In the fast-moving world of cryptocurrency, staking has emerged as a go-to strategy for holders seeking passive income through staking rewards. Yet traditional staking comes with a major drawback—locked-up assets. This capital inefficiency prevents users from deploying their funds across other yield-generating opportunities in the decentralized finance (DeFi) ecosystem.
Enter Lido, a decentralized autonomous organization (DAO) that’s redefining Ethereum staking through liquid staking. By allowing users to earn staking rewards while maintaining liquidity, Lido bridges the gap between yield generation and capital flexibility. Let’s dive into how Lido works, why it matters, and how you can get started.
Understanding Staking: The Basics
Staking is the process by which cryptocurrency holders contribute to network security on Proof-of-Stake (PoS) blockchains in exchange for rewards. Major PoS networks include Ethereum (ETH), Cardano (ADA), Polkadot (DOT), Solana (SOL), and Cosmos (ATOM).
To stake, users typically:
- Transfer coins to a compatible wallet.
- Lock (or “stake”) those coins.
- Delegate them to a validator node—or run one themselves.
While running your own validator offers full control, it requires technical know-how and a minimum of 32 ETH, making it inaccessible for most. That’s where staking services like Lido come in.
Most PoS networks offer annual percentage yields (APY) ranging from 3% to 15%. Ethereum, for example, typically delivers around 3–5% APY. While these returns are relatively stable, traditional staking locks your assets—meaning you can’t trade, transfer, or use them elsewhere during the staking period.
👉 Discover how liquid staking unlocks your crypto’s full potential—without sacrificing yield.
The Problem with Traditional Staking
The core issue with standard staking is illiquidity. Once ETH is staked:
- It cannot be sold or traded.
- It’s excluded from DeFi opportunities like lending, borrowing, or liquidity provision.
- Users lose flexibility at precisely the moment they might need it most—during market volatility.
Additionally, custodial staking solutions offered by centralized exchanges introduce counterparty risk. You’re trusting a third party with your assets, which contradicts the core ethos of decentralization.
Lido solves this with a non-custodial, decentralized approach to liquid staking.
What Is Lido?
Launched in December 2020 by Konstantin Lomashuk, Vasiliy Shapovalov, and Jordan Fish (Cobie), Lido quickly became a leader in liquid staking. Backed by top-tier investors like Paradigm, Coinbase Ventures, and Andreessen Horowitz (a16z), Lido initially focused on Ethereum but has since expanded across multiple blockchains—including Solana and Polygon—though its Solana staking service was sunset in February 2024.
As of 2025, Lido manages over $33 billion in total value locked (TVL), making it one of the largest protocols in DeFi.
How Lido Works: The Power of stETH
When you stake ETH through Lido, you receive stETH (staked ETH) tokens in return. These tokens represent your staked Ether plus accrued rewards, and unlike locked ETH, they remain fully usable.
Here’s the key benefit:
You earn staking rewards while retaining liquidity.
Each stETH token is pegged closely to the value of ETH—often slightly higher at issuance due to embedded rewards—and can be:
- Traded on decentralized exchanges (DEXs) like Uniswap.
- Used as collateral in lending protocols like Aave.
- Deposited into liquidity pools to earn additional yield.
This transforms idle staked assets into productive capital—fueling innovation across DeFi.
Technical Overview: Behind the Scenes
Lido operates through a combination of smart contracts and decentralized governance:
- User deposits ETH into Lido’s smart contract.
- The contract mints an equivalent amount of stETH.
- Node operators validate transactions on the Ethereum beacon chain.
- Beacon chain oracles monitor network performance and update stETH balances daily.
- Rewards compound automatically—no manual claiming required.
All operations are managed by the Lido DAO, governed by $LDO token holders who vote on critical decisions like node selection, fee structures, and security upgrades.
This modular, decentralized design minimizes single points of failure and enhances trustless operation.
How to Stake on Lido: Step-by-Step
1. Set Up a Wallet
You’ll need a Web3 wallet compatible with Ethereum. Popular options include:
- MetaMask: Browser extension and mobile app.
