What is Lido DAO (LDO)?

Lido DAO is a decentralized staking protocol that offers liquid staking services on various blockchain networks, primarily Ethereum. This means that users do not lose the liquidity of their assets when staking them; they can participate in the network's Proof of Stake validators even with small balances, without needing large amounts such as 32 ETH. Lido produces tokenized representative assets at a 1:1 ratio in exchange for the deposited assets. For example, a user who stakes Ethereum through Lido receives a token called stETH, which represents the value and yield of the staked ETH. This allows the Lido protocol to enable users to stake their crypto assets without locking them up.

The stETH tokens they receive are designed to always be equivalent to 1 ETH, and users can exchange them at any time, use them in other protocols, or convert them back to ETH. In short, liquid staking means earning staking rewards while maintaining the liquidity of staked assets. Lido DAO provides exactly this, offering a decentralized staking service (decentralized staking service).

The Lido protocol was launched in 2020 and was created to solve some of the limitations introduced by the Ethereum 2.0 network. In the Beacon Chain phase of Ethereum (ETH 2.0), there were difficulties such as a minimum staking requirement of 32 ETH, technical knowledge requirements, and the inability to withdraw staked funds. The Lido team developed the concept of liquid staking as a solution to these issues.

Let's take a closer look at this innovative cryptocurrency and explore questions such as what LDO token is and LDO coin's future.

Definition and Origins of Lido DAO

Lido DAO is an innovative DeFi protocol that essentially provides “staking and liquidity integration.” For users seeking an Ethereum staking solution, Lido allows them to stake their assets on the Ethereum network while remaining liquid. Staking refers to users locking their assets into a blockchain for a certain period of time to contribute to the network's security and earn rewards in return.

The protocol was first launched in December 2020, shortly after the Ethereum 2.0 Beacon Chain went live. At its inception, it aimed to solve some of the problems encountered on the Ethereum network: in the classic staking method, users had to lock up a high amount such as 32 ETH and could not access these assets during that period. Additionally, running one's own validator node required technical knowledge and infrastructure. Lido introduced the concept of liquid staking to overcome these obstacles.

So, how does Lido work? When users deposit Ethereum (or other supported coins) into Lido's smart contract, the smart contract distributes these funds to trusted validators selected by the protocol. In return, the user is given a representative token such as stETH. This token represents the amount the user has staked and the staking rewards accumulated up to that point. Thus, the user can participate in the Ethereum network's validators and earn staking returns while continuing to trade in the DeFi ecosystem with their stETH token.

The innovative aspect of the Lido protocol is that it offers a decentralized staking service. In other words, Lido pools user funds and distributes them to multiple validators in the background. These validators are actually reliable and experienced node operators selected by the Lido DAO community. The protocol is completely open source and its smart contracts have been audited. The smart contract code can be reviewed by anyone and has passed independent security audits. Thanks to this transparent structure, users have significant assurance regarding the security of the protocol when depositing funds into Lido. Lido's liquid staking model has brought great convenience to those who stake on networks such as Ethereum: let's answer the question “What is stETH?” in this context. stETH is a token issued in exchange for Ether staked on Lido and is pegged to 1 ETH. As a stETH holder, users continue to earn staking rewards on the Ethereum network and can sell stETH at any time, exchange it for another coin, or use it as collateral in DeFi protocols. This eliminates the liquidity loss issue experienced in traditional staking.

There is no single founder behind Lido DAO, which emerged in 2020. Lido DAO was founded in 2020 by Konstantin Lomashuk, Vasiliy Shapovalov, and Jordan Fish. The project was brought to life with the support of investors such as Semantic VC, ParaFi Capital, and StakeFish. The founders are experienced names in the Ethereum and DeFi fields: Lomashuk worked at Parity Technologies, while Shapovalov worked at P2P Validator. Jordan Fish is known for his podcast called “UpOnly.” Many well-known names and institutions also contributed to the establishment of Lido. For example, the $2 million seed funding round in December 2020 was attended by funds such as Semantic Ventures and ParaFi Capital, as well as industry leaders such as Rune Christensen, founder of MakerDAO, Stani Kulechov, CEO of Aave, and Kain Warwick, founder of Synthetix. This collective effort enabled Lido to be born as a community-focused, non-profit organization. Subsequently, the project quickly transitioned to a DAO model, transferring management entirely to the community. In other words, Lido is not managed by a few founders, but by a broad group of LDO token holders. Through on-chain governance mechanisms, every decision in the Lido DAO is made through community voting, and rules are enforced via smart contracts.

