There’s no denying there are great expectations projected upon the DeFi space in crypto, especially Decentralized Autonomous Organizations – aka DAO’s. Launched in December 2020, Lido DAO is the #2 ranked DAO protocol by market cap falling just behind Maker DAO – token rank #32 and #34 respectively.
What it is / What it does
Lido DAO is a liquid staking solution for proof-of-stake that was created in anticipation of the Ethereum Merge. Lido supports most main L1 liquidity.
To run an intricate first-choice liquidity option in the crypto space, the network opted to create a DAO in order to make all key operating decisions decentralized, non-bias, and trustless. (This is very important when dealing with any form of money, because when someone holds the power to make decisions that are solely in their personal interest, greed sets in and the only reliant is trust in that individual.)
The DAO is entrusted with:
The liquidity protocol governance.
Writing smart contracts.
Overseeing network fees and managing the parameters of their distribution.
Selecting node operators.
The native token – LDO – is used for voting rights and grants DAO privileges based on the amount owned. A unique feature of the Lido protocol is that its voting mechanism is independent and can be adjusted without affecting the immediate staked options, transactions, rewards, or other functionalities – Meaning that the DAO can change their entire governance structure or make changes as a collective that will not interfere with the other network operations.
This brings us to Lido’s main feature.
Liquid Staking
You’re probably wondering what liquid staking is as opposed to regular staking.
Here’s how regular staking works:
The user stakes a set number of tokens for a specified period.
The tokens are locked away for that period and earn a set yield.
The tokens are once again accessible once the locked timeframe expires.
Liquid staking goes as follows:
The user stakes a set number of tokens.
The tokens are NOT locked away but instead are staked to earn yield while also acting as collateral.
The user then receives a tokenized version of their funds that are backed directly on a 1:1 basis (Let’s say you staked ETH, you would earn an equal amount of staked ETH (stETH) which is a yield-bearing derivative of ETH. Staked tokens can be identified by the lowercase “st” before the ticker symbol)
The tokenized funds are now usable on other decentralized protocols and can be used in the same way as the staked token – yield farming, loan collateral, and other DeFi applications.
The tokens are available at any given time, so once the stETH tokens are returned, the staked ETH is made available immediately.
In essence, Lido DAO is a liquid staking community built to reward users without the need for locked-in assets. The DAO has dedicated a great combined effort of developers, and other blockchain specialists in order to build a compatible protocol. The protocol uses multi-channel liquid staking so it can be accessed through most networks that use the ERC20 token standard.
Other benefits of Lido
No required validator node.
No minimum deposits to earn.
Live market price.
However, there is a 10% fee on entry stakes for the time being in order to cover DAO expenses.
Lido DAO has a total of $14.18 billion assets staked currently and has paid out a total of $713 million in rewards for users in less than 3 years.