Offering a staking solution for Ethereum 2.0, Lido provides liquidity for staked assets, including liquid Ethereum staking. The Lido ETH staking facilities offer users the opportunity to mint stETH tokens and freely use them throughout the Lido ecosystem. This includes popular decentralized finance (DeFi) protocols where users can earn yield on their tokens. The Lido decentralized autonomous organization (DAO) governs the Lido ecosystem and the project’s staking app. LDO tokens, the second token in the ecosystem, are crucial to the DAO. But, what is Lido doing to offer such competitive liquid ETH staking services? Also, how much control over the platform does the Lido DAO have? And, what is so important about the LDO token?
In this article, we will address the above questions. Furthermore, we’ll look at exactly how easy it is to participate in the Lido ETH staking facilities and how users collect rewards. Also, we’ll be taking a deeper look into the Lido decentralized autonomous organization (DAO) and the roles and responsibilities it has.
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What is Lido?
Operating on its own native blockchain, Lido is a platform offering liquidity for staked assets. Further, Lido provides Ethereum staking facilities across multiple networks as a staking solution for Ethereum 2.0. At present, this includes the Ethereum 2.0 network and the Terra network, with Solana and Aave also soon to be available.
Offering a non-custodial service, users can take advantage of liquid ETH staking features. By simply staking ETH, users receive staked ETH tokens (stETH) in return. Users can then use the stETH tokens within the Lido ecosystem, including various popular decentralized finance (DeFi) platforms. Lido provides an opportunity for traders to earn rewards on smaller ETH deposits, with no minimum staking requirement.
The Lido staking app, the Lido decentralized autonomous organization (DAO), and the native LDO token together provide a solution for staking ETH and earning rewards. The project aims to offer fully decentralized ETH staking services. However, the team recognizes this is not yet possible sustainably. Therefore, a DAO is in place to ensure governance and upkeep of the platform. Also, all decisions, proposals, and updates from the DAO will be completely transparent.
Lido DAO
The project’s governing decentralized autonomous organization, or Lido DAO, is responsible for the management and smooth-running of the staking app. Also, the Lido DAO is in charge of distributing funds from the Lido Treasury. This could cover things such as development updates or community initiatives.
As the Lido blockchain is largely structured on the design of Ethereum 2.0’s Beacon Chain, the project recognizes it needs to be flexible and adaptable. This is to offer seamless staking compatibility with the continued Ethereum 2.0 launch, rolling out in several phases. Moreover, the team agrees a decentralized autonomous organization (DAO) governance structure is more beneficial than a small centralized entity. This ensures decisions and terms surrounding the platform updates are available for negotiation, fair, and of majority approval.
Alongside the responsibilities mentioned above, the Lido DAO is responsible for promoting the Lido brand and recruiting new validators and node operators. The DAO achieves this through several marketing and educational activities. Also, the Lido DAO holds the governing rights to various protocol parameters. This includes updates for approaching Ethereum 2.0 features and assigning oracles to present the reward/slashing rate feed, establishing stETH token balances. Also, the DAO can deploy smart contracts and set platform fees, among other duties.
The Lido DAO is a growing community of contributors to the platform working towards a shared goal of building the future of Lido.
LDO Token
The Lido blockchain operates with a dual token system, the LDO token, and stETH - we will discuss stETH shortly. The native LDO token is the key to receiving governing rights of the Lido ecosystem. One LDO token holds the weight of one vote. Therefore, the more LDO tokens one locks up in the voting contract, the more voting power and influence over decisions one has. Moreover, the voting mechanism for the LDO token governance is adjustable and upgradable, operable in parallel to other adaptable protocols on Lido.
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How does Lido ETH Staking Work?
Lido presents a decentralized platform to offer frictionless liquid Ethereum (ETH) staking services with competitive rewards. Firstly, users can stake their ETH holdings with no minimum requirement. The Lido ETH staking features offer daily staking rewards. Upon staking, users can mint stETH tokens, as staked ETH tokens, at a 1:1 ratio of the ETH deposited. The stETH balance takes into account the staked funds and staking rewards (minus any slashes or penalties).
Traders can use these stETH tokens within other popular decentralized finance (DeFi) applications with an opportunity to compound their yield. stETH tokens are flexible across decentralized applications (dApps) for yield farming, lending, or as collateral.
The Lido protocol smart contract holds the ETH funds from user deposits. Then, the protocol contract and said funds within the contract will become locked into an Ethereum Proof-of-Stake (PoS) deposit contract.
The ETH from users that is locked into the platform is delineated at 32 ETH. At this stage, the ETH funds are assigned to various node operators who can actively validate the network with the ETH stake. The nodes will never have direct access to the staked ETH on the platform. Furthermore, it’s worth noting that any ETH funds a user deposits at the time of writing will be unable for withdrawal until the implementation of smart contracts and transfers within the Ethereum 2.0 Phase 2 rollout.
