TLDR
Launchnodes is implementing a robust, institutional grade bridge between the permissioned Canton network, and Lido v3 Institutional Vaults on the Ethereum mainnet, allowing node operators, custodians, and issuers to offer tailor-made staking products to their customers. The Canton network has facilitated over $3.5 trillion in loans, and processes over $4 trillion per month in repo transactions.* The Canton network grew 8x over the past 12 months, with c. $3bn of Canton Coin in circulation+. This bridge unlocks prospective staking flows from these assets on Canton, to Lido’s proven infrastructure. Understanding the scale and appetite for Lido staking in this way is a key outcome of this PoC.
*https://www.canton.network/ecosystem
We are seeking a $50k grant, to partially fund the legal, compliance, development, testing and Business Development activities involved in developing, commercializing and attracting initial institutional customers to using this bridge to Lido v3 vaults.
This grant application is to support implementation of the core infrastructure and smart contracts, processes, workflow and regulatory steps to demonstrate a successful staking and ‘unstaking’ (“round trip”) transaction from Canton to Lido v3 vaults (and back) on the Hoodi testnet. Following the success of this semi-automated process, Launchnodes will harden, scale and automate this bridge for broad production use as a follow-on project - provided a solid business case exists for this expansion.
For the Proof of Concept, the smart contracts governing the flow of funds for the Canton to Lido transaction (and back) will be functional and automated - other aspects such as liquidity provision, bridge safety mechanisms and other functionality are not expected to be developed. The primary goals for the Proof of Concept are to demonstrate the architecture and processes, ensure alignment with regulatory compliance and identify initial prospective users of the bridge.
In addition to implementing the technical and business workflow, Launchnodes will engage and contract with key existing Canton participants who will become the first users of this bridge.
It is intended that all Lido operators with eligible Lido v3 vaults will be able to benefit from staked funds flowing from the Canton network. All Lido v3 vaults - from all operators - which comply with the appropriate regulatory requirements will be eligible for inclusion within the Canton bridge application.
Launchnodes is planning to spend in excess of $150k on this Proof of Concept, in development, legal, regulatory and advisory costs. Launchnodes is seeking a $50k grant commitment from LEGO for this foundational work.
The Canton Network
The Canton network is a public, permissioned blockchain network developed for financial institutions. Launched in 2023, participants include Goldman Sachs, BNY Mellon, HSBC and many other blue chip companies and regulated financial institutions. Canton has supported transactions of over $2.7trillion in loans, and $500bn in tokenized assets. Over 40 global financial institutions are Canton participants today.
Canton’s native token is Canton Coin (CC), listed on multiple exchanges.
Lido
Lido is the leading DeFi staking protocol globally, operating on Ethereum mainnet. Launched in 2020, Lido offers liquid staking with tradeable stETH, with both professional and ‘at home’ node operators. Lido is integrated with Coinbase, Kraken and Swissborg, and has received investment from a16z, Paradigm, Jump Crypto and others. Currently Lido has over $30bn in Total Value Locked (TVL).
Lido provides on-chain liquidity through stETH and wrapped stETH (wstETH) tokens.
Background
Currently Canton participants have limited direct access to DeFi yield in a seamless, compliant, regulated way. Canton Coin - and Canton stablecoins - do not naturally generate a yield, and cannot be natively staked on the Canton network.
Lido Institutional v3 vaults unlock DeFi yield for institutions - safely, at scale, and within a regulated framework.
This bridge enables holders of Canton Coin on the Canton network - or other Canton stablecoins - to lock these assets via the bridge smart contract, mint and stake stETH on the Ethereum mainnet, within a Lido v3 vault.
Key Bridge Features
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Staking enabled through Lido Institutional v3 vaults on Ethereum mainnet
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Establishes stETH as a viable asset for wholesale capital markets
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Secure process
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No ‘lock in’, funds can be unstaked at any point (aligned with current Lido unstaking)
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Real-time reporting and accounting
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Individual counterparties and amounts staked via the Canton network remain confidential
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The Canton app will publish an up-to-date list of eligible Lido v3 vaults - Canton users will be able to select vault(s) that they wish to stake to, and the amount that they wish to stake
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The app will also show vault performance, returns and other transaction/accounting information for any vaults that the Canton user has already staked to.
