Lido Review 2025: Leading Liquid Staking Protocol
The Leading Liquid Staking Protocol for Ethereum and Beyond
What Is Lido?
Lido is the world's leading liquid staking protocol, revolutionising how users can earn staking rewards while maintaining liquidity. Launched in 2020, Lido has become the dominant force in liquid staking, managing over $30 billion in total value locked (TVL) and serving hundreds of thousands of users globally.
The protocol's core innovation lies in solving the liquidity problem of traditional staking. When you stake ETH directly on Ethereum 2.0, your funds become locked and illiquid. Lido changes this by issuing stETH (staked ETH) tokens that represent your staked position while allowing you to use these tokens across the broader DeFi ecosystem.
In 2025, Lido continues to lead the liquid staking space with enhanced features, improved validator diversity, and expanded multichain support, making it the go-to choice for users who want to earn staking rewards without sacrificing liquidity or DeFi opportunities.
How Lido Liquid Staking Works
The Liquid Staking Process
Lido's liquid staking mechanism is elegantly simple yet powerful:
- Deposit ETH: Users deposit ETH into Lido's smart contract
- Receive stETH: Users immediately receive stETH tokens representing their staked position
- Validator Delegation: Lido stakes the ETH across a curated set of professional validators
- Reward Accrual: Staking rewards automatically increase the stETH balance daily
- DeFi Integration: Users can use stETH in DeFi protocols while earning staking rewards
stETH Token Mechanics
stETH is a rebase token that represents staked ETH plus accrued rewards:
- Daily Rebasing: stETH balances increase daily to reflect staking rewards
- 1:1 Backing: Each stETH is backed by 1 ETH staked on the Beacon Chain
- Transferable: stETH can be transferred, traded, and used in DeFi protocols
- Reward Compounding: Rewards automatically compound as they're added to the staking pool
- No Lock-up Period: Unlike direct staking, stETH provides immediate liquidity
Validator Network
Lido operates through a curated network of professional validators:
- Node Operator Selection: Validators are chosen through DAO governance
- Performance Monitoring: Continuous monitoring of validator performance and uptime
- Diversification: ETH is distributed across multiple validators to reduce risk
- Slashing Protection: Risk mitigation through validator diversification
- Professional Management: Experienced operators handle technical aspects
Reward Distribution
Lido's reward system is transparent and automated:
- Consensus Rewards: Block proposals and attestation rewards from validators
- Execution Rewards: MEV and priority fees from block production
- Daily Distribution: Rewards distributed daily through stETH rebasing
- Fee Structure: 10% protocol fee split between operators and treasury
- Compound Growth: Rewards automatically compound for maximum efficiency
Key Features and Benefits
Liquidity Advantages
Lido's liquid staking provides unprecedented flexibility:
- Immediate Liquidity: No waiting periods or lock-up requirements
- DeFi Integration: Use stETH across 100+ DeFi protocols
- Trading Flexibility: Trade stETH on major exchanges and DEXs
- Collateral Usage: Use stETH as collateral for borrowing
- Yield Stacking: Earn additional yields on top of staking rewards
DeFi Ecosystem Integration
stETH is widely integrated across the DeFi ecosystem:
- Curve Finance: Deep stETH/ETH liquidity pools with additional rewards
- Aave: Use stETH as collateral for borrowing other assets
- Uniswap: Trade stETH with minimal slippage
- Yearn Finance: Automated yield strategies using stETH
- Balancer: Liquidity provision with stETH in weighted pools
- 1inch: Optimal routing for stETH trades
Multi-Chain Expansion
Lido has expanded beyond Ethereum to other networks:
- Polygon: Liquid staking for MATIC tokens
- Solana: stSOL liquid staking derivatives
- Polkadot: stDOT for Polkadot ecosystem participation
