Lido DAO (LDO)
The Lido DAO (Decentralized Autonomous Organization) is designed to facilitate the staking of Ethereum (ETH) without the need for users to lock their assets or manage staking infrastructure. It offers liquidity for staked proof-of-stake tokens by providing tokenized versions of these assets on a 1:1 basis to users. An example is Lido Staked Ethereum (stETH), which represents staked Ethereum and includes both initial deposits and staking rewards. Lido supports Ethereum and other layer-1 blockchains like Solana, Polygon, Polkadot, and Kusama. Governance in Lido is controlled by the LDO token, which influences key decisions within the liquid staking protocols. Users can also engage in decentralized finance (DeFi) activities to compound their staking rewards.
History of Lido
Lido was launched in December 2020 following the activation of the Ethereum 2.0 Beacon Chain. Initially, staking on Ethereum required multiples of 32 ETH and technical expertise, and staked ETH was locked, limiting its use in other protocols. Lido addressed these challenges by offering non-custodial staking services, enabling users to tokenize their staked ETH as stETH for use across other platforms. Initially focused on Ethereum, Lido expanded to Solana in September 2021, Polygon in November 2021, Polkadot in May 2022, and Kusama in February 2022. Each supported blockchain offers its derivative token, such as bSOL for Solana and stMATIC for Polygon.
| Ticker | LDO |
| Category | Infrastructure |
| Website | https://stake.lido.fi/ |
| @lidofinance | |
| Telegram | lidofinance |
| https://www.reddit.com/r/lidofinance | |
| Contract Addresses | |
|---|---|
| ethereum | 0x5a...32 Copied! |
| optimistic-ethereum | 0xfd...5fCopied! |
| polygon-pos | 0xc3...56Copied! |
| arbitrum-one | 0x13...60Copied! |
Lido technology
Token mechanics
Users can deposit ether into the Lido smart contract to receive stETH tokens, which can be used in other decentralized protocols. stETH tokens are minted upon deposit and burned when withdrawn. The deposited ether is distributed among node operators selected by Lido DAO and locked into the Ethereum proof-of-stake deposit contract. Oracles facilitate communication between the beacon chain and the Ethereum 1.0 chain, updating stETH token balances daily based on the validator's performance. A 10% fee is applied to staking rewards, shared between node operators and the Lido treasury.
Tokenomics
Lido involves two main tokens: the stETH token and the LDO token.
stETH token
The stETH token represents staked ether in Lido, reflecting the value of the initial deposit, staking rewards, and penalties. It is pegged 1:1 to the amount of staked ETH and can be used in various DeFi applications, offering an alternative to staked ether that is both transferable and usable in financial protocols.
LDO token
The LDO token grants governance rights within the Lido DAO. Token holders influence decisions on protocol upgrades and fee structures. A total of 1 billion LDO tokens were minted at launch, distributed among the DAO treasury, investors, developers, founders, and validators. The LDO token's utility lies in enabling holders to participate in the governance of the Lido protocol.
Governance and upgrades
Governance structure
The Lido DAO uses a governance platform to discuss proposals, including Lido Improvement Proposals (LIPs) for core updates. Proposals undergo a review process before being open for community discussion. Snapshot forums offer off-chain voting to gauge sentiment before on-chain voting.
Lido V2 upgrade
Lido V2, proposed in February 2023, introduced two major enhancements: the Staking Router and a new withdrawal mechanism.
Staking Router
The Staking Router aims to decentralize the node operator registry, allowing for diverse participation from solo stakers, small groups, DAOs, and professional operators. It enhances Ethereum's resilience by distributing deposits among multiple entities.
Withdrawals
This feature allows users to unstake stETH in exchange for ETH at a 1:1 ratio. The withdrawal process includes Turbo Mode for standard conditions and Bunker Mode for handling exceptional scenarios.
Advanced DeFi strategies
stETH strategies
In June 2024, Lido partnered with Mellow Finance to offer advanced DeFi vaults for stETH holders. These vaults align with Lido's vision to expand into the Ethereum restaking space, providing additional opportunities for Ethereum stakers.
Decentralized Validator Vault
Launched in August 2024, the Decentralized Validator Vault enhances the number of Distributed Validators and boosts network security. Stakers can earn rewards from stETH and DVT provider incentives through protocols like SSV, Obol, and Mellow.