Lido on Polkadot

May 31, 2022 in Polkadot, General by Kasper Rasmussen

Today, we are thrilled to bring you Lido on Polkadot.

Lido on Polkadot, developed in collaboration with MixBytes, is a liquid staking solution for DOT. Users can stake their DOT with Lido on Polkadot/Moonbeam to earn daily staking rewards and benefit from the many opportunities available across the Moonbeam and greater Polkadot DeFi ecosystems.

To get started, visit polkadot.lido.fi.

Summary

Lido liquid staking on Polkadot lets users stake their DOT for daily rewards, immediate staking and unstaking, and a number of yield opportunities across Polkadot DeFi.
Stake DOT to receive stDOT - a rebasable token with a balance that will grow in your wallet every day as rewards come in.
Maximise rewards through dynamic reallocation of stake.
Minimise slashing risks through ledger splitting system.

Liquid Staking on Polkadot

The launch of Lido on Polkadot allows DOT holders to stake their assets while maintaining access to the liquidity of that staked position, and contributing to the security and stability of Polkadot.

When staking DOT with Lido, users will receive a staked DOT (stDOT) token in return. stDOT is a rebasable token similar to stETH with rewards reflected through a daily balance increase. Your stDOT represents your staked tokens, accruing rewards without bonding delay and can be sold without waiting an unbonding period, while having the reduced risk of slashing events. Rewards are maximized through dynamic reallocation to the most profitable DOT validator nodes.

These stDOT tokens can then be used to earn additional yield by leveraging the Moonbeam DeFi space (e.g. use staked DOT as collateral in stablepools on Curve). Once deposited on Moonbeam, your xcDOT (cross-chain DOT) and stDOT are XC-20 tokens, which act as ERC-20s but include native cross-chain capabilities. They can be used in applications on Moonbeam, as well as all applications on parachains connected to Polkadot. Unlike DOT, xcDOT can be held in your MetaMask wallet using new or existing Ethereum addresses.

Lido on Polkadot works on Moonbeam, a Polkadot smart contract platform. Moonbeam is quickly becoming the top destination for multi-chain DApps, allowing these applications to take full advantage of cross-chain interoperability within and outside of Polkadot. This starts with Moonbeam's full Ethereum compatibility, which makes it easy for new users to use familiar wallets (MetaMask and more) with their existing Ethereum addresses to easily access multi-chain applications like Lido.

How to Stake DOT with Lido

The process for staking DOT with Lido is simple. We've attached guides below depending on what you may be looking to do:

For a more general overview of Lido on Polkadot, check out the Lido on Polkadot docs section.

stDOT Launch Phases

1. Phase One

In this first phase of stDOT (3-4 weeks from launch), there will be a stake cap of 500,000 DOT (approximately $5m), with six reward oracles run by the MixBytes team. This phase will also include the launch of a Curve stableswap pool for stDOT/xcDOT.

2. Phase Two

Once Lido on Polkadot is live for approximately one month, the cap will be removed for DOT staking. By this time, additional DeFi protocols will have released support for stDOT. We will also see the launch of new decentralized reward oracles and multisigs that help decentralize decision-making on smart contract approvals.

stDOT APR Formula

The staking APR is calculated dynamically and fluctuates based on the node APY and the individual node fee. The formula is as follows:

Staking APR * (1- node fee) * (1- Lido fee)

The Lido fee is set at 10% of net staker rewards. The node APY and the node fee changes from node to node. There will be 10-10.000 active validator nodes in the system and the node fee may differ between each of these.

Assuming a 16.5% staking APR, a 2% node reward fee and a 10% Lido fee, the final APR will be 14.55%.

16.5% * (1-2%) * (1-10%) = 14.55% APR

Fee Simulation

Comparing fees and rewards for regular staking versus Lido DOT staking, we ultimately see a higher net reward for users staking with Lido due to the dynamic reallocation towards the most profitable validator nodes. See the calculation below for more information.

Simulation parameters

With Lido staking:

Lido protocol fee is 10% of net staker rewards.
A stake allocated per node is 2,000,000 DOT (~20,000,000 USD).
Overall stake in the Lido protocol is 50,000,000 DOT (~500,000,000 USD).
# of Validator nodes selected by Lido protocol is 25.

With regular staking:

A stake of 50,000,000 DOT equal to Lido simulation allocated to all validator nodes in the active set excluding nodes with 100% fee (114 nodes).

Simulation results

500,000 DOT total stake (test cap):

Lido APR — 16.5%
Regular staking APR — 11.64%

50,000,000 DOT total stake:

Lido APR — 15.8%
Regular staking APR — 11.64%

Looking Ahead

We are phenomenally excited about this launch and the further expansion of the Lido liquid staking ecosystem. MixBytes have been a stellar partner and the work they have achieved has been incredible. We look forward to taking this many steps further in the coming months with the launch of phase two DOT staking.

For more information, come visit us in the Lido Discord or Telegram, or reach out to MixBytes.

For media enquiries please contact Saad Qureshi [email protected]