- Kusama: stKSM for Kusama network staking
- Terra (Historical): Previously supported Luna staking
Governance and Decentralization
Lido operates as a decentralised autonomous organization (DAO):
- LDO Token: Governance token for protocol decisions
- Validator Selection: Community votes on node operator additions
- Fee Adjustments: DAO controls protocol fee parameters
- Protocol Upgrades: Community governance for major changes
- Treasury Management: DAO manages protocol treasury funds
How to Start Using Lido
Prerequisites
- Web3 Wallet: MetaMask, WalletConnect, or other compatible wallet
- ETH Holdings: Ethereum to stake (minimum amounts vary)
- Gas Fees: ETH for transaction fees
- Basic DeFi Knowledge: Understanding of smart contracts and risks
Step-by-Step Staking Process
- Visit Lido: Go to lido.fi and connect your wallet
- Enter Amount: Specify how much ETH you want to stake
- Review Transaction: Check gas fees and transaction details
- Confirm Staking: Approve the transaction in your wallet
- Receive stETH: stETH tokens appear in your wallet immediately
- Track Rewards: Monitor your stETH balance growth daily
Using stETH in DeFi
- Curve Pools: Provide liquidity to stETH/ETH pools for additional rewards
- Aave Lending: Use stETH as collateral to borrow other assets
- Yearn Vaults: Deposit stETH in automated yield strategies
- Uniswap Trading: Trade stETH for other tokens when needed
- Balancer Pools: Join weighted pools with stETH for diversified exposure
Withdrawal Process
Lido supports ETH withdrawals through their queue system:
- Request Withdrawal: Submit withdrawal request on Lido interface
- Join Queue: Enter the withdrawal queue with other users
- Wait for Processing: Wait for your turn based on queue position
- Claim ETH: Claim your ETH when withdrawal is ready
- Alternative: Trade stETH for ETH on DEXs for immediate liquidity
Risks and Considerations
Smart Contract Risks
As a DeFi protocol, Lido carries inherent smart contract risks:
- Code Vulnerabilities: Potential bugs in smart contract code
- Upgrade Risks: Protocol upgrades could introduce new vulnerabilities
- Composability Risks: Risks from interactions with other protocols
- Oracle Dependencies: Reliance on external data feeds
- Governance Attacks: Potential malicious governance proposals
Validator and Staking Risks
- Slashing Risk: Validators could be penalized for malicious behavior
- Performance Risk: Poor validator performance affects rewards
- Centralization Concerns: Concentration of stake in few operators
- Technical Failures: Validator downtime or technical issues
- Ethereum Network Risks: Risks inherent to Ethereum consensus
Market and Liquidity Risks
- stETH Depeg Risk: stETH may trade below ETH during stress periods
- Liquidity Crunches: Reduced liquidity during market volatility
- Withdrawal Queue Delays: Long wait times during high withdrawal demand
- DeFi Integration Risks: Risks from using stETH in other protocols
- Regulatory Risks: Potential regulatory changes affecting liquid staking
Risk Mitigation Strategies
- Diversification: Don't stake all ETH through a single protocol
- Gradual Exposure: Start with smaller amounts to test the system
- Monitor Peg: Keep track of stETH/ETH price ratio
- Understand Withdrawals: Know the withdrawal process and potential delays
- Stay Informed: Follow protocol updates and governance decisions
Fees and Economics
Lido Fee Structure
Lido charges a 10% fee on staking rewards, distributed as follows:
- Node Operators: 5% of rewards for validator services
- Lido DAO Treasury: 5% of rewards for protocol development
- User Net Rewards: 90% of staking rewards go to stakers
- No Deposit Fees: No fees for staking ETH initially
- No Withdrawal Fees: No protocol fees for unstaking (gas fees apply)
Yield Comparison
Lido's yields compared to alternatives:
- Solo Staking: Higher gross yield but requires 32 ETH and technical expertise
- Exchange Staking: Similar yields but custodial and less flexible
- Other Liquid Staking: Competitive yields with different risk profiles