History of Lido DAO: Important Milestones

Since its inception, Lido DAO has grown rapidly and achieved significant successes in the DeFi space. Here are some important milestones in the history of Lido DAO:

• 2020: Immediately following the launch of Ethereum 2.0 Beacon Chain, the Lido protocol went live in December 2020. The first version allowed users to receive stETH in exchange for locked ETH, thereby adding liquidity to the Ethereum staking process. Lido DAO was also founded and received its initial funding this year. This is because the protocol emerged as a solution to inefficiencies in Ethereum staking.

• 2021: The Lido team focused on DeFi partnerships to accelerate the growth of the protocol. In particular, incentive programs were launched on Curve Finance to provide liquidity for stETH. This allowed stETH to remain close to 1 ETH in value, while users were able to trade with low losses through stETH/ETH pools. In the same year, Lido's governance token, LDO, was officially launched, and the first DAO votes were held. With the distribution of the LDO token, protocol governance began to be transferred from the core team to the community. By the end of 2021, Lido announced plans to expand beyond Ethereum to other networks.
• 2021-2022: Although Lido DAO started with a focus on Ethereum, it quickly began to expand to other popular Proof of Stake networks. In September 2021, Lido integration (stSOL) for the Solana network was launched (later, in 2023, this integration was terminated by a community vote). Then, in November 2021, stMATIC was launched for the Polygon network (closed in 2025). In 2022, Lido began offering its liquid staking service for Polkadot (stDOT in May 2022, later discontinued) and its canary network Kusama (stKSM in February 2022). With these expansion steps, Lido has become a multi-chain liquid staking platform. It also expanded its user base by offering liquid staking products in ecosystems such as Solana and Terra (the stLUNA service on the Terra network was discontinued in mid-2022 due to issues within the Terra ecosystem). 2022 will be remembered for Lido not only for its multi-chain support but also for its tremendous growth: Lido became the largest staking provider on Ethereum, representing over 25% of the total staked ETH on its own. This demonstrated Lido’s dominance in the Ethereum staking market achieved in just two years.
• 2023: The Shanghai (Shapella) update implemented by the Ethereum network in April 2023 made it possible to withdraw staked ETH from the network. Following this critical update, the Lido protocol also updated its structure, introducing features that allow users to convert their stETH to ETH and withdraw it. The Lido v2 update, launched in May 2023, brought two major improvements to the protocol's core operations: a new modular infrastructure called Staking Router and a withdrawal feature for stETH. The Staking Router made Lido's validator registration system more flexible and modular, enabling greater diversity in validator participation on the network, thereby increasing decentralization and expanding the pool of trusted validators. With the withdrawal feature, users can now withdraw their locked ETH from Lido at a 1:1 ratio after a certain waiting period. These developments have turned Lido into a fully functional staking platform. Users can now lock any amount of ETH and receive stETH in return, and if they wish, they can exit later and retrieve their Ether. 2023 was also a period when the stETH token became firmly established in the DeFi ecosystem. Many major DeFi protocols began integrating stETH and accepting it as collateral. For example, the Aave protocol listed stETH as both collateral and a debt asset in the Ethereum market. This allowed users to deposit their stETH into Aave and borrow ETH or stablecoins in exchange, enabling them to create leveraged positions. The concept of staking usage in DeFi was solidified by Lido's success: stETH became one of the most preferred collateral options in decentralized finance applications. Following the Shanghai update, investors began using stETH extensively on platforms like Aave and Compound to achieve higher compound returns. Thanks to Lido’s network effect, the circulating supply of stETH reached a record high of 7.5 million by mid-2023, and Lido continued to lead the sector with a liquid stake supply 16 times larger than its nearest competitor.

• 2024: Lido DAO fully felt the effects of its v2 update, which it laid the groundwork for in 2023. The innovations brought by Lido v2 focused on increasing the protocol's transparency and governance capabilities. By early 2024, Lido had come to control approximately one-third of the total stake on Ethereum (approximately 30-31%), solidifying its dominant position in the industry. This situation brought both great success and responsibility for the protocol; in order to uphold the principles of decentralization, Lido took steps to bring more validators into its network and reduce the risk of power concentration at a single point. In 2024, Lido DAO implemented a delegation mechanism to increase community participation in governance processes. In August 2024, a governance vote approved an on-chain delegation system that allows LDO token holders to delegate their votes to representatives they trust, as well as a representative incentive program called the “Delegate Incentivization Program.” This provided convenience for LDO holders who could not actively participate in the voting process but trusted representatives who shared their views. One of the notable developments in 2024 was the introduction of a “dual governance” mechanism in Lido DAO. A proposal voted on and approved on the Snapshot platform on April 25, 2024, envisions this new model, which aims to give stETH tokens governance functionality. Additionally, throughout 2024, Lido DAO made improvements to its multisig wallet processes to enhance operational transparency and enhanced the traceability of protocol parameters.

