What Is Lido?
Lido is a protocol (= a program that runs on a blockchain) for what is known as liquid staking of Ethereum (ETH).
Before I explain what “liquid staking” means, I need to explain what staking is in the first place.
Staking
Staking means “locking up” your cryptocurrency in a network and helping it operate. In return, you get a reward – similar to interest on a savings account, except on the blockchain and in the form of cryptocurrency.
Ethereum (ETH) – the second-largest cryptocurrency in the world – runs on a principle called Proof of Stake. This means the network needs “validators” (= people or entities who verify transactions), and validators must lock up a certain amount of ETH to do so.
The problem: To become a validator on Ethereum, you need a high minimum amount of ETH – which is out of reach for most individuals. And once you lock up your ETH, it stays locked – until you request a withdrawal.
This is where Lido comes in.
Lido Solves Two Problems at Once
Lido removed two obstacles that plagued everyone who has less ETH or simply doesn’t like freezing their funds:
Problem 1: The minimum amount. With Lido, you can deposit any amount of ETH, however small. There’s no threshold and no minimum.
Problem 2: Liquidity. When you deposit ETH through Lido, you immediately receive a token in return (= a digital token that represents your value) called stETH (staked ETH). This token is freely transferable – you can sell it, swap it, or use it elsewhere – while your ETH collects staking rewards in the background.
This is what’s called liquid staking: you stay liquid (= you keep access to your value instead of waiting while it’s frozen).
How Lido Works – Step by Step
Step 1: You bring your ETH
You have ETH in your crypto wallet (e.g. MetaMask – one of the best wallets for Ethereum). You go to the Lido website and connect your wallet.
Step 2: You lock up ETH and get stETH
When you deposit a certain amount of ETH, Lido immediately sends the same amount of stETH to your wallet in return. The exchange rate on deposit is one to one.
stETH (pronounced “staked ETH”) is your “proof” that you have ETH locked up with Lido. But it’s not just proof – it’s a fully fledged token that you can do plenty with (more on that below).
Step 3: Rewards accumulate automatically
Every day, you’ll see the amount of stETH in your wallet slowly grow. These are your staking rewards. You don’t have to do anything – it all happens automatically in the background.
Step 4: Exit whenever you want
When you want your ETH back, you have two options:
- Wait for the withdrawal through Lido (it takes anywhere from a few hours to a few days, depending on the queue in the network)
- Sell your stETH on an exchange for ETH or another token right away (because stETH is a liquid token that trades freely)
This is a key advantage over traditional staking, where you have to wait when you withdraw.
What Is stETH and Why Is It Interesting?
stETH is not just a “deposit receipt.” It’s a fully fledged token accepted by numerous DeFi protocols.
DeFi (decentralized finance) refers to financial applications on the blockchain – lending, borrowing, swapping – without banks and intermediaries. They operate automatically through smart contracts.
What You Can Do with stETH:
1. Lend it out and earn interest
Protocols like Aave (= a platform for lending and borrowing crypto) let you “deposit” stETH and earn interest from lending. Staking rewards and lending interest accrue at the same time.
2. Provide liquidity and earn fees
On platforms like Curve and Uniswap (these are DEXs = decentralized exchanges where tokens are swapped without intermediaries), you can contribute stETH to a “liquidity pool” (= a shared reserve of tokens that makes swaps possible) and receive a share of the fees from swaps.
3. Use it as collateral for a loan
Through the Aave protocol, you can put up stETH as collateral and borrow another token – say, USDC (a stablecoin = a cryptocurrency whose value is pegged to the value of the dollar). Your ETH keeps earning staking rewards, while you also have access to cash in the form of a loan.
4. Simply hold it in your wallet
The easiest option: the stETH in your wallet grows on its own every day. No extra steps.
I explain more about how to make use of crypto strategies in my free e-book
Lido Earn – Advanced Products on the Platform
Lido isn’t just ETH staking. On its platform it also offers a product called Lido Earn, with two options:
EarnETH
EarnETH is what’s known as a “vault” (= a safe that automatically allocates funds) – a smart contract that distributes ETH and stETH among various vetted DeFi protocols in order to optimize yield.
A smart contract is an automated program on the blockchain that executes predefined rules without intermediaries. It cannot be changed unilaterally.
The APY (Annual Percentage Yield = annual yield that accounts for compound interest) on EarnETH changes depending on market conditions – I don’t cite exact figures because they fluctuate regularly. Always check the current data directly on the Lido platform.
EarnUSD
EarnUSD is a similar product, but denominated in USD – so it’s for those who don’t want exposure to ETH price swings but still want their funds to work in the DeFi ecosystem.
This is useful because many investors keep part of their assets in stablecoins and want those funds to not be “dead,” but to actively circulate in the ecosystem.
Both products – EarnETH and EarnUSD – are part of the Lido Earn section and are intended for those who are already comfortable with the basic mechanics of stETH and want to go a step further.
Lido and Security – What You Need to Know
How Lido approaches security:
1. Open-source code and independent audits
Lido is an open-source platform – meaning any developer can look at the code and verify that it works as claimed. In addition, the code has been reviewed multiple times by independent security firms (this process is called an “audit” = a review of smart contracts). All audit reports are publicly available on Lido’s website.
2. Lido DAO governs the protocol DAO
(Decentralized Autonomous Organization) means that no single person or company can unilaterally change the protocol’s rules. The community of LDO token holders (= Lido’s governance token, which grants voting rights) votes on all key decisions – from onboarding new validators to changing fees.