- DeFi Strategies: Potential for higher yields but increased complexity and risk
Total Cost of Ownership
- Protocol Fees: 10% of rewards (automatically deducted)
- Gas Costs: Ethereum network fees for transactions
- DeFi Integration Costs: Additional gas fees for using stETH in DeFi
- Opportunity Costs: Potential higher yields from other strategies
- Slippage Costs: Trading costs when converting stETH to ETH
Lido vs Competitors
Lido vs Rocket Pool
- Advantages: Larger liquidity, better DeFi integration, simpler user experience
- Disadvantages: More centralized validator set, higher protocol dominance concerns
- Best For: Users prioritizing liquidity and ease of use
Lido vs Coinbase Staking
- Advantages: Decentralized, liquid tokens, DeFi integration
- Disadvantages: More complex, smart contract risks, no customer support
- Best For: DeFi-savvy users who want liquidity and decentralization
Lido vs Kraken Staking
- Advantages: Liquid staking tokens, DeFi opportunities, no minimum
- Disadvantages: More complex setup, smart contract risks
- Best For: Users who want to use staked ETH in DeFi protocols
Lido vs Solo Staking
- Advantages: No 32 ETH minimum, no technical requirements, immediate liquidity
- Disadvantages: Protocol fees, smart contract risks, less control
- Best For: Users with less than 32 ETH or who want liquidity
Advanced Strategies with Lido
Yield Stacking Strategies
Maximise returns by combining stETH with other DeFi protocols:
- Curve LP + Convex: Provide stETH/ETH liquidity and stake LP tokens
- Aave Recursive Lending: Use stETH as collateral to borrow ETH and restake
- Yearn Strategies: Automated yield optimization with stETH
- Balancer Pools: Multi-asset pools with stETH for diversified yield
- Index Protocols: Include stETH in automated index strategies
Risk Management Techniques
- Hedging Strategies: Use derivatives to hedge stETH depeg risk
- Diversified Staking: Split between multiple liquid staking protocols
- Gradual Entry/Exit: Dollar-cost average into and out of positions
- Monitoring Tools: Use analytics platforms to track performance
- Emergency Procedures: Have plans for rapid position unwinding
Tax Considerations
- Staking Rewards: Daily stETH increases may be taxable income
- DeFi Activities: Additional tax implications from DeFi usage
- Trading Events: Converting stETH to ETH may trigger taxable events
- Record Keeping: Maintain detailed records of all transactions
- Professional Advice: Consult tax professionals for complex strategies
Pros and Cons Analysis
Pros
- Market Leader: Largest and most established liquid staking protocol
- Immediate Liquidity: No lock-up periods or waiting times
- DeFi Integration: Extensive integration across DeFi ecosystem
- Professional Validators: Curated set of high-performance validators
- Daily Rewards: Automatic reward compounding through rebasing
- No Minimum: Stake any amount of ETH, no 32 ETH requirement
- Battle-Tested: Years of operation with strong security record
- Governance: Decentralized governance through LDO token
- Multi-Chain: Expansion to other Proof-of-Stake networks
- High Liquidity: Deep liquidity pools for stETH trading
Cons
- Smart Contract Risk: Potential vulnerabilities in protocol code
- Centralization Concerns: Dominance in liquid staking market
- Depeg Risk: stETH can trade below ETH during stress periods
- Protocol Fees: 10% fee on staking rewards
- Validator Risk: Dependence on selected validator performance
- Withdrawal Delays: Potential queues during high withdrawal demand
- Complexity: More complex than simple ETH holding
- Regulatory Risk: Potential future regulatory challenges
- Gas Costs: Ethereum network fees for all interactions
- Learning Curve: Requires understanding of DeFi concepts
User Reviews and Community Feedback
Positive User Experiences
"Lido has been a game-changer for my ETH holdings. I can earn staking rewards while continuing to participate in DeFi. The daily reward accrual is smooth, and I love using stETH in Curve pools for additional yield."
