Key Takeaways
Lido is a liquid staking protocol for Ethereum (ETH) that lets users stake ETH without the standard 32 ETH minimum requirement.
When you stake ETH through Lido, you receive stETH, a token that represents your staked ETH and accrues staking rewards daily.
stETH can be used in other DeFi protocols to earn additional yield while your original ETH continues to generate staking rewards.
Following the Lido V2 upgrade in May 2023, ETH withdrawals are fully enabled, so users can unstake their ETH at any time.
LDO is Lido's native governance token, giving holders voting rights in the Lido DAO.
Introduction
Staking on proof-of-stake blockchains traditionally requires locking up tokens for a set period, which means you can’t access or use them until the lock-up ends. This creates a trade-off: you earn staking rewards at the cost of flexibility. Lido addresses this trade-off through liquid staking, where you can stake tokens and receive a tradeable token in return, keeping your assets accessible.
Lido launched in 2020 and has grown into the largest liquid staking protocol by total value locked. Today, it operates exclusively on Ethereum, focusing its staking infrastructure on the network where it has the deepest integration and largest user base.
What Is Lido?
Lido is a liquid staking protocol built on Ethereum. It allows users to stake ETH without meeting the standard 32 ETH requirement needed to become a validator directly on the Ethereum network. Instead, users can stake any amount of ETH, and Lido pools deposits together to run validators on their behalf.
The protocol was founded in 2020 and initially supported several proof-of-stake (PoS) blockchains, including Solana, Polygon, and Polkadot. In 2023 and 2024, Lido wound down support for those networks and shifted its focus entirely to Ethereum, where it operates as a major piece of staking infrastructure.
Lido does not custody your funds in a traditional sense. Deposits are managed through on-chain smart contracts, and a network of professional node operators handles the actual validation work. Rewards are distributed automatically based on your share of the staking pool.
How Does Lido Work?
When you deposit ETH into Lido, the protocol stakes it on the Ethereum beacon chain through a set of smart contracts. In return, you receive liquid staking tokens (LSTs) called stETH on a 1:1 basis with the ETH you deposited.
stETH is a rebasing token. This means the amount of stETH in your wallet increases each day as staking rewards are credited. If you hold 1 stETH and the daily reward rate is 0.01%, your balance becomes 1.0001 stETH the next day.
One of the key advantages of stETH is that it can be used across DeFi applications. You can provide stETH as collateral for loans, deposit it into liquidity pools, or use it in yield strategies. This allows you to potentially earn additional yield on top of the base staking rewards, though using DeFi protocols carries its own risks.
Since May 2023, when Lido V2 launched, users can also withdraw their staked ETH directly through the protocol. This removed the earlier limitation where unstaking required waiting for third-party liquidity or selling stETH on secondary markets. Withdrawals process through a queue that depends on the Ethereum network's withdrawal processing capacity.
The Lido DAO
Lido is governed by the Lido decentralized autonomous organization (DAO), a community-driven organization that makes key decisions about how the protocol runs. This includes setting fee parameters, approving or removing node operators, and managing the protocol's treasury.
The DAO uses smart contracts to enforce its governance rules. Proposals are submitted on-chain and go through a voting process. Any LDO token holder can participate in voting, and the outcome is applied automatically when a proposal passes.
Decentralized governance is intended to keep Lido aligned with the interests of its users rather than a centralized team. In practice, governance participation rates and the concentration of LDO holdings among early stakeholders are factors that users should be aware of when evaluating the protocol's decentralization.
What Is LDO?
LDO is Lido's native token and functions as a governance token for the Lido DAO. It is an ERC-20 token on Ethereum with a total supply of 1 billion. LDO holders can vote on protocol decisions, with voting power proportional to the number of LDO tokens held.
LDO is not a staking reward token. Staking rewards are paid in stETH, which accrues automatically. LDO is specifically for governance participation: it gives the community a mechanism to propose and vote on changes to the protocol.
LDO can be bought and sold on cryptocurrency exchanges and transferred between wallets like any other ERC-20 token. Holding LDO doesn’t entitle you to a share of protocol revenue by default, though governance proposals can change this.
FAQ
What is Lido used for?
Lido is used to stake ETH without locking it up. Users deposit ETH, receive stETH in return, and earn staking rewards daily. stETH can also be used across DeFi applications for additional yield opportunities.
How does stETH work?
stETH is a token that represents your staked ETH in the Lido protocol. It is a rebasing token, meaning your stETH balance increases each day as staking rewards accumulate. You can hold stETH to earn rewards, or use it in DeFi protocols.
What is the LDO token?
LDO is Lido's governance token. Holders can vote on protocol changes, with voting power proportional to their LDO holdings. LDO does not represent staking rewards; staking rewards are paid through stETH.
Is it possible to withdraw ETH from Lido?
Yes. Since the Lido V2 upgrade in May 2023, ETH withdrawals are fully enabled. Users submit a withdrawal request through the Lido interface, and ETH is returned after processing through the Ethereum network's withdrawal queue. Processing times vary depending on queue length.
Closing Thoughts
Lido simplifies Ethereum staking by removing the 32 ETH barrier and keeping staked assets liquid through stETH. Since enabling withdrawals in 2023, it has addressed one of the main limitations of earlier liquid staking designs. The protocol is governed by the Lido DAO through LDO token voting. As with any DeFi protocol, users should understand the associated smart contract risks and research the protocol independently before participating.
Further Reading
Disclaimer: This content is presented to you on an "as is" basis for general information and educational purposes only, without representation or warranty of any kind. It should not be construed as financial, legal, or other professional advice, nor is it intended to recommend the purchase of any specific product or service. You should seek your own advice from appropriate professional advisors. Where the content is contributed by a third-party contributor, please note that those views expressed belong to the third-party contributor, and do not necessarily reflect those of Binance Academy. Digital asset prices can be volatile. The value of your investment may go down or up and you may not get back the amount invested. You are solely responsible for your investment decisions and Binance Academy is not liable for any losses you may incur. For more information, see our Terms of Use, Risk Warning and Binance Academy Terms.