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Additional yield (and hedging) available through re-staking and other vault strategies
Bridging technologies and integrations between Canton and other blockchains are evolving and maturing rapidly, it may be that as part of this project, existing technologies will be leveraged to accelerate development and trust in the engineering approach.
Initial High-Level Flow Diagram and Process
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A price for converting Canton Coin (and other stablecoins) to ETH is continually presented to the bridge app on Canton via an oracle, along with a list of prospective Lido v3 vaults that can be staked to.
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A Canton participant sends Canton Coin - or Canton supported stablecoins - to the dedicated bridge smart contract on the Canton network, along with details of the target Lido v3 vault(s)
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The Canton-Lido bridge ‘watcher’ service detects the inbound transfer, locks the Canton/stablecoins on the Canton side
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A smart contract on the Ethereum mainnet releases the equivalent amount of ETH, based on the price published in 1. above
There are several mechanisms that Launchnodes is exploring to enable this, including having 1+ market markers / liquidity providers committed to providing ETH once Canton Coin is locked on the Canton network. Launchnodes is in discussions with 2 major liquidity providers interested in providing this service. The marginal cost of the liquidity provision will be paid for from the staking yield. ETH is ‘released’ (rather than eg. stETH) as this provides more options and liquidity initially. The locking of Canton Coin, and ‘releasing’ of ETH (and vice versa) is an atomic transaction where double-spending is impossible.
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Once ETH has been released on the Ethereum mainnet, this is automatically staked via the smart contract to the correct Lido v3 vault. This process involves automatically minting wstETH. wstETH will not be minted 1:1, to provide a level of insurance in the event of slashing or any other issue. The ratio of ETH to minted wstETH will be assessed and agreed based on the risks involved in the operation of each individual vault (eg. use of DVT technology, insurance policies of the operator etc.)
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Balances (staked amount, yield generated, Canton Coin equivalent, cash out position etc.) will all be available in real time from the bridge application on Canton.
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At any point, the Canton user can choose to unstake some, or all, of their staked assets. Sending a message to the Canton smart contract (vault, unstake amount) will trigger this unstaking.
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When a Canton ‘unstake’ message is received, the smart contract on Ethereum mainnet is triggered and the appropriate Lido v3 vault is notified to unstake the given amount of wstETH.
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This wstETH is returned back to the Ethereum bridge smart contract as ETH, either after a delay, or immediately if a liquidity provider facilitates this immediate withdrawal.
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Once the ETH has been returned to the Ethereum bridge smart contract, the required amount of Canton Coin will be released to the original staker. This amount will reflect i) The original amount staked, ii) The yield received from the Lido v3 Vault, iii) The change in the Canton Coin:ETH price.
Both ETH and Canton Coin have a liquid market and can be exchanged for fiat, stablecoins or other digital assets at any time. If the value of ETH rises substantially, the liquidity mechanism will ensure that more Canton Coin is available and returned to the original staker on the Canton network.
Conversely, if the value of ETH compared to Canton Coin falls during the course of the staking, the user could receive fewer Canton Coin than they originally deposited for staking. This will be made clear to all users and is a logical result of taking an ETH position using Canton Coin.
The value of a user’s stake and overall positions will be clearly shown on the application’s dashboard, and a user will be able to unstake quickly and easily, should they wish to.
Scope of Work
In addition to other non-technical aspects of this project’s delivery, the following are key stages leading to the first successful staking transaction to a Lido v3 vault from a Canton network participant, on the Canton network.
