrupt</a>.&nbsp;



More than 885 ether <a href="https://blockworks.co/news/sushiswap-pays-200k-bounty">has already been returned</a>, but a portion (roughly 39.8 <a href="https://blockworks.co/price/eth">ETH</a>) that was redirected to the Lido DAO treasury had yet to be recovered as of publication. 



A <a href="https://research.lido.fi/t/sushi-routeprocessor2-post-exploit-request-for-comment/4383">proposal</a> to return these funds had been flagged with the Lido team, and a related snapshot <a href="https://snapshot.org/#/lido-snapshot.eth/proposal/0x211ebdacbfae9d3492ff9e096b6f7be8a58bd48cd9eb8fc57454575b68bd6fc1">vote</a> was posted late last week.&nbsp;



So far, an overwhelming majority of Lido community members (99.92% as of publication) have voted to take “no action,” choosing not to return the 39.8 ETH back to Sifu.



Misha Putiatin, the CEO of Statemind, said on a discussion thread that despite the proposal making sense on a surface level, there could be severe ramifications to the protocol if it were to be approved.&nbsp;



“Without a clear framework, Lido DAO can be heavily throttled by [an] inflow of hack reimbursement proposals,” Putiatin wrote. “In case of reimbursement, DAO needs to be an arbitrary judge of what is legal/illegal activity for other protocols which is way beyond its usual capacity and might bring unpredictable legal risks.”



Updated May 10, 2023 at 9:47 am: Removed comment from Hasu. They were specifically commenting on validators and their relationship with third parties, not the DAO. Also added update at the top of the article.



Updated May 10, 2023 at 1:03 pm: A portion of the funds was redirected to the Lido DAO treasury, not the Lido execution rewards vault.



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Lido DAO Governance Unlikely to Return 39 ETH in Sushi Recovery

Michael Bodley

Venture capitalists are paying attention to cryptocurrency to fiat payroll processing solutions again — in at least one recent instance.&nbsp;



The latest indicator: Rise Works, which bills itself as a “web3-enabled payroll &amp; compliance solution,” has closed its seed round, the startup told Blockworks exclusively. The US-based startup works with DAOs, including the crypto staking specialist Lido (<a href="https://blockworks.co/price/ldo" target="_blank" rel="noreferrer noopener">LDO</a>), as well as a number of other types of decentralized organizations looking to compensate their personnel via digital assets.&nbsp;



The 2023 demise of a number of traditional Silicon Valley banking solutions, including Silicon Valley Bank (SVB), left crypto industry participants and their backers still holding dry powder with what they viewed as an opportunity to capitalize. Results have been mixed.



Read more: <a href="https://blockworks.co/news/silicon-valley-bank-meltdown-has-little-to-do-with-crypto">Silicon Valley Bank Meltdown Has Little to Do With Crypto&nbsp;</a>



In late March, on the heels of SVB’s collapse, <a href="https://blockworks.co/news/svb-contagion-rippling">contagion from the venture capital favorite bank spread to Rippling</a>, one of the top solutions for crypto companies when it comes to payroll and other back and middle-office operational and financial needs.&nbsp;



Around that same time, Rippling <a href="https://www.rippling.com/blog/rippling-raises-500m-in-series-e-funding" target="_blank" rel="noreferrer noopener">raised</a> a massive $500 million Series E round, according to the company, which described the round as “an unusual financing” in a March 17 <a href="https://twitter.com/Rippling/status/1636820635505786880" target="_blank" rel="noreferrer noopener">tweet</a>.&nbsp;



Enter Rise Works.&nbsp;



Its recently closed round was co-led by Sino Global Capital and Polymorphic Capital, CEO Hugo Finkelstein told Blockworks in an exclusive interview.



Other participating investors included Draper Associates, Hashkey Capital, Paradigm Shift Capital, WW Ventures, P2P and Cosmo Capital.&nbsp;



<h2 class="wp-block-heading">How Rise Works… works</h2>



The company is looking to capitalize on voids left for solutions in the wake of the series of prominent collapses of both traditional finance and crypto-native firms in that particular line of business, Finkelstein told Blockworks.&nbsp;



The startup’s differentiators, Finkelstein said, include its focus on DAOs. Decentralized organizations like DAOs have unique compensation structures for contributors or in-house employees, and are often headquartered or based in various jurisdictions — whether in the US or abroad.



“The fact that we’ve built ourselves on the blockchain,” is Finkelstein said is what makes Rise unique. “We can onboard DAOs very efficiently, very fast. That&#8217;s how we’ve won deals compared [to] our competitors over time, because we have the infrastructure ourselves.”



One of the prominent voices in the Lido ecosystem — who goes by the pseudonym “adcv” and holds the title of “<a href="https://steakhouse.financial/bios" target="_blank" rel="noreferrer noopener">chef</a>” at Steakhouse Financial — told Blockworks that Rise Works is “handling all of the compression of crypto to fiat payments for people who need it,” adding that “some of these [traditional] technologies are unfortunately still a few steps behind.”&nbsp;



Lido is a Steakhouse Financial client. Adcv described the Steakhouse as a “a consulting firm that acts as a CFO-for-hire for DAOs.”