Why is Lido DAO valuable?

There are many features that make Lido DAO unique and valuable. First, let's talk about how liquid staking prevents liquidity loss. One of the biggest advantages of using Lido DAO is that you don't experience liquidity loss with the stETH you receive in exchange for your staked ETH. In traditional staking methods, when you lock your assets as a validator, they remain locked during the withdrawal period and cannot be used for other purposes. Lido eliminates this problem: For example, when you stake 32 ETH through Lido, you immediately receive 32 stETH. Your stETH balance automatically increases in proportion to the staking rewards you earn, and you can sell this token or use it in other protocols at any time. As a result, Lido allows you to earn passive income without locking up your cryptocurrencies for long periods of time. This feature has become highly valuable to investors as it completely eliminates the “illiquidity” disadvantage that arises when participating in the Ethereum 2.0 staking process. We can examine other critical features under the following headings:

Ability to use in DeFi while earning passive income

Investors who stake with Lido can continue to utilize their assets in the DeFi ecosystem while earning staking returns. This is like “doubling your investment”: For example, a user can purchase stETH tokens and deposit them as collateral into the Aave protocol, in exchange for borrowing another asset (such as a stablecoin or ETH). Thus, in addition to staking income, they can pursue extra returns by making additional investments with the borrowed asset. As the use of stETH tokens for staking in DeFi becomes more widespread, new arbitrage and yield strategies have emerged for users. Thanks to Lido, “capital efficiency” is maximized; assets both earn staking rewards and are revalued on different platforms. This makes the liquid staking model much more attractive than classic staking.

Governance and community participation and the role of the LDO token

One of the key factors that makes Lido DAO valuable is its robust governance system. Critical decisions such as protocol development, parameter changes, and expansion to new networks are made not by a central authority but through votes by LDO token holders. The LDO token grants its holders voting rights in Lido DAO, enabling them to influence the protocol's future. This allows Lido to be collectively managed by a community that looks after the interests of its users. Forum discussions where everyone can express their opinions, preliminary votes on platforms such as Snapshot, and on-chain voting processes establish Lido's management on a transparent and participatory model. This transforms Lido from merely a staking tool into an example of a DAO governance system. LDO token holders possess voting power proportional to the number of tokens they hold, meaning the protocol's future is directly in the hands of its users.

Reliable validators and open-source infrastructure

Lido DAO's reliability is as important as its technical value. Since the protocol provides staking services on a large scale, security and validator performance are critical issues. Lido has proven itself in the industry since its inception and works in tandem with reliable node operators. For example, in the first phase of its financing, well-known validators such as Stakefish and Staking Facilities joined Lido's infrastructure. Lido DAO follows a decentralized approach in validator selection, distributing staking across multiple operators to minimize risks concentrated in a single point. Thanks to this transparency, potential vulnerabilities in Lido's smart contracts can be observed by the community and quickly addressed. The Lido team has a long-term perspective on security and reliability and acts with the awareness that it manages billions of dollars in assets. To date, Lido has remained resilient even during events such as the 2021 DeFi market turmoil and the 2022 Terra collapse.

Multi-chain support and ecosystem integrations

Another factor that enhances the value of Lido DAO is its presence across multiple blockchain networks and its adoption by a broad ecosystem. Following its success on Ethereum, it has now brought its liquid staking feature to networks such as Solana, Polygon, Polkadot, and Kusama, even though most of them are not currently active. This has made Lido a strong player in the industry in terms of interoperability. During the period when these integrations were active, users on different networks were able to engage in liquid staking with a similar experience through Lido and obtain the derivative tokens of the relevant networks (stSOL, stMATIC, stDOT, etc.). Lido's multi-chain strategy freed the project from dependence on a single network and transformed it into a general liquid staking platform.

Who is the founder of Lido DAO?

