Staking Liquidity Vaults (Lido V3)

Introduction

ETH staking offers ETH holders a way to generate a return on their assets. However, it has always come with an uncomfortable trade-off:

Native staking

• ✅ Choice of operator (jurisdiction, client diversity policies etc.)

• ✅ Negotiable fees

• ❌ Illiquid due to a variable exit queue, sometimes as high as 40+days (see current queue)

Liquid staking

• ✅ Liquid: can swap stETH for ETH, although sometimes with a haircut

• ✅ Liquid: can redeep stETH for ETH from the protocol, although with a delay

• ❌ No choice of operator

• ❌ Non-negotible fees (10% for Lido)

Lido V3 stVaults

Lido V3 aims to solve this problem by offering ETH holders the ability to stake with their chosen operator (benefits of native staking) while still being able to access liquidity on demand, by being able to mint stETH against natively staked ETH on validators as collateral.

The Problem

Lido V3 is a powerful primitive, but it's not a packaged solution to the problem of staking with a node operator with guaranteed liquidity. Setting up an stVault today would require

• Deploying at stVault from the Lido stVault factory, requiring familiarity with interacting with smart contracts (example transaction)

  • This includes defining the vault administrator, node operator, node operator manager and vault roles.

  • Most node operators are experts in staking operations, but not smart contracts or vault operations

  • Most ETH stakers are experts in digital assets, but not smart contracts or vault operations

• Configuring the vault

  • By default, Lido stVaults allow minting up to 50% stETH against the staked collateral. Increasing this requires Lido DAO application and smart contract calls on the node operator and vault admin side

• Creating validators

  • When an ETH staker supplies ETH to an stVault, it sits in the contract until it's deposited to a beacon chain validator

  • That requires the public key of the created validator(s) and a mechanism for creating.

  • Either the node operator is creating validators and registering them with smart contracts, or the ETH holder is (typically neither role is comfortable with that)

• Topping up validators

  • Topping up requires a strategy for how to "spread" the ETH around validators, e.g. maxxing out a MaxEB validator to 2048 ETH before creating another, or limiting to 32 ETH only (not recommend) or some arbitrary limit, such as 1,000 ETH per validator

• Partial withdrawals and exits

  • This requires a strategy for which validator to partial withdraw from first and when to exit.

All of these problems are solvable by either the node operator or ETH staker, but they are essentially "vault operations" which are better undertaken by professional vault operators.

The Solution

RockSolid Staking Liquidity Vaults wrap up the Lido V3 primitive into an e2e managed platform whereby:

For ETH Holders / Stakers

Stakers receive a dedicated vault UI with preconfigured vault including the chosen node operator and validator strategy. The onboarding is "white glove" including training. From that point an ETH Staker can:

• Deposit ETH to the vault and it will be instantly and automatically staked with the node operator

• Fees and performance are as per native staking (see Fees below)

• At any time, the ETH staker may mint stETH against the natively staked ETH to meet short term liquidity needs. This could be:

  • A DAT or fund meeting redemptions

  • A fund requiring short term liquidity for an acquisition (swap stETH for USDC)

  • A fund desiring a mix of staking rewards and stETH to deploy into higher yield DeFi

For Node Operators

Node operators are able to solve the difficult problem of "native staking"; guaranteed and instant liquidity, helping both retention for existing clients and unblocking sales to customers previously uncomfortable with unpredictable exit queues.

"Going it alone" requires skilling up operational teams to create, configure and advise customers on the operation of stVault smart contracts, including helping customers with validator creation, topups, withdrawals and exits. RockSolid Staking Liquidity Vaults are an e2e solution to offering native staking with guaranteed liquidity.

How it works

• RockSolid onboards a node operator by integrating their API

• Node operator sells the solution to their customer (the ETH staker)

• RockSolid deploys a per-customer Lido V3 stVault and configures to use the node operator as the staking destination, including fees using the RockSolid API and management tools

• RockSolid provides a dedicated vault page for the ETH staker to access their vault

• The ETH staker deposits/supplies ETH to the vault

• The RockSolid Vault Keeper gets notified of new deposits and:

  • Looks up the ETH staking straetegy (usually "MaxEB" whereby a 0x2 validator is created and topped up until 2048 ETH, and then another is created)

  • This is using the pre-integrated node operator API

• ETH is now staked with the node operator and earns staking rewards the same as it if it were natively staked (see Fees)

• If the ETH staker has need for liquidity, they can mint stETH between 50-95% of the value of the ETH staked. They can use the stETH as-is, or convert it to ETH or USDC using the deep stETH liquidity

  • While the stETH is "borrowed" from the vault, it is recorded as a liability and grows at the same rate as stETH (e.g. 2.7%)

  • When the short term liquidity needs have passed, the ETH staker can repay the stETH at any time.

• If the ETH staker wants to withdraw ETH from the validators, they simply go to the "Partial withdraw" section of the UI and can withdraw any ETH between 32-2048 ETH on any validator.

  • Partial withdrawals are taken per the "unstaking strategy" configured at setup time, e.g. from highest balance first

• If more is required, they can trigger exits directly from the UI

• Other house keeping tasks for Lido stVault operation, such as the daily updating of vault balances required by the protocol, are handled by the RockSolid keeper.

Non-custodial

One nice feature of the Lido V3 architecture is that deposits to the stVault are to a non-custodial smart contract. Additionally, ETH sent to the node operator's validators are controlled by the stVault smart contract, so the ETH staker, not the node operator retains ultimate control of the assets.

Architecture

Fees

• Lido V3 protocol fees

  • Infrastructure fee (% of staking rewards for any ETH staked on validators). This is 0% at the time of writing

  • Liqudity fee (% of the amount of stETH minted, only for the time its minted). This is 6.5% at the time of writing

• Node operator fees

  • As negotiated with your node operator, typically the same as for native staking

• RockSoldi fees

  • As negotiated with RockSolid, typically a percentage of staking rewards.