- Development of the process flow, ensuring regulatory compliance - including
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Ensuring adherence with applicable regulations (AML, KYB, sanctions screening, data privacy, securities law, FATF Travel Rule etc)
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Custody design, flow of funds report, liquidity management
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Accounting, legal and regulatory opinion on the process flow
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Regulatory risk assessment
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Risk controls and mitigations (operational, legal, technical)
It is intended that this Proof of Concept will initially cover the United States. This will expand as a second stage to incorporate Asia-Pacific (including Hong Kong, Singapore), the UK and EU. The rollout plan and priorities will be shaped by the local regulations, and through engagements with the first prospective customers for the bridge. These geographies align well with Canton’s current user base.
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Technical Architecture & Smart Contracts Finalized - including
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Development and test environments established
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Lido v3 test vault in place
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Oracles, watchers and bridge smart contracts (Solidity, DAML) finalized and tested
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Integrations implemented and tested
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Initial security review
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The specifics of the oracles and smart contracts will be defined and shared through the course of this project. Best practices for mission-critical applications will be adhered to, for security, scalability and resilience.
The initial security review for the bridge deployed solely on testnet will be undertaken by Launchnodes’ internal team.
There are several leading organizations specializing in Web3 security, and with good working knowledge of both Canton’s infrastructure and smart contracts, and Lido’s. Launchnodes will be selecting a partner here who can provide a comprehensive and thorough review of all aspects of this bridge, prior to rollout to production environments. Public confidence in the bridge is vital to ensure customer trust and participation.
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Successful Test Transaction (Canton Testnet, Ethereum Hoodi) - including
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Early adopter Canton participant(s) onboarded
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End-to-end test transaction - from Canton Coin to Lido and back
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Compliance checklist and sign-off
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Lido staking and accounting dashboard for Canton participants
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Business Case Development - including
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Engagement with existing Canton participants
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Business Case Development for Fully Automated Bridge and Production System
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Launchnodes will utilize its in-house, global engineering team with additional 3rd party specialist support (eg. legal, compliance, regulatory, security) as required.
Project Timing
Smart contract development, stakeholder engagement and other aspects of this project are already underway. It is expected that the regulatory/compliance aspects are likely to require 6 months’ from February 2026, with a test transaction expected to take place in July 2026.
Grant Request
Launchnodes is seeking $50k in grant support for this Scope of Work from the LEGO Committee, payable upon agreement in DAI or ETH/stETH/wstETH.
We request $25k up front, with the subsequent $25k paid upon the following deliverables being completed:
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A written legal/compliance opinion, explaining to financial institutions that the use of the Canton to Lido v3 vault Bridge is fully permissible within their jurisdiction, and complies with all of the applicable laws and regulations related to i) AML/KYB, Sanctions, FATF, Securities
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The Technical Architecture and Smart Contract Logic published
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The entire flow of funds and workflow processes defined, from a staking transaction emanating from the Canton testnet, resulting in a stake on the target Lido v3 test vault, and the corresponding return flow taking into account both gain and loss scenarios
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The Threat Model for the target system written and published
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A dashboard being made available, with real-time reporting
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2+ signed Letters of Intent from existing Canton participants
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Bridge contracts and watcher code available for public review.
All bridge contract and watcher code will be made fully available at the conclusion of this project under the MIT License terms.
This Proof of Concept will take place on Canton and Ethereum test networks, with a very limited set of users with access to the application and smart contracts. Launchnodes will commission a full, independent security audit - and publish the auditor’s report - prior to go-live on mainnet. This auditing is currently outside the scope of this grant.
Launchnodes has been quoted over $80k purely for expert legal and compliance opinions, and is expected to spend multiples of the requested grant amount over the course of this project.
Launchnodes will update the Lido community and ecosystem regularly through multiple channels, including the Lido Community Forums.
Summary
This proposal delivers a first-of-its-kind, bridge from the private, wholesale financial market that Canton provides, to Lido. It builds TVL, enhances the utility of stETH, and creates new institutional use cases for Lido v3 vaults - with limited financial risk to the DAO. This bridge also creates a template for other networks to bridge to Lido over time.
Questions & Answers
Why should Lido prioritize a bridge from the Canton Network?
