What Is Lido ?
LDO is an Ethereum token granting governance rights in the Lido DAO. The Lido DAO governs a set of liquid staking protocols, decides on key parameters (e.g., fees) and executes protocol upgrades to ensure efficiency and stability. By holding the LDO token, one is granted voting rights within the Lido DAO. The more LDO locked in a user’s voting contract, the greater the decision-making power the voter gets.
How is Lido secure ?
Lido is a secure liquid staking solution for a number of reasons:
- Open-sourcing & continuous review of all code.
- Committee of elected, best-in-class validators to minimise staking risk.
- Use of non-custodial staking service to eliminate counterparty risk.
- Use of DAO for governance decisions & to manage risk factors.
Usually when staking ETH you choose only one validator. In the case of Lido you stake across many validators, minimising your staking risk.
Why LIDO DAO ?
Lido DAO is a Decentralized Autonomous Organization, which builds liquid staking protocol for Ethereum.
In the case of liquid staking, the competitors are well-known providers like centralized exchanges and other decentralized protocols like RocketPool. The DAO is the logical compromise between full centralization and decentralization, which allows the deployment of competitive products without full centralization and custody on the exchanges.
We do not believe that it is possible to make a liquid staking protocol that is completely trustless. For the first phases of Ethereum 2.0, it is not possible at all.
- A DAO is an optimal structure for launching Lido because: Lido is highly dependent on the design and restrictions of the beacon chain;
- Ethereum 2.0 staking protocol may change and therefore Lido should be upgradable;
- An insurance provider must be selected and terms for slashing insurance must be negotiated;
- DAO governance is better than one person or a developer's team for making decisions about changes in Lido; and
- a DAO will be able to cover the costs of developing and upgrading the protocol from the DAO token treasury.
The DAO will accumulate service fees from Lido, which can be funneled into the insurance and development funds, distributed by the DAO.
What fee is applied by Lido ? What is these used ofr ? DAO Token
Lido applies a 10% fee on a user’s staking rewards. This fee is split between node operators, the DAO, and a coverage fund.
Lido Referral Program?
The Lido Referral Program transitioned to whitelist mode (in line with the following proposal) which means that only whitelisted referrals are able to participate and receive rewards. The goal of this is to help improve the security and productivity of the Lido referral program. Wallets, platforms, and protocols are welcome to apply for whitelisting on Lido governance forum.
What are the risks of staking with Lido ?
Coin's mission is to represent a better performing mainnet developed to support TNC's upcoming projects — namely Real Research — and its continuously growing ecosystem.
There exist a number of potential risks when staking ETH using liquid staking protocols.
- Smart contract security
There is an inherent risk that Lido could contain a smart contract vulnerability or bug. The Lido code is open-sourced, audited and covered by an extensive bug bounty program to minimise this risk.
- ETH 2.0 - Technical risk
Lido is built atop experimental technology under active development, and there is no guarantee that ETH 2.0 has been developed error-free. Any vulnerabilities inherent to ETH 2.0 brings with it slashing risk, as well as stETH fluctuation risk.
- ETH 2.0 - Adoption risk
The value of stETH is built around the staking rewards associated with the Ethereum beacon chain. If ETH 2.0 fails to reach required levels of adoption we could experience significant fluctuations in the value of ETH and stETH.
- DAO key management risk
On early stages of Lido, slightly more than 600k ETH became held across multiple accounts backed by a multi-signature threshold scheme to minimize custody risk. If signatories across a certain threshold lose their key shares, get hacked or go rogue, we risk these funds (<20% of total stake as of April 2022) becoming locked.
- Slashing risk
ETH 2.0 validators risk staking penalties, with up to 100% of staked funds at risk if validators fail. To minimise this risk, Lido stakes across multiple professional and reputable node operators with heterogeneous setups, with additional mitigation in the form of coverage that is paid from Lido fees.
- stETH price risk
Users risk an exchange price of stETH which is lower than inherent value due to withdrawal restrictions on Lido, making arbitrage and risk-free market-making impossible. The Lido DAO is driven to mitigate above risks and eliminate them entirely to the extent possible. Despite this, they may still exist and, as such, it is our duty to communicate them.
Team behind Lido DAO
Lido consists of a DAO that includes various members with different backgrounds. Lido DAO members include Semantic VC, ParaFi Capital, Libertus Capital, Terra, Bitscale Capital, StakeFish, StakingFacilities, Chorus, P2P Capital and KR1.