Unlike many other staking platforms, nodes don’t require a deposit with equal collateral of staking positions. Rather, the Lido DAO will ensure chosen nodes have a proven track record of staking assets, requiring only one asset deposit in the protocol contract. The Lido DAO aims to make the network infrastructure “more capital-efficient” using this approach.
stETH
Offering a truly liquid Ethereum staking solution, Lido provides users with a tokenized version of their staked ETH, stETH. A user’s stETH is representative of their entire ETH holdings on the platform, accruing daily staking rewards. The stETH tokens are a liquid alternative to the staked ETH and are compatible and fully operational with many other decentralized finance (DeFi) protocols. Unlike staked ETH on other platforms, stETH is “free from the limitations associated with a lack of liquidity”. Users’ stETH balance is a one-to-one representation of the full amount of ETH a user would be able to withdraw from the platform.
Until the rollout of Phase 2 of the Ethereum 2.0 upgrade, users will not be able to unstake their ETH on Lido. However, upon deployment of the transfers and smart contract feature upgrades, Lido will also be updating the protocol. This will then provide the stETH token holders with the option to burn their stETH in return for their funds staked on the platform.
The overarching goal of Lido ETH staking is providing liquidity for staked ETH on the Beacon Chain. However, it is the same liquidity that makes stETH available to sell on crypto exchanges. Moreover, before the launch of the Ethereum 2.0 Phase 2 update, exchange transactions will be the only way to capitalize on profits from the stETH tokens.
On the other hand, stETH still very much presents a liquid Ethereum staking service. The Lido ETH staking ecosystem expands across many of the platforms seeing high traffic in the decentralized finance (DeFi) industry. This includes several top DeFi protocols listed on DeFi Pulse. Moreover, stETH is fully flexible with how it can be used in protocols (e.g., lending or collateral, etc.).
Lido Ecosystem
The Lido ecosystem consists of several platform features and partnerships. Further to the DAO and the dual token system, including the LDO token and stETH, the Lido ecosystem includes the node operator registry. Also, the ecosystem consists of Beacon Chain oracles providing stETH token balances. Additionally, coming soon are the withdrawal contracts that are currently disabled until the launch of Ethereum 2.0 Phase 2.
Furthermore, the Lido ecosystem spans far and wide across the decentralized finance (DeFi) industry, allowing stETH to be used in other DeFi protocols. For storing stETH, users have a wide choice of crypto wallets, including MetaMask, TrustWallet, and the Ledger hardware wallets. Moreover, stETH token holders can use their tokens with reputable DeFi platforms such as Curve, Yearn Finance, and Balancer.
Lido Ethereum (ETH) Staking Referral Rewards
The Lido ETH staking app has a referral scheme offering referrers of the platform rewards at the time of writing. All users have to do is connect their crypto wallet to the Lido app. In turn, this will automatically generate a unique referral link. Users can then send this link to as many friends and family members as they like.
For each referee that signs up and stakes one ETH or more, the referrer will receive LDO token rewards. The calculation for rewards occurs over a period of two weeks, with real-time tracking available on the referral page. Referrers receive 15 LDO tokens for every one ETH their referee stakes over a 14-day period. Referrers receive payouts the following week of the period’s end.
Rewards are available through DeversiFi, with participants needing to connect their wallets to claim the rewards. Also, the rewards for participants are available in a public report after each period. The duration of the referral reward scheme is unknown. The project states the rewards will continue until the LDO token referral reward pool has been exhausted. However, the Lido DAO can vote to re-fill the reward pool at a future date.
Exploring Lido & Lido ETH Staking Summary
Lido is a liquid Ethereum staking service and Ethereum 2.0 staking solution. Offering decentralized liquidity for staked assets, users receive stETH for locking up their ETH on the platform. Then, users are free to use stETH as they wish throughout the Lido ecosystem. Lido is a suitable staking solution for everyday traders or investors, with only small amounts of ETH. There is no minimum staking requirement, and rewards accrue daily. Moreover, as a non-custodial service, Lido is a more secure alternative to staking with centralized exchanges. Also, Lido requires little maintenance compared to staking as a validating node.
The project development and direction are in the hands of the Lido decentralized autonomous organization (DAO). Responsible for everything from brand and marketing services to recruiting network participants, the DAO is crucial to the project. Furthermore, it is the project’s DAO that has management access to users' funds. The project makes it very clear that node operators do not have direct access to users' funds.
The Lido ecosystem aims to provide liquid staking for ETH on the Beacon Chain. As such, the project recognizes the need to be flexible and adaptable as Ethereum evolves into the next phases of its development. As the largest smart contract-enabled blockchain, Ethereum is enhancing its features, offering higher throughput, faster transaction speeds, and lower gas costs.
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