Lido DAO was launched by three prominent figures rather than a single central founder. Each of these individuals has made significant contributions to Ethereum and decentralized finance (DeFi), forming the cornerstones of Lido's technical and community-based structure. These individuals are as follows:

• Jordan Fish: Known in the crypto world by the pseudonym “Cobie,” Fish is recognized for his entertaining and sharp analyses. He is also the founder of the popular crypto podcast “UpOnly.” His influence within the community and ability to reach a wide audience played a significant role in Lido's early promotional efforts.
• Vasiliy Shapovalov: A developer with deep technical ties to the Ethereum infrastructure. Specializing in staking infrastructure, Shapovalov has previously worked on projects such as P2P Validator and has extensive experience in validator technologies.
• Konstantin Lomashuk: Known for his background at Parity Technologies and his contributions to the Web3 ecosystem. He is also one of the founders of the crypto investment firm Cyber Fund. He has been instrumental in shaping Lido's technical infrastructure as well as its long-term vision.

The project, which gained prominence with a blog post published in October 2020 and was activated with approximately $2 million in initial funding in December 2020, targeted key issues in the Ethereum staking process, such as liquidity loss and high minimum staking requirements (32 ETH).

Frequently Asked Questions (FAQ)

Below, you can find frequently asked questions about Lido DAO:

• What is Lido DAO and how does it work?: Lido DAO is a decentralized liquid staking protocol that allows users to stake their assets while maintaining liquidity. For example, a user who stakes Ether on Lido receives stETH tokens in return. These stETH tokens represent the value of the staked ETH and the rewards earned. Lido's smart contracts distribute the deposited Ether to trusted validators selected by Lido DAO, allowing users to contribute to network security and earn rewards without having to deal with technical details.
• What is stETH and how is it obtained? stETH is the name of the token given in exchange for Ether staked on the Lido protocol. When a user stakes Ethereum through Lido, stETH is minted (issued) in a 1:1 ratio with the deposited ETH. For example, if you stake 5 ETH, you will receive 5 stETH. The value of stETH is theoretically equal to 1 ETH and is automatically updated daily to reflect staking rewards. The most common way to obtain stETH is to stake ETH through Lido's official interface (via sites such as stake.lido.fi). Alternatively, you can purchase stETH tokens that are already in circulation from decentralized exchanges (e.g., Curve, Uniswap) to become a stETH holder.
• What is LDO token used for? LDO is the governance token of Lido DAO. LDO token holders have the right to vote on decisions that shape the future of the Lido protocol. For example, issues such as changing fee rates on Lido, adding Lido support to a new blockchain network, or the use of treasury funds are put to a vote by LDO holders. The more LDO tokens you have, the greater your voting power. LDO holders can contribute to the development of the protocol by expressing their ideas on Lido's forums. In addition, LDO is a cryptocurrency that can be bought and sold on various DeFi platforms.
• Is Lido reliable? Lido is a protocol that has gained widespread trust and proven itself in the DeFi field. Since its launch in 2020, Lido has not encountered any serious security incidents or attacks and has managed billions of dollars in assets without any issues, earning it a place among the “battle-tested” protocols. Additionally, Lido is backed by a strong community and reputable investors. However, as with any DeFi protocol, there are some risks associated with Lido. For example, there are smart contract risks (the possibility of undiscovered bugs), slashing risks (small interruptions may occur if Lido's node operators make mistakes), or decentralization risks (regulatory risks that may arise due to Lido's large share of the Ethereum staking market).
• Which networks does Lido support besides Ethereum? Lido DAO offers liquid staking services on multiple blockchain networks besides Ethereum. The main networks currently supported are Polygon (MATIC) and BNB. As Ethereum L2 solutions, it supports Arbitrum, Optimism, Base, ZkSync, Mantle, Linea, Scroll, Mode, Zircuit, and Unichain.
• What is the difference between liquid staking and classic staking? Classic staking means locking a cryptocurrency (e.g., ETH) into the network's validator node for a certain period of time. During this period, your assets cannot be moved; in return, you earn validator rewards, but your funds are not liquid. Additionally, classic staking typically requires a minimum amount (e.g., 32 ETH for Ethereum) and may technically require you to run your own node. Liquid staking, on the other hand, is an approach that adds flexibility to this process. A liquid staking protocol (such as Lido) stakes on your behalf and issues you a token (such as stETH) representing the amount you have staked. This token is liquid, meaning you can buy, sell, transfer, or use it in DeFi applications at any time. This way, your capital remains unlocked even while staking.

For those who want to participate in the Ethereum staking process without losing liquidity, do not forget to check out our detailed guide to Lido DAO.