3. Distributed validators
Lido doesn’t send all of your ETH to a single validator – instead, it spreads it across a large number of carefully vetted node operators around the world. This reduces the risk that the failure of one operator would affect the whole.
Risks you need to understand:
Smart contract risk: Smart contracts are code – and code can have bugs. Lido has had no major incidents so far, but the risk is never zero. Audits reduce this risk, but they don’t eliminate it.
Market risk: The value of ETH fluctuates. You receive rewards in the form of ETH, which means their value in euros moves together with the price of Ethereum itself.
My advice: Never invest more than you can truly afford to lose – no matter how reliable any protocol seems. Start with a small amount, understand the mechanics, then decide how to proceed.
The Lido Ecosystem – Where Does stETH Work?
One of Lido’s key advantages is its extensive ecosystem of applications that accept stETH. It’s not an isolated token – it’s an asset that works across the entire DeFi world.
Some of the most important integrations:
- MetaMask – a software crypto wallet; you can store and view stETH directly in the app
- Ledger Live – the interface for the Ledger hardware wallet (= a physical device for storing crypto, more secure than a software wallet); you stake directly from it without an intermediary
- Aave – crypto lending and borrowing; stETH as collateral or a source of passive interest
- Curve – liquidity pools for stable and similar tokens; stETH in swap pools
- Uniswap – one of the largest decentralized exchanges; liquidity pools with stETH
Practical Guide: How to Get Started with Lido
Here’s what you probably wanted to read from the start.
What you need:
- ETH (Ethereum) – you can buy it on an exchange, e.g. Binance
- A MetaMask wallet – a free browser extension you use to interact with DeFi applications
Step-by-step process:
- Buy ETH on an exchange (= a regulated crypto exchange where you buy and sell cryptocurrencies)
- Transfer your ETH to a MetaMask wallet — this means you move to “self-custody” (= having your own control over your money, without an intermediary)
- Go to lido.fi and click “Stake”
- Connect your MetaMask wallet by clicking “Connect wallet”
- Enter the amount of ETH you want to stake and confirm the transaction
- You’ll see stETH in your wallet right away
Lido’s fee: Lido keeps a portion of the staking rewards you earn as its fee. The exact percentage is shown on the platform and applies not to your principal, but only to the rewards generated.
Which exchange is best for people in Slovenia and how to safely buy your first ETH – I explained this in detail in my free e-book
Lido or Direct Staking – Which to Choose?
You might be wondering: wouldn’t it be better to lock up ETH directly on the Ethereum network without an intermediary?
Quick comparison:
| Direct staking | Lido staking | |
| Minimum amount | High threshold (out of reach for most) | No minimum |
| Liquidity | ETH is locked until withdrawal | stETH is immediately transferable and swappable |
| Technical management | Your own server, monitoring, maintenance | Lido handles the operational side |
| Rewards | The same network staking rewards | The same rewards, minus Lido’s fee |
| DeFi options | Locked ETH has no DeFi utility | stETH works across the broader ecosystem |
For individuals who don’t have access to the minimum amount for direct staking or the technical knowledge to run their own node, Lido is a sensible alternative. For those with sufficient capital and technical know-how, direct staking is an option worth considering.
Most Common Questions About Lido
Is Lido safe?
Lido is one of the longest-running and most frequently audited DeFi protocols. But no smart contract is absolutely safe – risk always exists. Audits reduce it, but they don’t eliminate it.
When do I get staking rewards?
Rewards accrue daily and automatically – without any action on your part. In your wallet, you’ll see the amount of stETH gradually increase.
Can I exit at any time?
Yes. Withdrawal through Lido is possible at any time. The duration depends on the queue on the Ethereum network. Alternatively, you can sell stETH on a DEX at any time for ETH or another token.
What is the difference between stETH and wstETH?
wstETH (wrapped stETH = “wrapped” stETH) is a technical version of stETH that is better suited to some DeFi protocols and blockchain chains that don’t support automatic balance adjustment (so-called rebasing). The value is the same; only the mechanics of recording rewards are different. Most beginners work with stETH, while wstETH comes into play with specific DeFi integrations.
Is Lido suitable for beginners?
The staking process itself is fairly simple. More advanced options – lending stETH, liquidity pools, EarnETH – require a prior understanding of DeFi. I recommend starting with simple staking and then building up your knowledge.
Why Lido Is Interesting
Lido is one of those protocols that solved a real problem in a simple way.
Most people don’t have access to the minimum amount for direct staking. Most people don’t want to freeze their funds. Most of us want to understand how the crypto ecosystem works – not invest blindly.
Lido doesn’t promise miracles. It’s a protocol with concrete mechanics: you stake ETH, you get stETH, and rewards accrue automatically. What you do with stETH next – that’s your decision, one that requires your own understanding and your own judgment.
And this is exactly what I emphasize again and again: crypto is not a “set and forget” system. It’s a system you need to understand before you enter it.
Start with the basics. Understand before you invest. You can access the knowledge here
Conclusion
Lido is an example of a protocol that solved a concrete problem in the Ethereum ecosystem: the accessibility of staking and the liquidity of staked assets.
Instead of keeping ETH sitting idle in your wallet – you lock it through Lido, get stETH that grows every day, and keep the option to use that value or cash it out at any time.
The process is simple:
- You lock ETH → you instantly get stETH
- stETH gradually grows every day (the network’s staking rewards)
- At your own discretion, you sell stETH, hold it, or use it in DeFi
No lockups. No high minimum amounts. No server of your own.
Interested in more than just staking? The free e-book helps you understand the basics of cryptocurrencies. Download it here.
