• Lido and Idle DAO launch new risk-adjusted ETH 2.0 staking products

  • Lido, a multichain liquid staking solution, and Idle DAO, a decentralized organization building financial products for Web3, have partnered to launch a novel DeFi primitive.

    The newly launched stETH Perpetual Yield Tranches (PYTs) were designed to target the more risk-averse segment of the DeFi market, offering an APR ranging from 1.8% to 8%.

    Idle DAO and Lido bring leveraged yield and deposit protection to ETH 2.0

    The Ethereum ecosystem has grown significantly in the past year and now has over 9 million ETH staked. With over 280,000 active validators on the network, the staked amount of ETH keeps constantly growing—ETH 2.0 currently has twentyfold the amount of staked ETH than the amount required by the Ethereum Foundation at launch.

    To further increase the amount of ETH staked and open up staking to a broader market, Lido has partnered with Idle DAO to introduce a novel risk-adjusted staking opportunity—stETH Perpetual Yield Tranches.

    In a press release shared with us, the companies said that these are the first ETH 2.0 products with a built-in protection mechanism. The rising interest institutional capital has shown for ETH 2.0 has revealed the need for a secure and sustainable yield, and Lido’s partnership with Idle DAO was designed to answer that need.

    Perpetual Yield Tranches are a DeFi product that segments yield and risk, enabling liquidity providers to earn a higher share of yield by taking a higher percentage of risk. Liquidity providers looking for a more stable staking opportunity are able to hedge the risk by depositing their assets into a built-in protected tranche.

    Idle DAO’s Junior Tranches receive a higher proportion of the yield generated via Lido, but take on a bigger financial risk. Senior Tranches, on the other hand, receive a smaller portion of the yield but carry lower risk and are first to be repaired in case of default.

    The current stETH APR is approximately 1.8% on Senior Tranches and 8% on Junior Tranches. However, Senior Tranches will see a much higher APR in the following weeks, thanks to a new incentive program the companies will launch.

    The initial bootstrapping phase of the collaboration between Lido and Idle DAO will last 4 weeks. Each week, 10,000 LDO tokens will be distributed to users to stimulate liquidity provision on stETH Senior Tranches, bringing its APR above 5%.

    “This new DeFi primitive is flexible, with no locking period or epochs, and fully fungible, allowing it to be easily embedded into other structured products or protocols. Integrators now have the opportunity to offer different products to their final users depending on their preferred risk level,” the companies told us.

    “DeFi protocols that integrated Lido as underlying yield source, current stETH holders, and ETH owners interested to generate passive income can benefit from the built-in protection feature on Senior Tranches with incentivized APY, or deposit into Junior Tranches to overperform the Lido yield.”

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