Lido on Polygon protocol upgrade

Marin · November 11, 2022, 6:38am

Lido on Polygon V2 upgrade proposal

Reasoning:

Following the successful launch of Lido on Polygon V1, we’ve been working hard incorporating stakeholder feedback to make marked improvements in reducing both staker as well as node operator friction. As a result, we’ve come up with a V2 of Lido on Polygon that makes fewer compromises, eases operator entry and exit, and provides a smoother flow for users and network participants. This version not only brings nice-to-have features for node operators participating in the Lido on Polygon protocol, but also reduces the gas needed for depositing and withdrawing tokens.

As we are committed to the values put forward by the community and the DAO, this upgrade will enable us to onboard a new set of node operators and further decentralise the Polygon network while providing options for more top tier node operators to join the Lido family.

Security:

As Lido takes pride in its dedication to security and this upgrade is no exception. A full smart contract code audit was done by Oxorio and is available for you to read here.

TL;DR change log:

Rebalancing stake among validators on deposits and withdrawals
Simplified logic for node operator registry
No need to transfer validator ownership to Lido’s smart contracts
Finer role based access control
Gas optimizations for delegations/withdrawals and node operator controls
Code refactoring for readability and maintenance
Small fixes and code improvements

Full Technical Changelog:

NodeOperatorRegistry

New logic for NodeOperatorRegistry contract.
The validatorFactory Contract is no longer used by the NodeOperatorRegistry logic.
Removed validator proxy logic, the validator can join the protocol without transferring the validator slot to the protocol.
Added logic to rebalance delegations.
Added logic to delegate tokens between validators.
Improved the logic to request a withdrawal from validators.
Added ADD_NODE_OPERATOR_ROLE and REMOVE_NODE_OPERATOR_ROLE roles to manage operator life cycle
Split the pause role into 2 sub roles PAUSE_ROLE and UNPAUSE_ROLE
Added possibility to remove a validator by any wallet if its status is in UNSTAKE or EJECTED
Added getProtocolStats function which allows to get info about if the system is balanced or not.

stMATIC

The requestWithdraw algorithm was changed to a new one that keeps the validators balanced.
Each requestWithdraw will generate 1 NFT token even if the request will be distributed between multiple validators.
Added token2WithdrawRequests to map 1 NFT token with multiple withdrawal requests.
Added PAUSE_ROLE and UNPAUSE_ROLE
The delegate function algorithm was improved to automatically do rebalance and delegate to the validators who have less delegation.
The claimTokens function is compatible with NFTs generated by the requestWithdraw in V1 and V2.
Added protocolFee setter.
Added rebalanceDelegatedTokens; it rebalances the system.

LidoNFT

Delete the NFT from token2Index after request withdrawal, in V1 it was set to ZERO.
Delete the NFT from tokenId2ApprovedIndex after approving the NFT, in V1 it was set to ZERO.

1.0.0

Action plan

Snapshot voting

A snapshot vote will be started next week to measure the DAO sentiment towards the proposed changes.

Deployment:

Deployment will go in 2 phases.

Phase one: Testnet release
Phase two. Mainnet release (approx 2 weeks after the testnet launch)

Marketing

Content will be released to inform the community about the upgrade and downtime of staking services and to address concerns with timely release.

Node Operator Operations

Validator slots will be retrieved by existing Lido on Polygon Node Operators from the contract
Existing Node operators will be registered in the V2 contract

Validator onboarding

Additions to the Lido on Polygon validator will be onboarded in Q4 or early Q1/2023. Depending on the TVL at a time, the Lido Node Operator Subgovernance Group (LNOSG) will decide on the number of node operators to be onboarded in the next round.

DeFiYaco · November 28, 2022, 10:48am

To allow the community and governance to check this proposal in more details and improve transparency, we are going to first deploy our contracts, verify them on Etherscan and post those addresses here and inside the snapshot proposal itself.

