What Is Lido?

Staking means committing cryptocurrency to help secure a proof-of-stake blockchain. On Ethereum, validators use staked ether (ETH) to back their work checking transactions and proposing blocks, earning rewards but risking penalties. Staked ETH cannot be spent while it remains in a validator.

Lido is a liquid staking protocol: users deposit ETH and receive stETH, a transferable token representing their share of pooled ETH and staking results. This lets them trade the token or use it in decentralized finance (DeFi) while the underlying ETH is staked. It does not guarantee an immediate exit at the same market price as ETH.

Why Use Lido for Staking?

Lido Finance pools ETH so users can participate in staking without running their own validator or supplying the full validator deposit themselves.

Activating an Ethereum validator requires at least 32 ETH. Running one also requires maintaining the hardware and software that perform its network duties. Lido lets users stake smaller amounts without operating that infrastructure themselves.

Assets staked through Lido are delegated to independent node operators running Ethereum validators. Rewards depend on Ethereum’s staking rules, network conditions and validator performance, rather than a fixed return chosen by Lido.

Network support has changed: new staking deposits ended on Polkadot and Kusama in March 2023, and Solana in October 2023; Polygon stopped accepting new stake through its interface in December 2024. This guide’s November 2026 update focuses on Ethereum staking. Bridged wstETH on another network still represents an Ethereum staking position, not staking of that network’s native token.

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Ethereum enabled staking withdrawals in April 2023. Lido also supports withdrawals through its own protocol, a feature introduced with its V2 upgrade. Completing a protocol withdrawal can require waiting.

Lido therefore offers two practical features:

• Participate in pooled Ethereum staking with less than the 32 ETH needed to activate a validator.
• Receive a transferable staking token that can be traded or used in DeFi while the underlying ETH remains staked.

From ETH to stETH and wstETH

The basic flow is to deposit ETH, receive stETH, and optionally wrap stETH into wstETH. These are two ways to hold the same underlying staking position, with different reward accounting:

• ETH: The asset deposited for Ethereum staking.
• stETH: A rebasing token whose wallet balance normally updates daily to reflect staking rewards after fees, or penalties.
• wstETH: Wrapped stETH. Its token balance does not change with staking rewards; instead, each token represents a changing amount of stETH.
• Wrapping: Locks stETH in the wrapper contract and issues wstETH at the current conversion rate, not necessarily one token for one token.
• Unwrapping: Burns wstETH and releases the corresponding stETH. It does not withdraw ETH or create a second stream of staking rewards.

The fixed-balance format makes wstETH useful for applications that do not support rebasing balances. For example, it can be used as collateral on Aave. Borrowing against it creates a loan, not an automatic extra staking reward.

There are two main ways to exit: request ETH through Lido’s withdrawal queue, or sell stETH or wstETH on a secondary market. A market sale avoids the staking withdrawal queue but depends on buyers and available liquidity. Its price can differ from the protocol’s redemption value, so neither token guarantees a sale at parity with ETH.

Users who deposit into Lido, or acquire its staking tokens on the market, can request a protocol withdrawal using stETH or wstETH. The queue unwraps wstETH to stETH during the request and issues a transferable NFT, a unique token representing the right to claim ETH. The user must wait for finalization, then claim the ETH. Timing depends on available ETH and Ethereum’s queues. Tokens in the queue stop earning rewards, and severe protocol losses can reduce the payout.

Lido takes a 10% fee from staking rewards, not the deposited principal. The fee is shared between node operators and the DAO treasury, and governance can change it. Rewards are variable, not guaranteed. Two amounts should be distinguished:

• Stakers receive the rewards remaining after the protocol fee, reflected in stETH balances or the wstETH conversion rate.
• The DAO treasury receives part of the fee, not all staking rewards. The Defiant’s report on Lido’s October 2026 treasury-revenue windfall explains the distinction between treasury income and payments to LDO holders.

Lido’s risk disclosure warns that smart contract bugs can cause losses and validator penalties, including slashing, can reduce staked assets. Slashing destroys part of a validator’s stake for breaking network rules. Lido’s token documentation explains that penalties can reduce stETH balances. Using stETH or wstETH in another DeFi protocol adds that protocol’s risks, including liquidation when collateral no longer adequately covers a loan.

The Defiant’s October 2026 report on Lido Lend’s proposed Fallback Exits describes a lending-market design that could use borrower collateral to satisfy withdrawing lenders. That proposal is separate from the existing staking withdrawal queue described above.

Lido DAO and LDO Tokenomics

Lido is governed through a decentralized autonomous organization, or DAO. LDO token holders vote on how the protocol operates.

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Governance covers protocol fees, upgrades and node-operator policies. Independent operators run the validators; token-holder votes do not set a guaranteed staking yield or eliminate staking risks.

LDO is an Ethereum governance token, with voting weight proportional to the amount held. It is distinct from stETH and wstETH, which represent staking positions rather than votes in the Lido DAO. Treasury staking-fee income is not automatically distributed to LDO holders.

Series Disclaimer:

This series article is intended for general guidance and information purposes only for beginners participating in cryptocurrencies and DeFi. The contents of this article are not to be construed as legal, business, investment, or tax advice. You should consult with your advisors for all legal, business, investment, and tax implications and advice. The Defiant is not responsible for any lost funds. Please use your best judgment and practice due diligence before interacting with smart contracts.

Correction (2026-11-01): Corrected claims that withdrawals were still unavailable, staking tokens guaranteed ETH parity and price discounts could not affect long-term holders; added stETH/wstETH mechanics, exit options and risks.