Ethereum staking
Staking refers to holding funds in crypto wallets and supporting a blockchain network's operation. Holders are also referred to as stakers and are rewarded for their effort. ETH is one of the first programmable blockchains, allowing decentralized games and financial services deployment via its smart contract capabilities. Since its inception, Ethereum has experienced tremendous growth. But due to its high gas fees, the platform's growth is hindered.
Ethereum is transitioning from a proof-of-work (PoW) to a proof-of-stake (PoS) network to improve its security and scalability. Ethereum 2.0 is slated to be fully deployed by September 2022. Following this transition, the ETH network will rely on validators staking their tokens and helping secure the network in exchange for rewards
Lido is a staking platform based on the ETH blockchain. Top blockchain staking providers support it. Usually, you would need 32 ETH to become an Ethereum validator on the ETH 2.0 Beacon Chain, or you use different staking pools. Lido is unique to the industry and allows you to stake any Ethereum (ETH) amount. Lido's novelty is that you can deploy your staked Ethereum across DeFi apps. Stakers do not have to choose between DeFi participation or staking Ethereum.
Lido gathers all the deposited Ethereum (ETH) from users. Users receive stETH, the native asset, in exchange for their ETH deposits. The protocol stakes the deposited ETH through a trusted group of node operators on ETH 2.0. It aims to eliminate various problems while staking Ethereum and reduce illiquidity and immovability. In simple words, Lido allows you to stake Ethereum anytime without worrying about a lock-up.
Users can stake ether (ETH) on the Lido platform and receive staking rewards for securing the Ethereum blockchain. Stakers receive stETH representing the amount of ETH staked at a 1:1 ratio. The main advantage of using the Lido platform is that you can use stETH in the same way you would use regular ETH. Moreover, the staking rewards are received daily with no minimum deposit or lock-up periods. Staking on Lido enables users to enhance their security without any risks.
The Annual Percentage Yield (APY) for the staked ETH depends on the network's total amount of staked ETH. As the staked ETH increases, the APY decreases. Users should also remember that Lido will apply a 10% fee for your yield, which will already be deducted from your rewards. The protocol uses pooling to transfer the liquidity from L1 to L2, which also incurs a small gas fee for your part of the share of the transaction.
Lido is the most flexible and effective way to stake their ether (ETH). It also contributes to the decentralization advantages of the Ethereum network. Lido's liquid staking feature and the governing DAO are set apart from other protocols. Users can earn rewards using liquid staking protocols, which means you don't need to lock assets or maintain a staking infrastructure. Soon after the tokens are deposited, users receive liquid tokens in exchange. These tokens are staked by the DAO-based smart contracts elected by the staking provider. These providers don't have access to the assets provided by users since the Lido DAO manages these.
Lido allows ETH staking without interacting with DeFi apps. In addition, Lido allows users to keep complete control over their staked assets. Users choosing to stake with Lido have the following benefits
Despite Ethereum 2.0 holding majority support, there are chances that it might not be implemented according to the official roadmap.
In addition, there are also unavoidable risks associated while using smart contracts. For instance, smart-contract networks are vulnerable to security risks like hacks and self-inflicted failures.
Therefore, DeFi platforms such as Lido are particularly vulnerable to security threats. These platforms offer exit transactions that are triggered by permissionless means to their users. This enables them to close down validators and take the ecosystem under their control. But to avoid such scenarios, Lido is audited by industry leaders in blockchain security such as Quantstamp, MixBytes, and Sigmaprime.
How to stake Ethereum (ETH) with Lido?
In a very few simple steps, Ethereum holders can start staking Ethereum (ETH) on the Lido protocol. Unlike other ETH staking protocols, Lido enables users to unstake their tokens at any time because it has no penalty fee and no locked down period. In addition, rewards are awarded every 24 hours, depending on the current APY.
Let's understand the staking procedure on Lido.
Go to stake.lido.fi and connect your wallet to the Lido protocol by simply clicking on the "Connect wallet" tab. In addition, you also have to accept the terms and conditions and then choose the wallet you wish to connect. After selecting the wallet from the list of supported wallets, you must confirm your wallet's connection to the Lido app.
After connecting your wallet to the Lido ETH staking app, the app will display your total available ETH that can be staked. To initiate staking Ethereum, select the amount of ETH you wish to stake and click on submit. Remember, keep some ETH in your wallet to pay the transaction fees.
Once you select the staking amount, your wallet will ask you to confirm the transaction. You need to check all the details and Confirm the transaction. This is how you stake Ethereum with Lido. Remember that you can also unstake your ETH at any time.
What is stETH?
Lido is a liquid staking protocol on Ethereum, allowing users to stake any amount of ETH. The protocol issues a stETH, the tokenized form of staked Ether, on a 1:1 ratio as a reward. It combines your initial staking deposit and the daily staking rewards. The stETH balance is updated daily at 12 pm UTC via token supply rebase to reflect earned stake rewards. Lido's stETH token can be used just as ether (ETH). Holders earn rewards through integrated platforms like Curve or SushiSwap, sell stETH tokens, convert them back to ether (ETH), or use them as collateral for DeFi lending.
The Lido DAO (decentralized autonomous organization) manages the Lido staking protocol. It represents the community that develops the necessary tools and services to stake Ethereum. The members of the Lido DAO monitor the growth and development of the Lido protocol. This DAO is also responsible for the technical development of the platform and promotes Lido through educational content and other activities.
The LDO token is the governance token responsible for the decentralized ownership of Lido. LDO holders can vote on any decision affecting the future of the platform. The amount of LDO determines the voting power. These tokens can also be used to manage fee parameters and add or remove nodes from the network.
Staking ETH on Lido is a convenient way to stake on the Ethereum 2.0 network. There are several ways to generate passive income in the crypto space, and Lido ETH staking might be the one. After all, you don't have to worry about your ETH getting locked up. As with other staking protocols, you can claim your digital assets anytime without them being locked up for one year.
Besides helping to secure the Ethereum 2.0 network, Staking Ether (ETH) using Lido can make you earn decent rewards over time.
Anyone can stake ETH on Lido, as there is no minimum required amount to start staking. You can also unstake your crypto anytime, and rewards are distributed daily.
Lido DAO (LDO) tokens cannot be staked. They can only be used for governance votes and trading purposes.
Lido finance has a 10% fee automatically applied to your earned rewards. This fee is applied only when you start earning staking rewards.
Yes, Lido is a DeFi application.
Yes, the Lido liquid staking protocol has been audited by industry leaders such as Quantstamp, MixBytes, and Sigmaprime.
Once you stake Ethereum on Lido, the stETH tokens on a 1:1 ratio will be issued. This stETH can be used as collateral to get a DeFi loan, or you can exchange it for another asset.
Anyone with a decentralized crypto wallet and some ether can start staking ETH with Lido. Just connect your wallet to the Lido app, select the amount of ETH to the stake, and then confirm the transaction from your wallet. The Ethereum staking rewards are awarded daily.
Using the Lido protocol for ETH staking can help you generate passive income and put idle ETH into use.