Lido Finance is the dominant liquid staking protocol on Ethereum — and historically the single largest smart contract system by TVL — that allows any user to stake any amount of ETH (bypassing the 32 ETH node operator minimum) and receive stETH (staked ETH), a liquid ERC-20 token that rebases daily to reflect accrued staking rewards and can be used freely across DeFi for lending, collateral, liquidity provision, or sale, while the underlying ETH is staked by a curated set of professional node operators who collectively control Lido’s validator set. Lido collects a 10% fee on staking rewards (split between node operators and the Lido DAO treasury), with governance managed by LDO token holders. At its peak in 2023, Lido controlled over 32% of all staked ETH — an extraordinary market dominance that sparked significant debate about centralization risk to Ethereum’s consensus layer.
Key Facts
| Founded | December 2020 |
| Founders | Konstantin Lomashuk, Vasiliy Shapovalov, Jordan Fish (Cobie) and others |
| Launched | January 2021 |
| Governance token | LDO (Lido DAO Token) |
| Primary liquid staking token | stETH (Ethereum) |
| Wrapped version | wstETH (non-rebasing, ERC-20 compatible) |
| Peak TVL | ~$35B (2023) |
| TVL (2025) | ~$20–30B (varies) |
| Peak ETH market share | ~32.4% of all staked ETH (2023) |
| Staking fee | 10% of rewards (5% node operators, 5% DAO treasury) |
| Supported chains | Ethereum (primary); previously Solana, Terra, Kusama (wound down) |
| Node operators | Curated set (~30–40 professional operators) |
| DAO | Lido DAO (LDO governance, Aragon framework) |
How Lido Works
Staking Flow
User deposits ETH into Lido contract
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Lido batches ETH into 32 ETH chunks
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Assigns to whitelisted node operators (Chorus One, P2P, Figment, etc.)
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Node operators run validators on Ethereum Beacon Chain
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Staking rewards earned by validators
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Daily rebase: stETH balances increase proportionally for all holders
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10% fee deducted before rebase (node operators + DAO)
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stETH: The Rebasing Token
Current stETH APR tracks Ethereum’s consensus layer yield (~3–4% as of 2025, variable based on validator count and network activity).
wstETH: The Wrapped, Non-Rebasing Version
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wstETH/stETH exchange rate grows over time
1 wstETH = 1.19 stETH (example after 2 years of ~8% APR)
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Node Operator Model
Lido does not run validators itself. Instead, it maintains a curated whitelist of professional node operators approved by LDO governance:
- Examples: Chorus One, P2P.org, Figment, Stakefish, Blockdaemon, Kiln, Nethermind
- Node operators are assessed for performance, uptime, and security practices
- Operators must post ETH as collateral (bond) proportional to their validator count — introduced post-Merge to align incentives
- Slashing risk is socialized across all stETH holders (slashing losses reduce everyone’s stETH balance proportionally)
- Lido is building the Community Staking Module (CSM) to allow permissionless node operators to join with reduced bond requirements
Centralization Concern
stETH Across DeFi
stETH/wstETH became the most widely integrated LST in DeFi:
| Protocol | Integration |
|---|---|
| Aave v3 | wstETH as collateral (billions deposited) |
| Compound | wstETH market |
| Curve Finance | stETH/ETH pool (historically one of the largest pools) |
| MakerDAO | stETH Vault (mint DAI against stETH) |
| Spark | Primary collateral for borrowing USDS |
| Uniswap v3 | wstETH/ETH concentrated liquidity pools |
| Balancer | wstETH/WETH pools |
The June 2022 stETH depeg event — when stETH briefly traded at ~0.94 ETH during the LUNA/Celsius crisis — revealed systemic risk: Celsius held massive stETH positions and was forced to sell, dragging the price. Because pre-Merge stETH could not be redeemed for ETH (withdrawals not yet enabled), the discount persisted for months. Post-Shapella (April 2023), stETH withdrawals became possible, eliminating the perpetual discount.
Lido DAO and LDO Governance
Lido is governed by LDO token holders through the Lido DAO:
- Vote on: Node operator additions/removals, fee parameters, protocol upgrades, treasury spending, new chain support
- Governance framework: Aragon (on-chain) + Snapshot (off-chain signaling)
- Treasury: Lido DAO controls billions in ETH, stETH, and LDO — one of the largest DAO treasuries in crypto
- Dual Governance (proposed): A mechanism giving stETH holders (not just LDO holders) a veto on governance decisions that could harm stakers — a major step toward better aligning incentives between token holders and users
LDO has no claim on protocol revenue directly — it is a pure governance token. Revenue flows to node operators and the DAO treasury, not LDO holders (as of 2025).
Withdrawal Mechanism
Post-Merge (September 2022) and post-Shapella (April 2023), Lido supports ETH withdrawals:
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User requests withdrawal (burns stETH → receives withdrawal NFT)
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Lido’s WithdrawalQueue contract queues the request
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Validators exit if necessary (triggered by Lido’s oracle)
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ETH finalized and claimable by user
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Wait times vary: during normal conditions, ~1–5 days; during high withdrawal demand, potentially weeks (limited by validator exit queue). The withdrawal NFT (ERC-721) can be traded on secondary markets, allowing users to exit faster at a slight discount.
History
- December 2020: Lido Finance announced; seed round led by Paradigm, $2M raised
- January 2021: stETH launches on Ethereum mainnet (Beacon Chain only — no withdrawals yet)
- March 2021: Curve stETH/ETH pool launches; becomes DeFi’s deepest liquidity venue for stETH
- May 2021: Lido expands to Terra (bLUNA) and Solana (stSOL)
- August 2021: LDO token distributed to early stakers; DAO governance activates
- September 2022: The Merge — Ethereum switches to PoS; Lido’s validator set grows rapidly
- June 2022: stETH depeg crisis; Celsius collapse causes stETH to trade at ~6% discount to ETH
- October 2022: Lido surpasses Coinbase Staking to become #1 ETH staking provider
- Early 2023: Lido reaches 32% ETH staking market share; centralization debate peaks
- April 2023: Shapella upgrade enables ETH staking withdrawals; Lido launches withdrawal queue
- June 2023: LDO governance rejects self-imposed 22% market share cap
- 2024: Lido winds down Solana staking (stSOL); focuses on Ethereum; CSM development accelerates
- 2025: wstETH becomes standard collateral across most major DeFi protocols; Dual Governance proposal progresses through governance