Canton is potentially the most credible on-ramp for trillions in institutional capital to enter Ethereum staking via Lido. $2.7trillion in syndicated loans, and $500billion in tokenized assets have already been transacted on Canton.
Participants include Goldman Sachs, BNY Mellon, Deutsche Borse and over 40 financial institutions - entities currently excluded from using DeFi due to compliance constraints.
Canton is Ethereum-aligned in principle, but isolated from staking yield - this bridge has the potential to unlock compliant staking flows.
If only 0.1% of assets currently tokenized on Canton flow into Lido vaults, this represents over $500m in potential Lido TVL.
This bridge is designed to strengthen Lido’s market position and TVL, while preserving its decentralized infrastructure. Using Canton Coin to build an exposure to ETH staking is a more streamlined process for these institutions than solving the mandate and custody issues related to purchasing ETH directly with fiat currency.
Why now?
With Lido v3 institutional vaults now available, Lido is now ready to serve this segment - without the risks and concerns regarding co-mingling of funds.
Is there potential for stETH to be used within the Canton network?
Absolutely. This bridge and workflow is currently focussed on using Canton Coin and Canton native stablecoins to earn yield as stETH. As a future development it would be feasible for holders of stETH to interact with high value tokenized assets (equities, real estate, bonds, gilts, gold etc.) on the Canton network. A DAO with a treasury on the Ethereum mainnet, for example, could participate in tokenized repo markets on the Canton network using their stETH.
Why are you not bridging from Canton Coin to stETH directly, why do you bridge to ETH?
Currently, there is vastly more liquidity for ETH than there is for stETH. Bridging to ETH enables many more liquidity providers to support the bridge by offering to provide ETH when Canton Coin is locked as part of the staking workflow.
The ultimate goal of this project is to enable ‘one click staking’ directly from the Canton network to a Lido v3 vault, ideally without any manual interventions, repetitious tasks, or delays in the process. Having to manually await or negotiate liquidity, or await approvals will dampen the utility of this bridge and appetite for users to stake and unstake in a seamless way.
Is this bridge technically hard?
There are complexities related to secure cross-chain messaging, custody, asset flows and other areas. In addition, the aspects to ensure that the bridge is appealing to tightly regulated entities and their compliance departments - and to ensure robust, secure production systems - do require careful planning, review, testing, delivery and ongoing management.
Bridges have typically been highly risky, with wallets being drained at scale in the past. How can we avoid this here?
Technology and safety mechanisms are vastly improved, and Launchnodes will be incorporating several safety features to ensure that the bridge is robust, with in-built anti-tamper mechanisms that prevent funds from being misappropriated.
Why not use existing cross-chain solutions and bridges?
Launchnodes will leverage existing technologies and partnerships where these can help to deliver the end-to-end solution in a secure, robust and commercially viable manner.
Solutions such as Wormhole, LayerZero and Chainlink could form part of this integration. Canton requires specific compliance gates, audit trails and transaction-level confidentiality. This dedicated bridge can ensure 100% compliance with exacting corporate requirements, and interface seamlessly with Lido v3 vaults.
Launchnodes will publish and make the source code publicly available, licensable under the MIT License terms, and audited by leading security specialists known to the Canton network, to Lido and to prominent DeFi projects.
Established blockchain interoperability platforms can offer valuable benefits, however the ‘first’ and ‘last’ mile that delivers specific use cases is generally missing. Launchnodes plans to deploy a full end-to-end application with tailored security and control, an optimized performance and cost structure, custom features, compliant-by-design, and with minimal external dependencies
Will banks and others want to take the exchange rate risk of converting stablecoins, in order to stake them? What if the ETH price falls?
It is acknowledged that some institutions and corporates will not initially wish to convert Canton Coin or stablecoins in order to hold ETH.
However the trend is that institutions are increasingly looking for ETH exposure, and for ‘true’ staking yield.
Launchnodes has also engaged with entities interested in offering a hedging option for users of the Canton-Lido bridge, protecting the staked assets from a fall in the ETH price and increasing the appeal of staking through this bridge.