Testnet smart contracts have already been live for some time and were verified on Goerli Etherscan.
All addresses are visible here:

{
  "network": 5,
  "dao": "0x3E46BEFDA7112d8954b923ea6bd9f07c2e615e10",
  "treasury": "0x3E46BEFDA7112d8954b923ea6bd9f07c2e615e10",
  "matic_erc20_address": "0x499d11E0b6eAC7c0593d8Fb292DCBbF815Fb29Ae",
  "matic_stake_manager_proxy": "0x00200eA4Ee292E253E6Ca07dBA5EdC07c8Aa37A3",
  "proxy_admin": "0x13b954d5FC225eF64650A7D723de763F03e1dbD2",
  "lido_nft_proxy": "0xb7f0F701473458549768753F3176411105ec9693",
  "lido_nft_impl": "0xDfB4A0f4C1f39CCEad3851E4C99EB0DC32c8CdaF",
  "stMATIC_proxy": "0x9A7c69A167160C507602ecB3Df4911e8E98e1279",
  "stMATIC_impl": "0x54428212123c5de67ee776eefeb09ad44186d875",
  "node_operator_registry_proxy": "0xbba726ffc99828c7eaa1e4fE1Ed9115f178cD69B",
  "node_operator_registry_impl": "0x304acD621d4B394AdE4c805Cb7dC778756c79926",
  "fx_state_root_tunnel": "0x5C0e4a60Cb0cC9271994d834510e196e3985b616",
  "fx_state_child_tunnel": "0x2071947Fa4f823b7F9B21C78B0afD5EfFc2D968e"
}

The mainnet deployment is scheduled for this week.

DeFiYaco · November 29, 2022, 11:07am

Lido on Polygon V2 contracts are deployed on Ethereum mainnet and verified on Etherscan.

{
    "network": 1,
    "dao": "0xd65Fa54F8DF43064dfd8dDF223A446fc638800A9",
    "treasury": "0xd65Fa54F8DF43064dfd8dDF223A446fc638800A9",
    "matic_erc20_address": "0x7D1AfA7B718fb893dB30A3aBc0Cfc608AaCfeBB0",
    "matic_stake_manager_proxy": "0x5e3Ef299fDDf15eAa0432E6e66473ace8c13D908",
    "proxy_admin": "0x0833f5bD45803E05ef54E119a77E463cE6b1a963",
    "lido_nft_proxy": "0x60a91E2B7A1568f0848f3D43353C453730082E46",
    "lido_nft_impl": "0x8B747A13D2Af956Ea7B9a36E659807Ea5cF5E04A",
    "stMATIC_proxy": "0x9ee91F9f426fA633d227f7a9b000E28b9dfd8599",
    "stMATIC_impl": "0xCa7fB9581f1EFC89455D6B5B792E80726AC1Caaa",
    "stMATIC_child": "0x3A58a54C066FdC0f2D55FC9C89F0415C92eBf3C4",
    "node_operator_registry_proxy": "0x216B8b78e0632138dc38907dd089aAB601ED6EDC",
    "node_operator_registry_impl": "0x1b6c71EdbdB8174420Cf9B368B38A1B52bfDd7F3",
    "fx_state_root_tunnel": "0xc7dd5c30DcA04f487c9ede0c5AC580c91587fc66",
    "fx_state_child_tunnel": "0x0833f5bD45803E05ef54E119a77E463cE6b1a963",
}

All the existing node operators are added to the new Node Operator Registry, and that can be checked by calling this function: getValidatorIds

Remaining steps to conclude the upgrade process:

Snapshot proposal
Upgrade implementations from V1 to V2 after successful Snapshot voting
Coordinate with node operators to migrate staking NFTs back to their reward addresses

zuzu_eeka · December 5, 2022, 6:35pm

Lido on Polygon V2 upgrade snapshot voting is now live and ends on December 12 at 4PM UTC.
The voting reaches a quorum if more than 50 million LDOs vote for one of the options and is supported if more votes choose the “For” option.
https://snapshot.org/#/lido-snapshot.eth/proposal/0xbb5c7f1b0ae30b502ec207cffa324b05f69d6024cc56d94b0ea8df69216de1c4

Anna_Vareniuk · December 12, 2022, 6:58am

Thank you for the update @DeFiYaco!

