Can you please elaborate a bit more?
How did you get the understanding that stETH is undercollaterized? Essentially every stETH is directly backed with the same amount of ETH that is deposited/staked into the protocol.
Not sure about the majority of the comments but feels like pure FUD, spam and lack of information.
eg:
stETH is VERY much undercollateralized. If there is slashing event, that ETH is burned. That ETH must be backed from another source to maintain APR. You can’t count the deposited ETH as backing anything when it is burned!
Lido’s insurance fund only has around 6k stETH total, which (A) is stETH-denominated itself and (B) services a massive TVL.
See here: Lido: DAO Insurance Fund | Address 0x8B3f33234ABD88493c0Cd28De33D583B70beDe35 | Etherscan
Whether you think a slashing or mass slashing can happen or not is up to you, but it is a fact that stETH is massively undercollateralized.
That is simply not true. Read please: Lido | Lido Docs
TLDR (but you should read it still):
Yes, it is true. What do you think rebasing means? It means the APR eats the losses. That is what undercollateralized means.
Rebasing means that the balance changes with the amount of ETH so the ratio between stETH minted and ETH in the system is kept at 1:1 or that the protocol is kept fully collateralized at all times.
You are pointing in the right direction, but I guess not understanding that it is the mechanic used to prevent exactly what you are mentioning (undercollaterization).
It is expected and intended that the APR would get lower with the slashing. How do you imagine having a system that gains value by receiving staking rewards and does not lose the value with slashing events? (without using another token or insurance to cover the losses)
Sorry, but you are not correct. stETH is undercollaterlized because in a mass slashing event the insurance will be burned through instantly and the APR will bite the dust. This is why people correctly equate this to FTX. The “it can never happen” scenario eventually will happen. That stETH can rebalance from insurance for some slashings does not equate to “proper collateral”. It means that for some cases there could be enough. This is a real risk of Lido. Every protocol has risks, you can’t talk your way out of it. This is why a DIVERSITY OF LSTs is critical. ANYONE who advocates to go all in on one LST is GAMBLING NOT INVESTING.
Apologies but it is hard to have a discussion when fundamentals are not straight.
Insurance is not a protocol mechanism.
Maybe this works for you if you want to insure your stETH
Anyway, to mitigate the risks of such events is the reason of having lower number of NO’s compared to other protocols with strict standards to join the set. All NOs are reputable and some of the core builders or operators on Ethereum. (Yes the set will be expanded, Wave 5 in process + additional options will be available soon).
Whatever direction DAO takes based on community feedback there is always somebody going hostile and attacking with a lack of technical backing. Current NO’s are a problem while operating for Lido protocol but they are not a problem while operating for other protocols which most often the FUDers support due to having investments into them. The reality is if the situation you’re describing happens it will affect other protocols and native staking as well.
The gist is:
Lido protocol is the only liquid staking protocol that handled 600k+ ETH of withdrawals.
Lido protocol has slashing insurance
Lido protocol has 9 auditors for V2
Lido protocol has 14b TVL and is sustainable (7.8m ETH staked)
Lido protocol has 164,896 unique stakers
Lido protocol is already a brand in Ethereum ecosystem. A trusted one
Lido protocol has the largest number of integrations
Users give a vote of confidence by choosing Lido protocol to stake their ETH
P.S. Happy to see a writeup of those other LSTs that outperform stETH in any sense.
How I see it, no Lido protocol = CEX dominance of Ethereum.
You’re conflating two types of “insurance”. If the 6k pool is depleted in a mass slashing, APR will suffer. This is what undercollateralized means. I think you know that, so I’m not sure the point you’re trying to make by listing agencies that have no effect on this.
Lido is the MOST vulnerable to these mass slashings because of how few NOs they have (they are the most centralized and permissioned of all “decentralized” LSTs). They also have such a huge portion of the staked ETH amongst those few NOs.
Talking about people FUDing for pointing out risk is not accurate. I think Lido can be a good part of a DAOs LSTs. But I am very suspicious of someone saying to go all in on one LST. Especially because they are “TOO BIG TO FAIL”. Diversifying your portfolio because all LSTs have risk is the smartest choice. Or in Mantle’s case, even developing their own without the risks of Lido.
If you are advocating going all in on ONE risk profile, we have nothing left to discuss. It is irresponsible.
I must have been under a rock. Did not know about this discussion until now.
What does Mantle get out of this deal? Is Lido providing additional $LDO tokens? If so, what is the value?
I am sure smaller LSTs or other alternatives will share revenue and provide their network tokens, boosting Mantle’s treasury.
@Seraphim How does Mantle benefit financially from this collaboration? Also, why does Lido deserve Mantle’s ETH than any other LST out there?
Will Lido be able to provide at least 1% of LDO tokens to Mantle’s treasury for renting this TVL? If no, I am sure other LSTs will be able to provide better value here.
@defiyaco
What this strategic collaboration provides to both parties is well described in the original post:
So, to answer your question(s): this does not propose any $LDO token allocation, instead the revenue share is more sustainable model for this type of collaboration.
There is no reason for other LSTs not to do the similar proposal and offer whatever % of the token supply if their contributors find it reasonable. Personally, I think that strategy might work in the short term and attract “chain hoppers” as I like to call them, but as soon as the token incentives dry out, the same user base just hops to another network.
End result: token allocation spent + significant churn %
Please refer to [PASSED] MIP-25: Mantle Economics Committee, and ETH Staking Strategies for the most recent discussion on this thread. This thread will be archived.
