What is Lido DAO?
Lido is a liquid staking solution built on the Ethereum 2.0 Beacon Chain. Users can earn staking rewards on the Beacon Chain by depositing ETH to a smart contract, in return receiving stETH tokens at a 1:1 ratio to represent their deposit amount + staking rewards accrued. stETH is minted on deposit and burned when redeemed. The staking contract is managed by Lido DAO (Decentralized Autonomous Organization) who act as an intermediary to distribute the pooled funds across elected Beacon Chain staking providers. The goal of Lido is to provide users with a decentralized, non-custodial staking service to eliminate counterparty risk. Rather than staking funds to a single validator, Lido DAO distributes staked Ether across many validators to minimize risk factors. As a liquid staking solution, Lido has no lock-up requirements, and rewards are distributed in real-time. LDO is the ERC-20 governance token of Lido DAO, granting users voting rights to help decide on changes to the protocol, for example, fee amounts, assigning node operators and oracles, and other important decisions. Though many risks are mitigated by smart contract security standards and decentralized architecture, users may be exposed to risk if the exchange price of stETH becomes lower than its inherent value due to withdrawal restrictions on Lido. The value of stETH is backed by the projected value of staking rewards associated with the Ethereum Beacon Chain. If ETH 2.0 fails to reach the required levels of adoption Lido may experience significant fluctuations in the value of ETH and stETH.
