Lido Finance
Lido DAO (decentralized autonomous organization) is a liquid staking solution available on major blockchains like Ethereum, Solana, Terra, and Polygon. Since for example the initial staking on Eth2’s Beacon Chain locks the assets, Lido DAO allows assets to be liquified and used for other protocols while receiving staking rewards. The term liquid staking refers to the act of receiving liquid tokens in return for depositing tokens. Liquid tokens can be used to stake other blockchain protocols. Founded in December 2020, a few weeks after the launch of ETH 2.0, Lido is governed by a DAO. Some key members of Lido DAO are P2P Capital, KR1 and Semantic Ventures. It’s also backed by renowned investors like Kain Warwick, Banteg and Julien Bouteloup [1].
1. Is It a Protocol or Token?
Both Protocol and Token.
Lido is a liquid staking solution and yield farm for ETH and other Proof-of-Stake blockchains backed by industry-leading staking providers. Lido lets users stake their ETH - without locking assets or maintaining infrastructure - whilst participating in on-chain activities, e.g. lending [2]. Lido is a staking solution that lowers the barriers to entry especially for Ethereum 2.0 staking. Instead of staking ETH in multiples of 32, it allows users to stake a fraction of the ETH and still earn rewards from Ethereum 2.0 [3].
2. Category
Lido is a liquid staking solution for Ethereum 2.0. Lido lets users stake their ETH - with no minimum deposits or maintaining of infrastructure - whilst participating in on-chain activities, e.g. lending, to compound returns [5].
3. Does it have TVL? -
Yes, total TVL is $13.64b. as of 1 March 2022 [6].
Lido has the following distribution of TVL as of 1 March 2022 [6][17].
Ethereum | $5.96bln |
Solana | $229.12m |
Terra | $7.45bln |
4. Provide the following information at a protocol and pool level where appropriate:
As of 21 Jan 2022
Assets Not applicable
Liabilities Not applicable
Reserves Not available
Treasury $ 13.64b [6].
Market Cap
$47,929,956 [7]
Ratio of Reserves to TVL (deposits only; unleveraged) Not available
Ratio of Treasury to TVL (deposits only; unleveraged) 0.3162 [6][4].
Ratio of native Market Cap to TVL (deposits only; unleveraged) 0.003483 [5]
Are they double-counting leverage? - NO
5. Further details on the Token?
Markets where it’s available?
If you would like to know where to buy Lido DAO Token, the top cryptocurrency exchanges for trading in Lido DAO Token stock are currently DigiFinex, Bybit, Bitget, Gate.io, and MEXC. You can find others listed on our crypto exchanges page [7].
Liquidity:
Circulating Supply - the total amount of tokens in circulation 24,539,272.69 LDO [7].
Total Supply - on-chain supply minus burned tokens 1,000,000,000 [7].
Max Supply - theoretical maximum as coded 1,000,000,000 [7].
6. What chain is it on? - MultiChain
Initially developed with a focus on Ethereum, Lido is expanding to other blockchain networks like Terra and Solana. Staking for Terra and Solana was launched in March and September 2021, respectively [1]. Very recently, on Feb 18, Lido unveiled liquid staking for Kusama (KSM) on Moonriver. Users can stake their KSM with Lido to earn daily Kusama staking rewards and benefit from the many opportunities available across the Kusama DeFi ecosystem [8].
7. Could it be exploited?
It has not been exploited yet.
8. What assets does it support?
Lido Supports ETH, Luna, Solana, Matic and Kusama [14].
9. How does it combine the risks of those assets?
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 minimize 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 Ether staked via the Lido DAO is 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 funds becoming locked.
Slashing risk ETH 2.0 validators risk staking penalties, with up to 100% of staked funds at risk if validators fail. To minimize 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 [2]. More details on a potential depeg risk for stETH can you find here.
10. Does it wrap and distribute assets?
Yes, it wraps assets.
Lido's wrapped stETH (wstETH) is stETH which is deposited into the stETH wrapper to create a new token called wstETH. Wrapping stETH creates a DeFi-compatible version of the stETH token which allows for easier integrations with DeFi protocols including Uniswap and ARCx.
Due to the nature of Lido, the amount of stETH on your balance is not constant - it changes daily as staking rewards come in. This is what's known as a rebasable token. In the case of stETH, this is reflected through a daily token balance change to reflect your earned rewards.
This rebase works across integrated DeFi platforms like Curve and Yearn. This means that if you are to stake your stETH across these protocols to earn additional yields, you will continue to benefit from daily stETH staking rewards as well. UniSwap, 1inch and SushiSwap are not designed for rebasable tokens and as a result you risk losing out on a portion of your daily staking rewards through providing stETH as liquidity across these platforms.
