What is Lido Staked ETH?

Lido Staked ETH (stETH) is a derivative of Ethereum (ETH) that is staked on Lido, a decentralized protocol that allows users to participate in Ethereum's consensus mechanism. Lido seeks to address some of the challenges associated with staking on Ethereum, such as the requirement of a minimum of 32 ETH to stake, the indefinite lock-up period of tokens until withdrawals are enabled, and the risk of slashing if validators misbehave or go offline. By staking ETH with Lido, users can stake any amount of ETH with multiple professional validators who aim to share the slashing risks and strive to provide uptime. Lido liquifies ETH and creates staked ETH liquid by issuing stETH tokens, which can then be used in various decentralized finance (DeFi) applications.

How does Lido Staked ETH work?

When users stake their ETH with Lido, they receive stETH in exchange. This token represents their stake in the Ethereum network and can be held like any other ERC-20 token. In return for staking their ETH, users receive a share of the compensation generated by the network. This compensation is paid out in the form of ETH, which the protocol auto-converts into stETH and accumulates in the user's account. One of the key benefits of stETH is its liquidity, which allows it to be utilized in various decentralized applications. Traditional staking locks up funds until a pre-determined period is over, but with stETH, users can receive compensation while still having access to their funds at any time.

What are the potential use cases for Lido Staked ETH?

The primary use case for Lido Staked ETH is to enable users to participate in Ethereum's Proof of Stake consensus mechanism without needing a minimum stake. This makes it more accessible for individuals who may not have the required 32 ETH to stake directly on the Ethereum network. Additionally, stETH tokens can be used in various DeFi applications. This provides users with more flexibility and potential to receive compensation from their staked ETH. Furthermore, stETH aims to diversify its stake across different validators, reducing the risk of slashing and making it a potential option for those looking to participate in the Ethereum network with their ETH holdings.

What is the history of Lido Staked ETH?

Lido is a decentralized autonomous organization (DAO) that is governed by its community members. The team behind Lido consists of various node operators, developers, auditors, and partners who contribute to the project’s security, functionality, and growth. Some of the node operators include P2P Validator, Chorus One, Staking Facilities, Certus One, Stakefish, and others. The stETH tokens are created when users deposit their ETH into Lido’s smart contract. The contract then sends the ETH to one of Lido’s validators who stake it on behalf of the user. The user receives an equivalent amount of stETH tokens in return. The stETH tokens represent both the initial deposit and the compensation received by staking. The balance of stETH tokens increases over time as more ETH is generated through staking. The compensation is calculated based on the total amount of ETH staked on Lido and the current rate of staking.