What is Lido?

Key Takeaways

• Lido Finance is a liquid staking service for cryptocurrencies.
• Users deposit coins into a staking contract and receive derivative tokens (e.g., stETH for ETH), ensuring liquidity while earning rewards.
• ETH is the most popular asset on Lido, with stETH supported by major decentralized exchanges (DEXs).
• Governed by a Decentralized Autonomous Organization (DAO), Lido uses LDO tokens for governance decisions.

Background

Founders and Funding

Founded by Konstantin Lomashuk and Vasily Shapovalov, Lido launched on December 19, 2020, after testing on Goerli. Key milestones:

• 2020: Raised $2M from investors like Semantic Ventures and ParaFi Capital.
• 2021: Paradigm invested 15,120 ETH for 70M LDO tokens.
• 2022: Andreessen Horowitz contributed $70M.

👉 Explore Lido’s staking opportunities

How Lido Solves Ethereum Staking Challenges

Problems Addressed

1. High Entry Barrier: Ethereum 2.0 requires 32 ETH to become a validator.
2. Illiquidity: Staked ETH is locked until Ethereum’s upgrades complete (estimated late 2022 at the time).
3. Technical Risks: Validators face penalties ("slashing") for downtime.

Solution

• Liquid Staking: Users stake any amount of ETH, receive stETH, and trade/use it in DeFi.
• Pooled Validation: Lido delegates ETH to professional validators, minimizing slashing risks.

How Lido Works

Process Overview

1. Deposit ETH → Receive stETH (1:1 ratio).
2. stETH accrues daily rewards (auto-rebasing).
3. Use stETH in DeFi (e.g., lending, liquidity pools).

Architecture

• Staking Pool: Smart contracts manage deposits/delegations.
• Oracle: Tracks validator balances daily; adjusts stETH supply.

Fees

• 10% commission (5% to node operators, 5% to Lido treasury).

Supported Cryptocurrencies

| Blockchain | Token | Derivative Token |
|------------|-------|------------------|
| Ethereum | ETH | stETH |
| Solana | SOL | stSOL |
| Polkadot | DOT | stDOT |
| Polygon | MATIC | stMATIC |

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Governance and Tokenomics

LDO Token

• Max Supply: 1B (64% to founders, 35% to DAO treasury).
• Voting: Holders decide on protocol upgrades/fees.

stETH

• ERC-20 token representing staked ETH + rewards.

FAQ

1. Can I unstake ETH immediately?

No. ETH remains locked until Ethereum enables withdrawals. However, stETH can be traded on DEXs.

2. Is Lido decentralized?

Yes. Validators are vetted by the DAO, and multi-signature wallets secure assets.

3. What happens if a validator is slashed?

Losses are socialized across all stETH holders.

4. Which wallets support stETH?

MetaMask, Ledger, and most Ethereum-compatible wallets.

Lido combines staking rewards with DeFi liquidity, making it a cornerstone of Ethereum’s Proof-of-Stake ecosystem.