How does Lido work? | Lido: Help (2024)

FAQs

How does Lido work? | Lido: Help? ›

Lido allows users to receive staking rewards in real-time. When staking with Lido, users receive stETH tokens on a 1:1 basis representing their staked ETH. stETH balances can be used like regular ETH, and are updated on a daily basis to reflect your ETH staking rewards.

stETH is Lido's liquid variant of staked ETH. stETH is a transferable rebasing utility token representing a share of the total ETH staked through the protocol, which consists of user deposits and staking rewards. Because stETH rebases daily, it communicates the position of the share daily.

How does Lido (LDO) work? Liquid staking services like Lido get new users to participate in securing PoS networks such as theirs by allowing users to stake any amount of proof-of-stake assets in exchange for block rewards.

How does it generate revenue? In return for providing the staking infrastructure, risk and rewarding validators, Lido DAO earns a 10% fee of staking rewards.

While each network works differently, generally, the Lido protocols batch user tokens to stake with validators and route the staking packages to network staking contracts. Users mint amounts of stTokens which correspond to the amount of tokens sent as stake and they receive staking rewards.

As previously mentioned, Lido Finance has undergone comprehensive security audits conducted by reputable firms such as Quantstamp, Sigma Prime, and MixBytes. These audits ensure that the platform adheres to rigorous safety protocols.

The current estimated reward rate of Lido Staked ETH is 3.28%. This means that, on average, stakers of Lido Staked ETH are earning about 3.28% if they hold an asset for 365 days. The reward rate has not changed over the last 24 hours. 30 days ago, the reward rate for Lido Staked ETH was 2.94%.

Lido allows users to receive staking rewards in real-time. When staking with Lido, users receive stETH tokens on a 1:1 basis representing their staked ETH. stETH balances can be used like regular ETH, and are updated on a daily basis to reflect your ETH staking rewards.

What are the risks of staking ETH via Lido? Staking ETH via Lido has inherent risks tied to liquid staking, including slashing, stETH deviating from its ETH peg, and potential smart contract vulnerabilities. Learn more details here. *Rewards are not guaranteed.

Liquid staking offers several advantages over traditional staking methods. First, it provides traders with increased flexibility. By being able to use their staked assets for other financial activities, token holders can access liquidity without needing to unstake their tokens.

Is staking on Lido taxable? ›

Similarly, on Lido, stakers received stETH when staking to ETH2. If you chose to see staking as a taxable event, any capital gain or loss would be the difference between the value of the ETH when you purchased it and when you staked it.

How long do I need to wait before receiving rewards? With Kiln staking, rewards are earned at each block proposed by the validator. With Lido, you receive staking rewards within 24 hours of your deposit being made, without waiting for validator activation.

According to several people with knowledge of the matter, the project is called Symbiotic and has drawn backing from not only the Lido co-founders, Konstantin Lomashuk and Vasiliy Shapovalov, through their venture firm Cyber Fund, but also Paradigm, the crypto venture capital firm that is one of Lido's lead investors.

So it's best to leave your rewards in your rewards address until you need them. As your staking rewards are held in the rewards address of your wallet, and not by the stake pool, you do not need to withdraw your staking rewards when delegating from one stake pool to another.

Liquid staking allows stakers to keep the liquidity of their staked tokens by using a stand-in token that they can use to earn additional yield through DeFi protocols. Before diving into liquid staking, let's understand staking and the problems associated with it.

Ethereum withdrawals are live on Lido Protocol, allowing users to unstake their stETH 1:1 directly through the Lido UI.

Lido DAO voting power is linearly proportional to the token balance of the voter on a specified block (”snapshot”). The more LDO there is on a user's balance, the greater voting power the voter gets.

Counterparty risk: when staking through Lido or other Liquid Staking solutions, users are entrusting their funds to a third party - in this case, the staking provider. There is a risk that the staking provider could suffer a hack, insolvency or act maliciously, which could lead to a loss of funds.

wstETH (wrapped stETH) is a non-rebasing version of stETH, wstETH's price denominated in stETH changes instead. The wstETH balance can only be changed upon transfers, minting, and burning. At any given time, anyone holding wstETH can convert any amount of it to stETH at a fixed rate, and vice versa.

When you deposit ETH into Lido, new stETH tokens are created for you. These tokens reflect your staking rewards daily through a process called a "rebase," which happens at 12 PM UTC. Your stETH balance grows automatically with the staking rewards.