As some DeFi protocols - e.g. Uniswap - require a constant balance mechanism for tokens, Lido let's you "wrap" your stETH into wstETH to keeps your balance of stETH fixed. Instead of updating daily, wstETH uses an underlying share system to reflect your earned staking rewards [10].
11. What are the conditions for the wrapped assets to be liquidated? Back to the original portfolio or adjusted for value?
stETH is a token that represents staked ether in Lido, combining the value of initial deposit + staking rewards. stETH tokens are minted upon deposit and burned when redeemed. stETH token balances are pegged 1:1 to the ethers that are staked by Lido. stETH token’s balances are updated when the oracle reports change in total stake every day.
stETH tokens can be used as one would use ether, allowing you to earn ETH 2.0 staking rewards whilst benefiting from e.g. yields across decentralized finance products [2].
Wrapped stETH does not rebase but the stETH in the wrapper contract rebases at 12PM UTC every day. When you eventually redeem your stETH with wstETH in your wallet you will receive stETH and any interest that was accrued while in the wrapper [10] [11].
12. What are the dependencies of the protocol? How does risk bubble up?
Lido does not have any dependencies on any third party apps or APIs. For Ethereum, the underlying risk is the ETH2.0 Beacon chain and any issues with that.
13. Does it have a governance token
Lido's governance token is called LDO. There are 1 billion of the tokens and 64% of them are dedicated to the founders and other early participants who got Lido off the ground, but that giant stash is locked for a year and then will be parceled out (vested) over the following year [4].
14. How decentralized is it?
The LDO token governs all Lido DAO governance and network decisions to ensure its prolonged stability and decentralized decision-making to facilitate the growth of fair, trustless and transparent liquid staking. Lido is a DAO community which builds a liquid staking service for Ethereum. Inspired by the growth of the Ethereum ecosystem, Lido lets users stake their ETH tokens in a secure, non-custodial and transparent manner to contribute to the stability of the Ethereum ecosystem as a whole.
Lido’s Ethereum staking protocol has been built as a DAO to preserve Lido’s upgradability and stability whilst maintaining decentralized infrastructure. The Lido DAO governs a set of liquid staking protocols, deciding on Lido’s key parameters whilst spearheading Lido network upgrades. Members of the Lido DAO have the responsibility to govern Lido to maintain its ongoing efficiency and contribute to the overall growth of the Lido community [13].
15. Additional Information
VAR - VaR could be applied to manage risk of LPing from a LP provider perspective
LCR - Not applicable
Are there any other metrics that might be useful?
Annual percentage rate(APR) - APR is denominated in terms of stETH, not USD, and is not a guaranteed or promised return or profit. The current Ethereum's APR is 5%. Lido's APR is currently lower due to the activation queue for ETH validators as well as Lido's staking rewards fee. Lido's APR could grow as the rate of active stakers on Lido becomes higher, but will not exceed Ethereum's APR. With Lido, you receive staking rewards within 24 hours of your deposit being made, without waiting for validator activation. You can find the current APR on the Lido staking page [2].
16. How is this exposed to layers in Defi:
What layers are upstream (built on top of the protocol)? Are there other protocols that use it as a source of data/pricing oracle, or put funds into it?
Lido empowers stakers to put their staked assets to use. Apps and services integrated with Lido can be found here [9].
What layers are downstream (protocols/assets built on or put into the platform). For example, yield farms are built on top of lending protocols
Lido relies on the Staking Node operators for the specific blockchain.
17. Smart Contract information
List the protocol´s smart contract address
Lidos protocol address : 0xae7ab96520DE3A18E5e111B5EaAb095312D7fE84 [16][17].
List the Token´s smart contract address
LDO token tracker address: 0x5A98FcBEA516Cf06857215779Fd812CA3beF1B32 [17].
Are there any other relevant smart contracts?
List of all addresses can be found here [15].
References:
Stake.lido, https://stake.lido.fi/
Coinmarketcap, https://coinmarketcap.com/currencies/lido-dao/
Defillama, https://defillama.com/protocol/lido
Coinmarketcap, https://coinmarketcap.com/currencies/lido-dao/
Blog.lido, https://blog.lido.fi/lido-for-kusama/
Lido.fi, https://lido.fi/lido-ecosystem
Lido.fi, https://lido.fi/
Contributors
| Discord Handle | ETH Address | Reward | Contribution |
|---|---|---|---|
Deadsec | 0x1A2E1d4553d33c080746A056AA3F832823fADB51 | 0 $CMK (internal) | Original version |
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