- Alex K., DeFi Enthusiast
"As someone with less than 32 ETH, Lido was my only option for staking. The process is straightforward, and the integration with other protocols makes it incredibly versatile."
- Maria S., Retail Investor
Areas for Improvement
"The withdrawal queue can get quite long during market stress. I wish there were more predictable withdrawal times, though I understand the technical constraints."
- David R., Long-term Holder
"The 10% fee feels a bit high compared to solo staking, but I appreciate the convenience and liquidity. The trade-off is worth it for my use case."
- Jennifer L., Active Trader
Common User Praise
- Excellent liquidity and DeFi integration
- Reliable daily reward distribution
- Professional validator management
- Strong security track record
- User-friendly interface and experience
- Comprehensive documentation and support
Frequent User Concerns
- Withdrawal queue delays during high demand
- Protocol fee impact on net returns
- stETH depeg risks during market stress
- Centralization concerns with validator set
- Complexity for newcomers to DeFi
Frequently Asked Questions
What is Lido and how does it work?
Lido is a decentralised liquid staking protocol that allows users to stake ETH and receive stETH tokens in return. These stETH tokens represent staked ETH plus accrued rewards and can be used in DeFi protocols while continuing to earn staking rewards. The protocol manages a network of professional validators to stake your ETH on the Ethereum Beacon Chain.
Is Lido safe to use?
Lido is widely used and audited, but risks remain, including smart contract vulnerabilities, validator performance issues, and stETH market liquidity/depeg risks. The protocol has been battle-tested with billions in TVL, but users should understand these risks before staking. Always do your own research and consider your risk tolerance.
What is the difference between ETH and stETH?
ETH is the native Ethereum token, while stETH is a liquid staking derivative that represents staked ETH plus accrued rewards. stETH can be used in DeFi protocols and typically trades at a 1:1 ratio with ETH, although market conditions can cause temporary depegging. stETH balances increase daily to reflect staking rewards.
How much does Lido charge in fees?
Lido charges a 10% fee on staking rewards, which is split between node operators (5%) and the Lido DAO treasury (5%). This fee is automatically deducted from rewards, allowing users to receive net staking rewards through the growth of their stETH balance. There are no deposit or withdrawal fees from the protocol itself.
Can I unstake my ETH from Lido?
Yes, Lido supports ETH withdrawals through their withdrawal queue system. Users can request to unstake their stETH and receive ETH back, though there may be a waiting period depending on the queue length and Ethereum network conditions. Alternatively, you can trade stETH for ETH on DEXs for immediate liquidity.
What happens if stETH depegs from ETH?
stETH can temporarily trade below ETH during market stress or high withdrawal demand. This is usually temporary as arbitrageurs step in to capture the price difference. However, users should be aware of this risk, especially if they need to convert stETH to ETH quickly during periods of market volatility.
Can I use stETH in other DeFi protocols?
Yes, stETH is widely integrated across the DeFi ecosystem. You can utilise it in protocols such as Curve (liquidity provision), Aave (collateral for borrowing), Uniswap (trading), Yearn (yield strategies), and many others. This allows you to earn additional yields in addition to staking rewards.
What is the minimum amount to stake with Lido?
There is no minimum amount to stake with Lido, unlike solo staking, which requires 32 ETH. You can stake any amount of ETH, making it accessible to retail investors. However, consider gas fees relative to your stake size, as small amounts may be less economical due to transaction costs.
How are staking rewards distributed?
Staking rewards are distributed daily through a rebasing mechanism that increases your stETH balance. The rewards come from Ethereum validator rewards, including block proposals, attestations, and MEV. Lido automatically compounds these rewards, allowing your stETH balance to grow over time.
What are the main risks of using Lido?
Main risks include smart contract vulnerabilities, validator slashing or poor performance, stETH depeg during market stress, withdrawal queue delays, and general Ethereum network risks. While Lido has a strong security record, users should be aware of these risks and consider implementing diversification strategies.