Lido stETH is a liquid staking solution built on Ethereum. Stake providers are using stETH as a payment medium. The ETH holders stake their tokens and earn stETH in return in the process. So it is a unique staking platform for providing liquidity which we will explain in detail in the following. Before investing in this token, you should learn more about it. Read on to understand how it works and where to buy it
stETH is a great solution, and it provides ETH 2.0 with great advantages such as liquidity, mobility, and accessibility.
What is Lido stETH?
The Lido stETH is an ERC-20 token on the Ethereum blockchain. In this platform, users stake Etehrum to earn Lido stETH. Lido is an Ethereum based token, and for staking ETH, the holders will receive Steth as a reward. Ethereum is one of the largest PoS networks globally that use the proof of stake mechanism to operate. Many different decentralized platforms are running on this network with the same idea.
Lido is a fantastic staking solution for ETH 2.0 to solve the common problem of staking. Lido tries to provide liquidity and the permission to secure ETH 2.0 with any amount of ETH.
You can stake your ETH and receive a stETH token using the lido platform. This token demonstrates their ETH on the Ethereum beacon chain. There will be a stETH token in circulation for every Eth that is locked. Then the users can use the Steht in any way they can use Eth.
To understand the concept, you need to get familiar with staking issues. Are you familiar with staking downsides? You can skip the next part; otherwise, continue reading.
Stakes should lock their tokens for a specific time. It can be a couple of months or years. In the meantime, the staked ETH cannot be transferred, and the holder cannot sell the ETHs. So staking ETH guarantee the liquidity of the Ethereum network.
It is interesting to know that Eths that are locked in ETH 2.0 cannot be transferred even after the transactions are enabled on the ETH 2.0. if you are interested in securing ETH 2.0, you need to stake 32 ETH in the platform. Otherwise, you cannot participate.
How does Lido stETH work?
Lido is a staking solution built on the Ethereum blockchain. Traders can stake their Eth in Lido and earn stETH. It has the same value as ETH, and it can be traded on different exchanges. Lido aims to keep the Ethereum network liquid to let users earn rewards without actually staking assets.
Once a user deposits ETH into the Lido smart contracts, he receives stETH or staked ETH in an ERC-20 token. As soon as the transactions are able on the beacon network of ETH 2.0, users can redeem stETH for unstaked ETH along with reward directly. And in the meantime, the user can trade and transfer the stETH, unlike the beacon chain ETH.
Goals and limitations of Lido
If you want to support ETH 2.0, you need to stake 32 ethers. If a user misbehaves, his reward will be slashed. A bug in the validator’s node or a disconnectivity issue is possible misbehaviors. So staking ETH is not attractive due to risks. Lido is a simple platform to use.
Users can earn staking rewards using this platform without entirely staking and locking their tokens.
Users can stake less than 32 ETH on this platform. On the other hand, the Lido reduced the risk of losing a deposit due to software errors.
Lido consists of different components, which we will explain in the following.
lido’s Staking Pool is a protocol designed to manage deposit, staking rewards, and cashouts.
The leading smart contract of the platform is the staking pool. Users using this contract can deposit withdraw. On the other hand, the minting and burning of the token are done through these contracts. The fees applied to the rewards and adjusting to the received updates are done with the help of staking smart contracts.
Using this contract, users can send their ETH to the Lido network and mint stETH in return. Node operators verify the transactions. Then oracle will be used to keep track of the balances of the DAO validators. Staking rewards and penalties result in changes in the balance.
stETH is the native and the liquid token of the platform that represents Eth on the ratio of 1:1. Once the ETH is staked, the stETH will be minted, and at the end of the staking period, they can be redeemed. The platform provides stETH for a decentralized application like lending applications as well.
Aragon DAO manages the protocol parameters. The DAO is the best structrure for rinind Lido. In this case, you do not need to trust a single point of failure to maintain a 1:1 relationship of ETH to stETH. Using DAO, you can trust a distributed community to reduce the risk.
One person does not govern the Lido, or a team of developers and a community will decide the necessary changes.
Benefits of Lido stETH
For every ETH you stake in Lido, you will receive a stETH token whose value is pegged to ETH. It is possible to redeem stETH for Eth at the end of the staking time. stETH is a liquid token, and you can use it in decentralized applications. On the other hand, you can use this token in any way you can use ETH. You can transfer it, sell it or spend it. Lido is a great solution to solve the illiquidity, immobility, and inaccessibility of the ETH 2.0 contracts.