Procedure for Staking Liquid Assets With the introduction of the upcoming Lido v2 update, Lido plans to provide staking reward withdrawals in addition to improving the architecture of the staking process.

The implementation of the new Lido staking router and facilitating withdrawals for Ether (ETH) staking participants will be two of the biggest focus areas of the proposed upgrade.

The stakeout router features a modular architectural design. This architecture allows the construction of on-ramps for additional node operators, such as independent participants, decentralized autonomous organizations (DAOs), and distributed validator technology clusters. The latter refers to a technique that allows to distribute the responsibilities of the validator in several different nodes.

The modular architecture of the Staking Router is expected to make it possible for Lido to evolve into an extensible protocol. Validation modules shall be handled in the same way as validator group sets, which are capable of performing the protocol provider function. The modules will be responsible for managing an internal operator registry, storing validation keys, and distributing bets and rewards among their operators.

Users who are interested in withdrawing ETH will need to undergo a suggested request and claim procedure. Users will need to lock their stETH before they can start the withdrawal process after submitting a request. The user’s ETH will be retrievable after the request has been fulfilled, the ETH will be locked, the locked stETH will be burned, and the protocol will mark the request as reclaimable.

A concise roadmap outlines the development phases from February to April 2023, during which the code will be tested on the Goerli Testnet. This will be followed by a retirement credential rotation ceremony and the upgrade itself.

Withdrawal credential rotation is required due to a discrepancy between Lido protocol validators using BLS-based “0x00” signatures and those using newer smart contract-based “0x01” signatures. BLS-based “0x00” signatures are the older method, while “0x01” signatures are based on smart contracts.

Lido will rotate the credentials and will do so through a DAO ceremony. During the ceremony, the participants will sign a rotation message and then that message will be transmitted to the consensus layer network.

Lido Finance is now leading the race as the largest decentralized finance protocol, with over $8 billion of value promised on its platform by 2023, as previously reported. The next Ethereum Shanghai upgrade is expected to take place in Shanghai, China.