In brief
- Lido Finance is a major staking project that allows users to stake Ethereum with any amount of ETH.
- Unlike other stakers, Lido offers a Staked ETH token to keep users liquid.
If you’ve been following Ethereum for the past three years, you’re likely familiar with Lido Finance. This liquid staking protocol emerged during Ethereum’s transition to proof-of-stake and has become the dominant player in the staking market. According to data from Hildobby, Lido commands over 31% of the total Ethereum staked, amounting to nearly $50 billion. While Ethereum 2.0 introduced staking as part of its upgrade, early stakers faced limitations. They needed 32 ETH and had to wait for another upgrade called Shanghai to withdraw their holdings.
Lido Finance addressed these issues by allowing users with less than 32 ETH to enjoy the benefits of staking and remain liquid. Users could stake their Ethereum with Lido and receive a liquid staking derivative (LSD) or a liquid staking token (LST), such as Staked Ethereum (stETH) in Lido’s case. This token held a 1-to-1 price peg with Ethereum and could be used as collateral in other DeFi projects like Maker and Aave.
How does Lido Finance work?
Lido acts as an intermediary between users and the Ethereum blockchain, eliminating the need for users to run their own validators. The protocol selects and onboards node operators responsible for validating transactions on behalf of users. Currently, Lido has 36 node operators managing over 273,000 nodes on Ethereum, including well-known brands like BridgeTower, ChainSafe, and Figment.
Becoming a node operator involves a rigorous onboarding process to ensure high-quality validators. Lido has implemented an insurance fund funded by protocol fees to protect users from slashing penalties, which are monetary penalties imposed for validator downtime or malicious behavior. This setup allows everyday users to participate in Ethereum’s staking process, regardless of the amount of ETH they hold.
Hot Take: Lido Finance revolutionizes Ethereum staking with liquidity and accessibility
Lido Finance has revolutionized Ethereum staking by offering liquidity and accessibility to users. With Lido, anyone can participate in staking Ethereum, regardless of the amount of ETH they have. By providing a liquid staking derivative like Staked Ethereum (stETH), Lido allows users to remain active in the DeFi ecosystem, earning additional yield on platforms like Maker and Aave.
Additionally, Lido’s selection of reputable node operators ensures the security and reliability of its staking process. The insurance fund further safeguards users against slashing penalties, creating a more secure environment for stakers.
As the leading staking solution in the market, Lido Finance continues to shape the future of Ethereum staking by making it more inclusive and user-friendly.
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