What is Lido DAO (LDO)? Everything you need to know

Lido's liquid staking service enables users to access staking rewards without sacrificing token liquidity. Lido empowers users to utilize their staked assets, supporting various PoS cryptocurrencies. The platform provides a liquid staking solution that lets users earn rewards on staked coins while also receiving a tokenized version of the staked coins. This token can generate returns in other DeFi protocols.

What is Lido (LDO)?

Lido DAO is a cutting-edge decentralized autonomous organization that provides a liquid staking solution on Ethereum 2.0 and other Proof of Stake (PoS) networks such as Solana, Polygon, Polkadot, and Kusama. Through Lido DAO, users can convert their staked assets into a liquid form for use in other protocols, a concept known as 'liquid staking'. This process involves locking up assets initially and receiving a tokenized version of the staked tokens on a 1:1 basis, which can then be used for additional DeFi activities to earn extra yields.

Established in December 2020 shortly after the launch of ETH 2.0, Lido DAO has been managed by key members like P2P Capital, KR1, and Semantic Ventures. It has gained a strong reputation for its liquid staking services and currently has over $13 billion in staked assets. While focusing primarily on Ethereum, Lido DAO is expanding its services to other blockchains like Terra and Solana, both of which introduced staking in 2021, as well as other layer 1 PoS networks.

What sets Lido DAO apart is its decentralized approach and attractive annual percentage rates (APR). The platform offers APRs of 4.8% for Ethereum, 8.1% for Terra, and 6.6% for Solana staking.

Who is responsible for developing the Lido DAO platform?

Lido was founded by Kasper Rasmussen and Jordan Fish, also known as CryptoCobain. The Lido DAO is backed by a group of individuals and organizations with strong reputations in the DeFi sector. Members of the Lido DAO include Semantic VC, Chorus, ParaFi Capital, P2P Capital, Libertus Capital, Terra, StakeFish, Bitscale Capital, StakingFacilities, and KR1. Notable angel investors include Stani Kulechov from Aave, Banteg from Yearn, Will Harborne from Deversifi, Julien Bouteloup from Stake Capital, and Kain Warwick from Synthetix.

How does the Lido Protocol work?

The liquid staking services provided by the Lido protocol enable users to earn block rewards from staking PoS assets while mitigating issues such as illiquidity, complexity, and centralization. The Lido DAO presents an innovative solution that grants users access to tokens that are typically locked up, thereby reducing the barriers to entry and costs associated with staking requirements.

When users stake tokens on the Lido DAO platform, they interact with a staking pool smart contract that stakes the tokens on the relevant PoS blockchain. Users also receive tokenized versions of their deposited funds (stAsset tokens), which can be used to earn rewards not only from the original protocol but also from other DeFi protocols and decentralized applications (dapps) such as lending and yield farming. This allows users to maximize their potential earnings.

The staking pool smart contract manages user deposits and withdrawals, determines staking reward fees, delegates funds to node operators, and mints and burns tokens as necessary.

In what ways can tokens be utilized?

Consider Ethereum (ETH) as an example. Through Lido staking, users receive 1:1 stETH tokens, which correspond to their deposited ETH. These stETH tokens can be used similarly to regular ETH, allowing users to earn staking rewards in real-time, with updates provided daily. Using Lido does not require lock-ups or minimum deposits.

The liquid staking protocol of Lido DAO encompasses three main processes: staking, minting, and DeFi.

Staking

Users can stake any amount of ETH by depositing it onto the platform.

Minting

In exchange for the staked ETH, Lido issues stETH tokens at a 1:1 ratio, representing the staked ETH.

DeFi

Users can utilize these stETH tokens within the DeFi ecosystem to potentially earn higher yields without needing to lock up their staked coins.

Through the Lido DAO platform, users can stake any quantity of ETH to the Beacon Chain without being bound by typical lock-up requirements. Lido charges a 10% fee for providing this staked ETH service.

How can validator rewards be earned from staked assets?

Validator rewards can be earned by staking PoS tokens on the platform. To stake ETH, become a validator, and earn rewards for validating transactions on the Ethereum platform, users typically need to stake a minimum of 32 ETH tokens. However, Lido offers a way to stake a fraction of this amount and still earn a proportional share of block rewards.

Users deposit ETH into the Lido smart contract and receive an equivalent amount of stETH, an ERC-20 token representing the deposited ETH. These tokens are minted upon receiving the funds and burned when users withdraw their original ETH. The staked funds are then distributed to multiple validators (node operators) on the Lido network and deposited into the Ethereum Beacon Chain, where they are secured in a smart contract and inaccessible.

The Lido DAO assigns, onboards, supports, and adds validators' addresses to the smart contract registry, providing them with a set of keys for validation. The ETH deposited on the Lido platform is divided into groups of 32 ETH among active Lido node operators, who use their public validation key to validate transactions. The block rewards are then shared proportionately among the validators.

This method of distributing staked assets eliminates the single-point-of-failure risks associated with single-validator staking.

How can I buy the Lido DAO token and earn staking rewards?

If you're seeking to diversify your digital asset portfolio, adding Lido tokens could be a smart move. The Tap app offers a simple and secure method for users to quickly add these tokens to their portfolios, making it one of the easiest trading experiences available.

Through the Tap app, users can enter the Lido ecosystem by purchasing LDO tokens using either cryptocurrency or fiat currency. These tokens can then be securely stored in the integrated crypto wallet or transferred to the Lido platform to participate in its earning opportunities. To begin, simply download the app and create an account.