Summary: Lido is the largest liquid staking protocol, with over $12 billion in Total Value Locked (TVL), allowing users to stake on several PoS networks including Ethereum, Solana, and Polygon.
The recent V2 upgrade advances decentralization and introduces new features like the Staking Router. Staked tokens (stETH) can be used in DeFi applications like Curve or AAVE to earn additional rewards.
What is Lido Staking?
Lido is a premier liquid staking protocol offering flexible staking across multiple PoS networks. Users can stake tokens, receive transferable staked tokens (e.g., stETH), and use them in various DeFi applications (e.g AAVE), allowing staking rewards and additional DeFi opportunities. Lido, operating on a decentralized autonomous organization (DAO) model, empowers its native LIDO token holders to make protocol management decisions.
The protocol has over $12 billion in Total Value Locked (TVL) and supports several PoS networks including Ethereum, Solana and Polygon. When staking native tokens with Lido, users receive a corresponding st[token], representing their deposit and accumulated rewards over time. With Lido, the staking process is simplified, and it does not require a minimum deposit or hardware setup, making it accessible to a wider audience.
What is Lido V2?
Lido V2 is a major upgrade to the Lido protocol, significantly advancing decentralization. It introduces the Staking Router for creating on-ramps for new Node Operators and 1:1 withdrawals for stETH holders, enhancing Ethereum's staking ecosystem. Additionally, new modules like the Community and DVT encourage a diverse operator base.
With improved security validated by seven audits, Lido V2 simplifies staking while ensuring Ethereum's decentralization. Community developers, teams, and researchers are invited to propose modules and contribute directly to the protocol.
What Staking Assets Does Lido Support?
The Lido liquid staking protocol currently supports 5 Proof-of-Stake (PoS) networks:
Lido did previously support Terra, Polkadot and Kusama, however terminated development for these networks due to lack of demand.
What can I do with stETH?
Staked Ethereum (stETH) is a token you receive when you stake your Ethereum (ETH) through the Lido protocol. Here's what you can do with stETH:
- Earn Staking Rewards: Holding stETH allows you to earn rewards over time as it reflects the staking rewards generated by the staked ETH + the Lido (LIDO) token emission rewards.
- Participate in DeFi: Unlike traditionally staked ETH, stETH is liquid and can be used in various DeFi applications. For example, you could provide liquidity to stETH/ETH on Aura Finance and earn an additional 4.73% APY.
- Trade: You can also use stETH as collateral to trade on various decentralized exchanges.
- Swap for wstETH: You can convert your stETH to wstETH and bridge it to a Layer 2 like Arbitrum or Optimism for extra yields.
Please note that participating in DeFi activities involves risk. Always do your own research and consider seeking advice from financial advisors.
wstETH vs stETH
stETH and wstETH are tokens in the Lido ecosystem. stETH represents your staked ETH plus daily rewards, causing its balance to change daily. This variability can be problematic for some DeFi protocols requiring stable token balances.
To solve this, wstETH was introduced. It keeps a constant token balance, representing a share in the total stETH pool. As staking rewards increase the pool size, the value of each wstETH (not the quantity) grows, making it more DeFi-compatible.
Is Lido Safe?
Lido has a good reputation for smart contract security, which is exemplified by it being the protocol with the most Total Value Locked (TVL) in DeFi with over $12 billion in assets. Despite this, it still carries many risks as a DeFi protocol. These include potential smart contract vulnerabilities, validator misbehavior, regulatory changes, market liquidity issues, flaws in the underlying Ethereum network, and centralization concerns.
As with any investment, it's important to conduct thorough research and stay updated on latest developments by following the official Lido Finance Twitter @LidoFinance.
In conclusion, Lido is a pioneering liquid staking protocol with a broad range of supported PoS networks, including Ethereum, Solana, and Polygon. The protocol's upgrade to Lido V2 has enhanced its decentralization while retaining user-friendly staking procedures. Users can earn staking rewards through Lido's stETH tokens and participate in a variety of DeFi applications.
The introduction of wstETH has resolved balance variability issues with stETH, making it more DeFi-compatible. Despite its impressive reputation and security, users are reminded of the inherent risks associated with DeFi and are encouraged to conduct thorough research and stay informed about Lido's latest developments.