is a DAO that allows its users to stake their ETH in a liquid and also decentralized way.
Ethereum still has to switch to proof of stake but you can already stake your coins on the beacon chain to earn rewards. Most ETH holders want to participate in this staking process but you can only stake with a minimum of 32 ETH, which is at the time of writing this about $93,000. This threshold makes it impossible for small investors to put their ETH to use.
Additionally, staked ETH cannot be used in DeFi applications like as collateral for DeFi loans on Aave. Staking ETH is not flexible and is difficult on your own, that’s why we need a solution to make it simpler.
Many centralized exchanges like are offering their own solution by allowing their users to stake any sum of ETH on their exchange and gives them BINANCE ETH (BETH) tokens in exchange. This BETH is backed by staked ETH so its value should stay close to it and you can still use your BETH however you want, which also means you could sell it to receive your ETH back earlier. If you keep your BETH in your wallet, then they will distribute staking rewards in form of new BETH to you and when ETH 2.0 finally launches then you will be able to swap all your collected BETH to ETH at a rate of 1:1.
This makes the process much simpler and provides the users with the comfort of having their staked asset liquid. But there is one big problem: It is centralized! There is no point in using DeFi and cryptocurrencies if you depend on a centralized middle man. That’s why Lido was founded, it works the same as Binance and BETH do but in a decentralized way.
You can stake your ETH on Lido to receive stETH which will receive more stETH. Right now you cannot unstake your ETH, this will only be possible after ETH 2.0 launches, but you can still trade your stETH and you can also use it in DeFi, for example you can put your stETH in a lending protocol and earn an additional yield on top of your staking rewards.
All the collected ETH is put into pools of 32 ETH and then provided to node operators that never have direct access to the funds. There are no fees for depositing ETH but there is a 5% fee on all staking rewards that is going to node operators and another 5% fee is going to the Lido DAO treasury. The remaining 90% are being distributed to the holders of stETH.
Many people believe that Lido will only be useful until Ethereum has fully implemented proof of stake, but such liquid staking will always have utility. That’s why Lido has also migrated to other blockchains that run on proof of stake and allows their users to stake their native coins in a liquid way. Currently Lido is also running on Terra LUNA, , Polygon and Kusama. There are also DeFi applications that have a focus on utilizing liquid staked coins, like the Anchor Protocol, and Lido could bring such applications to all blockchains it is running on.
There are some smart contract risk for staking with Lido, especially for ETH because there could be issues with the adoption of the beacon chain. Still, Lido makes staking much more convenient and is the only way for small holders to take part in decentralized ETH staking.
The LDO Token
LDO is the governance token of Lido. The Lido DAO governs the liquid staking protocols, decides key parameters like fees, decides how the treasury is being spend and executes upgrades to Lido.
There was is a total supply of 1 billion tokens. 36.32% were set aside in the DAO treasury, 35% went to the developers and were locked for the first year and are being vested for another year, 22.18% are being sold to investors and 6.5% went to partnered validators. There was also a very small airdrop to early stakers. All in all, most of the supply is controlled by the founders, they use their funds for further development and for grants but the actual users and stakers received pretty much nothing.
The value of the LDO token depends on how many funds are locked in its smart contracts. If more people mint stETH, or stLUNA or stSOL, then LDO will gain value because not only will the voting rights in the DAO effect more coins but the Lido treasury will grow too. Lido provides a great service by helping small investors to participate in staking and also in DeFi simultaneously while staying decentralized. As proof of stake gains popularity and Ethereum moves closer to adopt it, there could be an increasing demand for platforms like Lido. However, the tokenomics are far from perfect since most of the supply is with the founders but almost nothing went to the users.
The LDO token can be bought on the MEXC Global exchange but you can buy it on the SushiSwap DEX too. You can store your tokens in a normal MetaMask Wallet which you can also use to interact with the Lido application.
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