Abstract

Lido (LDO) is a secure liquid staking solution for Proof-of-Stake (PoS) cryptocurrencies, supporting Ethereum 2.0 (integrated) staking, and other growing ecosystems of Layer 1 PoS blockchains system. Users can stake PoS tokens to Lido and receive a tokenized version of the pledged assets at a 1:1 ratio. They can use tokenized versions of their staked assets to earn additional income from other DeFi protocols while receiving staking rewards from tokens deposited into Lido.

Introduction

One challenge faced by staking in the PoS blockchain is the lack of liquidity of the pledged assets. Once the tokens are locked, users cannot access or redeem the tokens until the end of the locking period, which deprives users of the opportunity to obtain additional income from other DeFi protocols in the market. Complex verifier settings and high entry barriers also block ordinary retail investors who want to participate in PoS staking.

In order to improve the liquidity of pledged tokens and lower the threshold for staking, Lido provides an alternative to traditional PoS staking.

What is Lido?

Lido was founded in 2020 and is a liquid staking solution for Ethereum (ETH) and other PoS blockchains, including Solana (SOL), Polygon (MATIC), Polkadot (DOT), and Kusama (KSM).

Lido releases a 1:1 tokenized version of the pledged assets to users. This provides users with liquidity to stake PoS tokens, so they can earn staking rewards in Lido while participating in other DeFi on-chain activities to earn additional benefits.

How does Lido work?

In order to allow more users to participate in the PoS network, through liquid staking services such as Lido, users can stake any amount of PoS assets to obtain block rewards. Liquid staking is an innovative alternative that solves the poor liquidity, complexity, and centralization issues of PoS staking by not locking users’ staking tokens. It also lowers the barrier to entry for staking, as well as the opportunity costs associated with locking requirements.

After users deposit PoS assets into Lido, their tokens will be pledged in the PoS blockchain through the Lido protocol. This is a staking pool smart contract that manages user deposits and withdrawals, entrusts funds to node operators, and determines staking reward fees, as well as the minting and burning of tokens. Additionally, the smart contract contains a complete list of node operators, verification keys, and reward issuance records.

Users will receive a tokenized version of their deposited funds (stAsset tokens), which can be used in the original deposit protocol, Other DeFi protocols, as well as decentralized applications (dApps), receive rewards at the same time, such as staking for lending and liquidity mining, in order to maximize reward income.

Take staking Ethereum as an example. In the long-awaited “integration” of the upgrade (previously known as ETH 2.0), Ethereum moved to PoS. Each user submits a minimum of 32 ETH to become a verifier and receive payment for confirming network transactions. But for ordinary users, this minimum pledge requirement is not practical.

Through Lido, users can only pledge a fraction of 1 ETH to receive block rewards. After staking Ether, users will receive stETH, an ERC-20 token that represents their deposited Ether at a 1:1 ratio. stETH tokens are minted when funds are deposited into the Lido staking pool smart contract, and stETH is destroyed once a user withdraws Ethereum tokens.

The Ethereum pledged by the user will be issued to the node operator (verifier) in the Lido network and deposited into the Ethereum beacon chain for processing verify. Funds are protected within smart contracts and cannot be accessed by validators. Afterwards, Lido DAO will select, load, support the validator address, and add the address to the registry smart contract, after which the selected validator will receive a set of verification keys.

The Ether deposited by the user will be divided into several groups of 32 ETH among all active Lido node operators. Public verification keys will be used to verify transactions involving user-staking assets. Splitting user stakes among multiple validators effectively eliminates the single point of failure risk associated with single validator staking. Additionally, node operators will set up addresses that will allow users to withdraw their staked ether once the integration is complete.

Lido DAO

In order to manage the Lido protocol in a decentralized manner, Lido launched the Decentralized Autonomous Organization (DAO) to make key decisions on how the protocol operates. This ensures that the protocol is in the best interests of its stakeholders and increases transparency and decentralization.

Lido DAO governs a set of liquid pledge protocols. It utilizes smart contracts to determine and enforce rules to facilitate an efficient decentralized decision-making process. These include managing fee parameters and allocations, as well as adding and removing node operators from the network.

What is LDO?

LDO is Lido’s native utility token and governance token. This is an ERC-20 token with a total supply of 1 billion.

LDO is used to reward network users. It also grants holders governance rights within the Lido DAO, allowing them to participate in the governance process by voting on certain decisions. The more LDO tokens you hold, the greater your voting rights.

How to buy LDO on Binance?

You can buy LDO on cryptocurrency exchanges such as Binance.

1. Log in to your Binance account and click [Transaction] - [Spot].

2. Search for "LDO" to view available trading pairs, including LDO/BUSD, LDO/USDT and LDO/BTC.

3. Visit the [Spot] box and enter the quantity of LDO you want to purchase. In this example we will use a market order. Click [Buy LDO] and the purchased tokens will be credited to your spot wallet.

Summary

Lido’s liquid staking service provides users with a comprehensive Staking benefits without sacrificing token liquidity. It caters to both small and large PoS token holders, giving them the flexibility to stake and redeem at any time. In addition, by eliminating complex staking settings and lowering the entry threshold for PoS staking, liquid staking in protocols such as Lido will drive the vigorous development of DeFi in the future.