Finkelstein said Rise is intended to straddle the “Web 2.5” line in a manner that appeals to both crypto native types and traditional companies. The startup’s solutions for payroll work with both fiat- and crypto-based treasuries and corresponding internal accounting systems.&nbsp;



The startup’s on-chain solution is built on the Arbitrum (<a href="https://blockworks.co/price/arb" target="_blank" rel="noreferrer noopener">ARB</a>) blockchain and fits <a href="https://erc725alliance.org/" target="_blank" rel="noreferrer noopener">ERC-725</a> token standards for <a href="https://blockworks.co/news/what-is-decentralized-identity">decentralized identity</a>, Finkelstein said.&nbsp;



Crypto firms looking for compliant payroll processing solutions often run into a series of thorny problems when it comes to setting up the right backend solutions for the right jurisdiction under the right regulator. The <a href="https://blockworks.co/tag/sec" target="_blank" rel="noreferrer noopener">SEC</a> and <a href="https://blockworks.co/tag/cftc" target="_blank" rel="noreferrer noopener">CFTC’s</a> series of crypto enforcement actions against crypto companies with US business has placed the industry on edge so far in 2023.&nbsp;



US regulators <a href="https://blockworks.co/news/sec-boost-crypto-enforcement">have also been staffing up</a> in terms of personnel with crypto experience. Crypto market players as a result have been especially on edge when it comes to setting up compliant solutions, solutions that match know your customer (KYC) and anti-money laundering provisions, especially.&nbsp;



And not just in the US; countries including India <a href="https://blockworks.co/news/india-crypto-kyc-aml">have amped up their own compliance standards</a> for crypto players that fall under their jurisdiction.&nbsp;



Tim Draper, the managing partner of his Draper Associates, told Blockworks in a statement that “work is becoming borderless, and more people are looking to be paid in cryptocurrencies.”



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Built ‘On The Blockchain’ DAO Payroll Processor Rise Works Gets Sino’s Dollars

<div id="highlights-block_62b490a343898" class="highlights">
 <ul>
 <li>Lido staked ether has caused a liquidity crisis in the crypto market</li>
 <li>User funds will remain safe unless stETH sells at 15% discount, Instadapp founder Samyak Jain said</li>
 </ul>
 
</div>



Instadapp, a smart wallet built on top of popular DeFi projects such as Uniswap and Maker, is designed to help manage assets for users with little financial or technical background. But in addition to smart contract risk, the ongoing instability in the price of Lido staked ether (stETH) has the potential to wreak havoc.



The company launched Instadapp Lite in March, a platform that allows its users to earn interest by depositing funds into strategy vaults, including swapping ether for stETH. The strategy currently earns a projected 7.79% annualized yield, by applying leverage.



While stETH was expected to trade at the same price as ether, it is not pegged to it and in fact has recently traded at a discount. Ordinarily that’s not a problem, and funds in Instadapp’s vault will remain safe unless stETH diverges in value relative to ETH by -15%, Samyak Jain, founder of Instadapp, said during a Wednesday <a href="https://twitter.com/MakerDAO/status/1538914358469742593" target="_blank" rel="noreferrer noopener">Twitter spaces</a> interview with MakerDAO.



So far, stETH has remained no more than about -7% relative to ETH, but the gap is wide enough to <a href="https://cms.blockworks.co/will-lido-staked-ether-trigger-the-next-big-crypto-crash/" target="_blank" rel="noreferrer noopener">cause fears</a> of a liquidity crisis in the crypto market. As of Thursday at 11:00 am ET, each stETH trades at about 0.95 ETH.



After TerraUSD (UST) <a href="https://cms.blockworks.co/?s=Terra" target="_blank" rel="noreferrer noopener">collapsed</a> in May, setting off a broad market decline, demand for stETH dropped substantially as investors seeking liquid assets rushed to sell. That placed significant pressure on liquidity pools where stETH is traded, chiefly the Curve decentralized exchange.



The crux of the problem is that once stETH is minted, it cannot be redeemed until after both <a href="https://cms.blockworks.co/?s=the+Merge" target="_blank" rel="noreferrer noopener">the Merge</a> — when the Ethereum blockchain migrates from proof-of-work to proof-of-stake — and a further upgrade that will enable withdrawals expected in the second quarter of 2023. While stETH itself is fully liquid, the ETH backing it is not, and the market therefore applies a discount.



The Lido DAO which administers stETH has tried to mitigate risks by increasing short-term rewards in its LDO governance token tokens.



“The most [Lido] can do is create awareness and provide rewards so that users are willing to buy more stETH in the current market situation,” Jain said. Until then, the stETH price divergence remains a risk.



