What is Lido Staked Ether (STETH)?
Lido Staked Ether (STETH) is a synthetic asset created by the Lido DAO to enable Ethereum holders to earn staking rewards without having to lock up their tokens. STETH represents a claim on a portion of the ETH staked by the Lido DAO in the Ethereum 2.0 Beacon Chain, and it can be traded, transferred, and used as collateral like any other ERC-20 token. STETH is backed 1:1 by ETH, meaning that the supply and market value of STETH correspond to the staked ETH held by the Lido DAO.
How does Lido staking work?
Lido is a decentralised autonomous organisation (DAO) that allows users to pool their ETH and stake it in the Ethereum 2.0 Beacon Chain. The Beacon Chain is the first phase of Ethereum 2.0 that launched in December 2020 and implements proof-of-stake (PoS) consensus, which differs from the current proof-of-work (PoW) consensus used in Ethereum 1.0. PoS allows users to stake their ETH as collateral instead of mining it by solving complex mathematical puzzles, which is more energy-efficient, secure, and scalable than PoW.
However, staking requires users to lock up their ETH for a certain period and until the Ethereum 2.0 network reaches full maturity, which may take two to three years. This means that stakers cannot use their staked ETH for other purposes, such as trading, investing, or borrowing, and may miss out on potential gains or losses in the meantime. Also, not all ETH holders have enough ETH to meet the minimum threshold required for staking, which is currently set at 32 ETH or around $70,000.
Lido solves these issues by offering a liquid and decentralised solution for staking ETH. Users can deposit any amount of ETH to Lido and receive an equivalent amount of STETH, which represents their share of the staked ETH. Lido uses a network of validators to stake the pooled ETH and distribute the rewards to STETH holders proportionally. STETH holders can trade, transfer, or use their STETH at any time, without having to wait for the staking period to expire or worry about the technicalities of staking and validator selection.
What are the benefits of staking with Lido?
Lido provides several benefits for ETH holders who want to stake their ETH:
- Low barrier to entry: Lido allows users to stake any amount of ETH, even if they do not have 32 ETH or more, which is the minimum threshold required for solo staking.
- Liquidity: STETH is a liquid asset that can be traded, transferred, or used as collateral on various DeFi protocols. This means that STETH holders can earn staking rewards while maintaining the flexibility and accessibility of their assets.
- Decentralisation: Lido is a decentralised and transparent solution that uses a network of validators to secure the pooled ETH. STETH holders can monitor the performance of the validators, vote on governance proposals, and participate in the DAO's decision-making process.
- Additive rewards: Lido offers additional rewards in the form of its native governance token LDO, which can be earned by staking STETH or providing liquidity to the Lido protocol. LDO allows users to vote on proposals, earn a share of the protocol fees, and participate in the DAO's management.
How to stake with Lido?
To stake your ETH with Lido, you need to follow these steps:
- Connect your Web3 wallet (such as MetaMask or WalletConnect) to the Lido interface on the Ethereum mainnet or any other supported network, such as the Kovan testnet.
- Select the amount of ETH you want to stake and approve the transaction on your wallet.
- Receive the equivalent amount of STETH on your wallet, which represents your share of the staked ETH.
- Monitor your staking rewards on the Lido dashboard or any other supported platform, such as Etherscan, Zapper, or DeBank.
- Trade, transfer, or use your STETH as collateral on various DeFi protocols, or stake it further to earn additional rewards in LDO.
Conclusion
Lido Staked Ether (STETH) is an innovative and decentralised solution that allows ETH holders to earn staking rewards without sacrificing liquidity, accessibility, or decentralisation. Lido enables anyone with any amount of ETH to participate in Ethereum 2.0 staking and leverage the benefits of proof-of-stake consensus. Lido demonstrates the power and potential of DAOs and DeFi protocols to disrupt the traditional finance and investment industry and provide more inclusive and sustainable alternatives for investors and users.
