Lido

Lido DAO is a community that builds liquid staking service for Ethereum. Lido allows users to earn staking rewards without locking assets or maintaining staking infrastructure. Staking with Lido is primed to start along with Phase 0 of Ethereum 2.0.

Ethereum is soon to be the biggest staking economy in the space. However, staking on the first stages of Ethereum 2.0 comes with a high market risk related to frozen staked assets until transfers will be available in Ethereum 2.0, which is expected to happen next year at the earliest. Until that time, no one will be able to withdraw staked ether, and, for example, sell them on an exchange.

Lido liquid staking protocol is an Ethereum 2.0 liquid staking protocol solving these drawbacks. Users can deposit their ether in Lido smart contracts and receive stETH -- a tokenized version of staked ether -- in return. The DAO-controlled smart contracts then stake tokens with DAO-picked node operators. Users' deposited funds are controlled by the DAO, node operators never have direct access to the users' assets.

Unlike staked ether, the stETH token is free from the limitations associated with a lack of liquidity and can be transferred at any time. The stETH token balance will be calculated based on the total amount of staked ether, plus rewards and minus any slashing penalties.

Lido is a much more flexible solution than self-staking since it avoids freezing assets and maintaining a validator node. In addition, it allows staking users to earn rewards on as small a deposit as they want without restriction on the number of ether deposited.

At the start, the system applies a 10% fee (this can be changed by the DAO) on staking rewards that are split between node operators, the DAO, and a slashing insurance fund. This fee level should make Lido staking more profitable than what is offered with most available exchange staking, but, unlike them, Lido’s amount of staked ether is fully auditable and does not rely on a single party’s private key management. Despite the strict limitations of the beacon chain, the first stage of Ethereum 2.0, we propose a decentralized approach for liquid staking.