Lido review: liquid staking for Ethereum
How Lido turns staked ETH into a transferable token, who runs the validators, and the trade-offs of liquid staking.
Lido is a liquid staking protocol that launched on Ethereum in December 2020. It lets users stake ETH without running a validator and without locking up their position.
How liquid staking works
- A user deposits ETH into Lido's contracts.
- Lido assigns the ETH to validators run by a set of professional node operators.
- The user receives stETH, a token that represents the staked ETH and reflects staking rewards.
- stETH can be held, transferred or used in other applications, while the underlying ETH stays staked.
Why it became popular
Running a validator requires technical skill and a minimum amount of ETH. Liquid staking removes those barriers and keeps the position transferable.
The LDO token
LDO is Lido's governance token. Holders vote in the Lido DAO on parameters, fees and node operator decisions.
Withdrawals
Since Ethereum enabled staking withdrawals in 2023, stETH holders can request to redeem it for ETH through Lido. Requests enter a queue and are completed as validators exit, so redemption can take time; the alternative is to sell stETH on the market at the current price.
Risks and debates
- Smart contract risk in the staking and token contracts.
- Slashing of validators run by node operators.
- Price of stETH on the market can trade slightly away from ETH, especially during stress.
- Concentration: a large share of staked ETH in one protocol has been debated in the Ethereum community.
Read What is staking? for the basics. The market is on the LDO coin page.
This review describes the project's design and is not investment advice. Cryptocurrency prices can be highly volatile.
Blog posts are for education and information only and are not investment, legal or tax advice.