I have a question regarding the fee and infrastructure:

Earlier, it was discussed that the commission should be 5% to be able to join Lido on Polygon with its possible change in the future (in the next Onboarding Waves). How are things now? Will be Node Operators able to set any fee? or everyone should have the same rate?
Can the Node Operator (in case, it will be approved by DAO after evaluation) run on the existing Polygon node or should it be a separate setup?

TIA!

DeFiYaco · December 12, 2022, 7:30am

Hey @Anna_Vareniuk,

The commission fee requirement is our policy, it is not written in the code. Any commission fee between 0% and 5% is acceptable. Different LoP NOs can have different commission fees set. That will not be an issue
The NO can run the existing Polygon node. No need to run the separate setup. After this protocol upgrade, accepted NOs will just be added to the Node Operator Registry and that is it. No need to transfer validator ownership to Lido contract like it was required in v1.

Thanks for your questions, please wait for our announcement of the NO onboarding round that we are targeting for the beginning of the next year.

Anna_Vareniuk · December 12, 2022, 7:47am

@DeFiYaco, thank you for the quick response

So returning to the commission fee, so do I understand it right that NOs will not be allowed to set a commission fee above 5%, let’s say 7% or 10% or whatever? Only within 0%-5% range?

We will follow up on updates, thank you!

DeFiYaco · December 12, 2022, 8:36am

That is the current policy, yes. We might revisit it after we receive all the applications for the second onboarding round if we see it makes sense. For now, we want to keep it capped at 5%.

Also, keep in mind that on top of these staking commission fees, Lido on Polygon NOs receive additional rewards from each reward distribution: Fees | Lido On Polygon Docs

Anna_Vareniuk · December 12, 2022, 10:27am

Okay I see, thank you for the detailed answers!

DeFiYaco · January 10, 2023, 11:04am

Since the last proposal did not pass, we have used the extra time during the holidays to audit and upgrade stMATIC and lido nft contracts with extra logging and event data to enable easier analytics and integrations with third party protocols.
All changes are audited and the reports are publicly available on Github: polygon-contracts/audits/v2 at main · lidofinance/polygon-contracts · GitHub

{
    "network": 1,
    "dao": "0xd65Fa54F8DF43064dfd8dDF223A446fc638800A9",
    "treasury": "0xd65Fa54F8DF43064dfd8dDF223A446fc638800A9",
    "matic_erc20_address": "0x7D1AfA7B718fb893dB30A3aBc0Cfc608AaCfeBB0",
    "matic_stake_manager_proxy": "0x5e3Ef299fDDf15eAa0432E6e66473ace8c13D908",
    "proxy_admin": "0x0833f5bD45803E05ef54E119a77E463cE6b1a963",
    "lido_nft_proxy": "0x60a91E2B7A1568f0848f3D43353C453730082E46",
    "lido_nft_impl": "0x4CA459DFC8b1cACa3763C954E889e6D644984385",
    "stMATIC_proxy": "0x9ee91F9f426fA633d227f7a9b000E28b9dfd8599",
    "stMATIC_impl": "0x15152eEE59752F18C2de8fbd4Bc83Ec20c448303",
    "stMATIC_child": "0x3A58a54C066FdC0f2D55FC9C89F0415C92eBf3C4",
    "node_operator_registry_proxy": "0x216B8b78e0632138dc38907dd089aAB601ED6EDC",
    "node_operator_registry_impl": "0x1b6c71EdbdB8174420Cf9B368B38A1B52bfDd7F3",
    "fx_state_root_tunnel": "0xc7dd5c30DcA04f487c9ede0c5AC580c91587fc66",
    "fx_state_child_tunnel": "0x0833f5bD45803E05ef54E119a77E463cE6b1a963",
}