Who’s funding the other $100k+, and how committed are they?
Currently, Launchnodes plans to fund the additional $100k+ expected for legal, technical and compliance activities, along with smart contract development, stakeholder engagement and other necessary activities leading to the first staking transaction with a live institution. This funding is expected to come from Launchnodes’ own resources.
Launchnodes is also engaged with other parties who are interested in co-funding either the initial Proof of Concept, the full production rollout, or both aspects.
What’s the projected ROI in terms of TVL, usage, or revenue?
We are not making TVL projections at this stage. Initial discussions with Canton ecosystem participants indicates strong support for this bridge to Lido and it is expected that Canton-native funds and stablecoins will seek the yield opportunity that this brings.
$25m staked on Lido v3 vaults (at 4% APY for 1 year) would generate fees to Lido in excess of the value of this grant. ETH staking vault operators are currently offering rewards above this level (eg. Steakhouse Financial offers 4.2% APR on its Decentralized Validator Vault currently). It is expected that a further grant will be requested, following a successful Proof of Concept, to productionize this bridge and enable live transactions and ongoing operations on Canton and Ethereum mainnet. This future grant will be contingent upon a clear business case, and interest from prospective institutional stakers.
How soon can you be in production and on mainnet?
We have taken a conservative view of the time to develop and deploy the Proof of Concept of 6 months. It is expected that the production rollout, following the successful Proof of Concept will be a further 3 months.
What will happen after the PoC is complete?
A full business case will be developed and reviewed before a go/no-go decision is made regarding the full, ‘production ready’ automated Canton-Lido bridge. Letters of Intent will be sought from early adopter users of the bridge.
The ‘production ready’ system will require significant further development to ensure scalability, security and robust ongoing operation as a mission-critical application.
Does Launchnodes Provide Financial Services?
No, Launchnodes is a software and IT services organisation that has been helping clients to operate blockchain nodes and services since 2020.
Why Launchnodes?
Launchnodes have demonstrated their ability to develop secure, institution grade staking applications that integrate fully with Lido’s staking contracts and infrastructure. Launchnodes are an established member of the curated operator set on Lido, and an active operator and participant within the Canton network and ecosystem.
Technical infrastructure is a small part of this overall program. Launchnodes’ expertise in delivering mission-critical systems within complex regulatory environments and financial services organisations ensures that stakeholder management, risk and regulatory compliance aspects are integral to project success.
About Launchnodes
Launchnodes is a member of the Lido set of curated operators, and has been helping organizations and individuals to operate their own ETH staking nodes since 2020. The founding team at Launchnodes has a strong pedigree in investment banking and financial services, and is experienced in navigating projects requiring careful regulatory compliance, complex stakeholders, and mission-critical rigour.
Launchnodes has gratefully received 2 Lido grants historically, and implemented robust solutions aligned with the grant requests:
Lido Impact Staking - This philanthropic platform and smart contracts extended and integrated closely with Lido’s staking middleware, and is now used by UNICEF, UNICEF Giga, UNHCR, Mercy Corps, GiveDirectly and a range of the world’s leading NGOs, charities and multilaterals. Charitable foundations are now beginning to stake with Lido through this platform, with an expectation that this trend will accelerate.
UNHCR - UNHCR were engaged with Lido and estimating a project spend in excess of $400k over a 2 year period, to enable impact staking focussed on their vital, life saving work. With Lido’s $5k grant to Launchnodes, within 4 weeks Launchnodes provided a dedicated Impact Staking site for UNHCR, and staked 10 ETH to support their work.
Launchnodes has strong experience in successfully running nodes across multiple different client software, protocols and geographies. In addition, Launchnodes has demonstrable experience of integrating with Lido’s infrastructure, and of developing robust smart contracts. Launchnodes publicly publishes its security audit reports prior to launch of any production system.
Launchnodes operates Canton validator nodes and is deeply engaged with both the Lido and Canton teams and ecosystems.
