After the forthcoming Shanghai update for Ethereum has been implemented, the Lido team has presented their recommended proposals for how the protocol could allow ether withdrawals. In a post on the community forum, the Lido team communicated its ideas and suggestions to the Lido DAO, which serves as the governance structure for the project. After the Shanghai update is implemented, the functionality will provide users the ability to unstake any ether tokens that they have staked.
To build a better protocol for Lido’s stakers, and to protect stakers against a variety of differing scenarios, Lido’s withdrawal mechanism will have two modes:
Turbo & Bunker.
— Lido (@LidoFinance) February 22, 2023
Details of the upgrade
The Lido team characterized the process of creating the withdrawal function as a difficult and time-consuming endeavor. This complication is caused by the manner in which staked ether withdrawals will function when the Shanghai update is implemented. Since the procedure will be asynchronous, it is important to note that withdrawals won’t take place simultaneously for all participants.
According to the design paper, the withdrawal function that is intended for Lido will have two different options. The first mode, which is known as “turbo,” will handle unstaking requests in the quickest manner feasible, while the second option, known as “bunker,” will be activated when there is widespread slashing. When validators in a proof-of-stake network violate the guidelines for reaching an agreement, they are subject to the punishment known as “slashing.”
Validators on the Ethereum blockchain incur a penalty in the form of the destruction of a percentage of the tokens they have staked. According to the design document, the bunker method of Lido was developed with the intention of preventing skilled actors from benefitting at the cost of the community.
The ability for users to withdraw funds is likely to be an essential component of Lido’s business moving ahead. On Ethereum, Lido is the liquid staking protocol that has the largest market share. According to the Dune dashboard, the project is responsible for 29% of all of the ether that has been staked.
In the next few days, Lido DAO will discuss the particulars pertaining to the design. A vote will be held by the community to decide how to proceed with any new proposals before the plans are included in the protocol.
What the Shangai update will mean for developers
The Shanghai hard fork unlocks all staked ETH for validators. Validators might queue up to get their staked tokens and remove them from the system. With Ethereum’s DeFi supremacy and high staking reward, several observers think this eventuality is improbable. After the Shanghai update, validators will be able to withdraw staked assets, so they won’t have to worry about locking up a large chunk of money (32 ETH was worth $150,000 at its height) for an indefinite period.
Validators may unstake ETH following the Shanghai split in two ways. A “withdrawal credential” may unstake awards from the last several years. Unstaking all 32 ETH is the more drastic choice.