Despite his concerns, Jain remains optimistic that the price of stETH will recover once the market stabilizes, stating in a <a href="https://blog.instadapp.io/usdc-strategy" target="_blank" rel="noreferrer noopener">blog post</a> that “almost all my ETH holdings are in the form of Lido Staked ETH.”



A second vault in Instadapp Lite generates additional yield by betting on the future price of stETH but allows users to deposit and withdraw in USD Coin (USDC), a stablecoin pegged to the US dollar.



This approach uses the first stETH strategy, by borrowing ETH using USDC as collateral in the Aave money market protocol and buying stETH. The stETH is then supplied to Aave and used to borrow an equal amount of ETH, which is sold back to USDC, and also supplied to Aave. This limits directional price risk on ETH, and uses ETH staking rewards converted back to USDC to generate interest.



“You are able to capitalize on the current market inefficiency by first building a capital allotment, in this case using USDC. [You can utilize] that capital to borrow in ETH and buy stETH at a discounted rate which you can immediately cash out,” he said.



If stETH returns to par with ETH, you can close the position and pocket the extra profits, Jain said.



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Continued StETH Weakness Could Spell Trouble for Instadapp Lite Users

<div id="highlights-block_62ac9bb3f01d7" class="highlights">
 
</div>


<div id="highlights-block_62ac9c778463f" class="highlights">
 <ul>
 <li>The majority of stakers on Lido are on Ethereum, but LDO holders possess governance power over other chains</li>
 <li>Lido hosted a conversation about the proposal on Twitter Spaces</li>
 </ul>
 
</div>



The DAO overseeing Lido, the largest provider of staking services for Ethereum, has proposed a switch up of its governing system to “reduce the existing scope of governance” for its token holders.



Lido DAO, a decentralized autonomous organization, is governed by the holders of the DAO’s governance token, LDO — holders participate in transparent on-chain voting to decide on platform parameters and proposals.&nbsp;



Although the Lido DAO is currently deployed on Ethereum, LDO holders possess governance power over liquid staking protocols on other chains, including Polygon and Solana.



Under the DAO&#8217;s current multichain governance system, LDO holders have incentives related to other chains, which are “not necessarily aligned with those of Ethereum network participants,” Sam Kozin, lead smart contract developer at Lido, wrote in a <a href="https://research.lido.fi/t/ldo-steth-dual-governance/2382" target="_blank" rel="noreferrer noopener">blog post</a>.&nbsp;



To solve this problem, the Lido team has proposed a dual governance solution that sits between LDO holders and stakers. The proposal will introduce “a dispute and resolution mechanism for misaligned incentives between stakers and LDO holders.”&nbsp;



“This [resolution] mechanism is designed to be triggered when LDO governance becomes captured as a result of attacks or misaligned with stakers and the network, because this mechanism allows two stakers to block governance decisions, it has the effect of disincentivizing LDO governance from executing decisions that go against the stakers interests,” Kozin said during a Twitter spaces event on Thursday, held to discuss the dual governance proposal.



During the general decline in the crypto market, Lido’s staked ethereum (stETH) tokens have <a href="https://cms.blockworks.co/will-lido-staked-ether-trigger-the-next-big-crypto-crash/" target="_blank" rel="noreferrer noopener">been losing value</a>, relative to ether, and this split has contributed to a liquidity squeeze in the crypto market. Although each stETH token is fully backed by ether locked in Ethereum’s Beacon Chain, stETH will not be redeemable for ether on a 1:1 basis until after the blockchain’s <a href="https://cms.blockworks.co/shadow-forks-and-testnets-the-ethereum-merge-approaches/" target="_blank" rel="noreferrer noopener">Merge</a> and a subsequent network upgrade to enable withdrawals projected to occur sometime in 2023. As a result, stETH is trading below 0.94 ETH per token as of Friday at 8:00 am ET, exacerbated by heavy selling from <a href="https://cms.blockworks.co/blockfi-says-it-liquidated-a-large-client-amid-3acs-margin-calls/" target="_blank" rel="noreferrer noopener">struggling</a> crypto hedge fund firm Three Arrows Capital.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">people think Celsius is the biggest stETH dumper but its 3AC and it isnt relatively close, they are dumping on every account and seed round address they have, most looks like its going to payback debts and outstanding borrows they have <a href="https://t.co/9bZnmTXQzj">pic.twitter.com/9bZnmTXQzj</a>&mdash; moon (@MoonOverlord) <a href="https://twitter.com/MoonOverlord/status/1536697618797142016?ref_src=twsrc%5Etfw">June 14, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Hasu, a prominent though pseudonymous blockchain researcher and strategic adviser to Lido, believes that for the protocol to grow and capture more revenue, “the community, the team developers need to trust that Lido isn’t something that will harm Ethereum.”



“The more governance power you have in your protocol, the more the governance and participants are incentivized to exploit and extract money from it by doing something that&#8217;s against the protocol,” Hasu said. “Less governance will make it easier for people to trust us and will save us a lot of money.”



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