- Ledger: Hardware wallet for enhanced security (used with MetaMask as an interface).
👉 Start earning yield today with secure, non-custodial staking—no experience needed.
2. Connect to Lido
- Visit the official Lido platform.
- Click “Connect Wallet” and select your provider.
- For Ledger users: Connect your device, unlock it, and select your account in MetaMask.
3. Deposit ETH and Receive stETH
- Enter the amount of ETH to stake.
- Confirm the transaction in your wallet (gas fees apply).
- Receive stETH instantly—your balance grows automatically with rewards.
4. Use Your stETH
Now that you hold stETH, you can:
- Trade it for other tokens on DEXs.
- Supply it to Aave or Compound to borrow against it.
- Provide liquidity on Curve or Balancer to earn trading fees.
- Stake it elsewhere for compounded yields.
Participating in Governance
Lido is community-governed via its native token, **$LDO**. Holding $LDO grants voting rights on proposals related to:
- Protocol upgrades
- Node operator selection
- Fee distribution
- Emergency responses
While stETH holders benefit from rewards, only $LDO holders can shape the protocol’s future—encouraging long-term alignment and decentralization.
Lido’s Key Advantages
- ✅ Non-custodial: You retain full control of your assets.
- ✅ Liquid: stETH can be traded or used across DeFi.
- ✅ Decentralized: No single entity controls operations.
- ✅ Automated Rewards: No need to manually claim or compound.
- ✅ High Security: Uses threshold signatures and multi-oracle systems.
Competitors in the Liquid Staking Space
While Lido dominates with the largest market share, alternatives exist:
- Rocket Pool: Decentralized ETH staking with a focus on node operator accessibility.
- Ankr: Offers liquid staking across multiple chains.
- Frax Ether (sfrxETH): Part of the Frax Finance ecosystem, with deep integration into yield strategies.
Despite competition, Lido remains the most widely adopted due to its maturity, robust infrastructure, and strong community governance.
Frequently Asked Questions (FAQ)
Q: Is stETH the same as ETH?
A: No. stETH represents staked ETH plus rewards. It’s liquid and usable in DeFi but not directly exchangeable 1:1 on centralized exchanges.
Q: Can I lose money staking with Lido?
A: Yes. Risks include smart contract vulnerabilities, slashing penalties for validator misbehavior, and potential depegging during extreme market events—though safeguards minimize these risks.
Q: Does stETH earn compound interest?
A: Yes. Rewards are automatically reinvested, so your stETH balance increases over time without manual action.
Q: Can I unstake my ETH from Lido?
A: Yes. Since Ethereum’s Shanghai upgrade in 2023, users can withdraw staked ETH or request unstaking via official channels.
Q: Is Lido safe?
A: Lido uses audited smart contracts, decentralized oracles, and multi-sig controls. While no system is 100% risk-free, it’s among the most secure liquid staking options available.
Q: What happens if Ethereum’s price drops?
A: Your stETH value will decline along with ETH, but you’ll still earn staking rewards in relative terms. Diversifying risk across assets is always recommended.
Final Thoughts
Lido is doing for Ethereum staking what Robinhood did for stock trading—democratizing access through simplicity and innovation. By combining user-friendly design with powerful DeFi functionality, Lido enables anyone to earn yield without sacrificing liquidity.
As institutional interest grows—especially with potential Ethereum ETF approvals—platforms like Lido will play a crucial role in making staking accessible at scale. With Ethereum still dominating over 57% of DeFi’s total value locked, the demand for efficient, flexible staking solutions will only increase.
Whether you’re a beginner or a seasoned DeFi user, liquid staking with Lido offers a smarter way to put your crypto to work.
👉 Turn your idle crypto into active income—explore liquid staking now.
Core Keywords:
- Liquid staking
- Lido
- stETH
- Ethereum staking
- DeFi
- Staking rewards
- Non-custodial staking
- DAO governance