Lido Finance Expands to Arbitrum and Optimism to Enhance Ethereum Staking

One of the leading staking providers for the Ethereum network, Lido Finance, has officially launched on two layer-2 networks, Arbitrum and Optimism. This strategic move aims to significantly improve accessibility for users interested in Ethereum staking while simultaneously reducing gas fees associated with transactions.

The initiative to extend services to layer-2 solutions was initially announced in July when Lido’s team recognized that various layer-2 networks had started to demonstrate significant economic activity. The deployment on Arbitrum and Optimism commenced on October 7.

Lido offers liquid staking services, which provide enhanced flexibility for stakers. Unlike traditional staking methods that lock up Ethereum, Lido’s model allows investors to withdraw their funds at any time, addressing one of the main concerns expressed by institutional investors regarding asset lockup.

Industry leaders, including Coinbase CFO Alesia Haas, have noted that institutional staking is unlikely to gain momentum unless the lockup issue is resolved, making Lido’s model increasingly attractive in this context. Lido’s staked Ethereum is represented by its tokens, such as wstETH, which can be bridged across various networks.

The first phase of Lido’s layer-2 rollout includes enabling the bridging of Lido’s Wrapped Staked Ether (wstETH) token to both networks. Lido issues stETH, the Ethereum liquid staking token, in relation to the amount of staked ETH. Meanwhile, the wrapped version maintains a constant balance of stETH for use across decentralized finance (DeFi) applications that require stable balance mechanisms.

In addition to this expansion, Lido is allocating 150,000 Lido DAO (LDO) tokens in rewards monthly from the launch date for wstETH bridged across Arbitrum and Optimism. This initiative is designed to enhance liquidity for wstETH and support farming incentives via partnerships with DeFi platforms such as Balancer, Curve, and Kyber Network.

As stated on its website, Lido currently has approximately $7.4 billion worth of staked ETH, representing around 5.5 million tokens and roughly 40% of the total ETH being staked. Earlier this year, it was reported that stETH lost its peg to Ethereum due to the ongoing crypto contagion, but it quickly recovered.

The layer-2 networks chosen for Lido’s expansion are notable; together, they account for an 80% market share. Arbitrum leads with a 51% market share and a $2.42 billion total value locked (TVL), while Optimism holds a 30% share with a $1.45 billion TVL, according to data from L2Beat.