What is Lido? Everything you need to know about DAO cryptocurrency LDO
Lido (LDO) emerged as the leading Ether (ETH) staking platform in the world by contributing over 30% of all ETH staked, as of January 2023.
The staking platform’s governance token LDO gained over 50% in the first week of 2023 on expectations that more users will stake their ETH as Ethereum completes its upcoming ' ‘Shanghai’’ upgrade in March 2023.
What is Lido and how does it work? Here we take a look at LDO coin price history, latest news and risks involved with Lido staking.
What is Lido?
Lido (LDO) is a crypto staking solution currently available on Ethereum, Solana (SOL), Polkadot (DOT) and Kusama (KSM).
Staking is the process of depositing cryptocurrencies as collateral in order to verify and create blocks on proof-of-stake (PoS) blockchains like Ethereum. Stakers gain the chance to earn rewards by validating blocks.
As of January 2023, staking on Ethereum requires users to lock up their ETH. Ether stakers can withdraw their tokens after the network upgrade called Shanghai, which is expected in the first half of 2023, according to Ethereum’s website.
Lido is managed by the Lido Decentralised Autonomous Organisation (DAO). According to its whitepaper, the Lido DAO is responsible for the following:
What is your sentiment on ETH/USD?
Deploying Lido smart contracts
Setting platform fees and protocol parameters
Recruiting node operators and validators
Managing insurance and development funds
Managing withdrawals
How does Lido work?
Lido provides liquid staking solutions to users by issuing stETH tokens for ETH staked on its platform on a 1:1 basis.
Stakers can use their stETH tokens like regular ETH for trading on crypto exchanges and for various activities across decentralised finance (DeFi) websites.
“Liquid staking protocols allow users to earn staking rewards without locking assets or maintaining staking infrastructure. Users of these protocols can deposit staking tokens and receive tradable liquid tokens in return,” said Lido.
However, stakers will only be able to retrieve their staking rewards and redeem stETH for ETH after the completion of Ethereum’s Shanghai upgrade.
As of 9 January 2023, ETH stakers using Lido were earning at 4.6% annual percentage rate (APR) compared to 4.8% across the Ethereum ecosystem.
The Lido DAO manages the entire staking fund. The platform charges a 10% fee on the earnings which is split between node operators and the Lido DAO. Lido also supported the staking of SOL, DOT and KSM on their native blockchains. At the time of writing, Lido supported MATIC staking on Ethereum.
There were 54 node operators on Lido across Ethereum, Solana and Polygon. Lido had 29 permissioned node operators on Ethereum, 11 on Solana and 6 on Polygon. As of 9 January 2023, Lido offered a yield of 7.2% APR on SOL staking, 6.3% APR on MATIC staking, 14.8% on DOT staking and 13.9% on KSM staking.
Users need web3 wallets to stake on Lido. There is no minimum staking amount on Lido.
What is LDO coin?
The LDO coin is the governance token of the Lido DAO.
What is lido coin used for? The main purpose of the LDO coin is for voting on Lido’s key parameters like platform fees and other proposed upgrades.
According to its whitepaper, LDO voting weight is equal to the amount of LDP a voter stakes in the voting contract.
The LDO coin launched in December 2020 with a supply of 1 billion tokens. The initial token distribution was as follows:
DAO Treasury - 36.3%
Investors - 22.2%
Developers - 20%
Founders and future employees - 15%
Validators and withdrawal key signers - 6.5%
As of 9 January 2023, LDO was the 33rd largest cryptocurrency in the world at a market capitalisation of $1.32bn. The current circulating supply stood at about 824 million tokens representing 82% of the max LDO supply.
According to CoinMarketCap, over 52% of LDO supply was held by the top 10 holders, as of 9 January 2023.
LDO coin price history and news
The earliest data on CoinMarketCap showed lido cryptocurrency trading at about $1.8 in early January 2021.
The token traded range-bound between $0.50 and $3.28 from January to April 2021. LDO saw its first big break in May 2021 as it rose over $5 amid a broader crypto market rally.
As ETH surged to an all-time high of over $4,800 in November 2021, LDO posted an all-time high of $11.
The crypto bear market that followed in 2022 saw LDO slump to an all-time low of $0.406 on 18 June. The fall of Terra in the first half of the year affected Lido – Terra was one of the blockchains that Lido staking supported.
Lido soon after announced that it would shut down its Terra operations.
The biggest driver for the lido cryptocurrency in 2022 was Ethereum’s transition from the proof-of-work to proof-of-stake consensus in a process commonly known as ‘The Merge’.
In July 2022, LDO gained about 375%, its biggest monthly gain ever after Ethereum developers confirmed the September 2022 launch date for The Merge.
However, LDO price saw losses again as investor sentiment soured following multiple bankruptcies in the crypto industry. LDO closed the year at $0.95 having posted a yearly loss of nearly 75% in 2022.
LDO started 2023 on a strong note by surging over 50% in the first seven days of the year. Tokens of rival staking platforms StakeWise and Rocket Pool saw similar gains during the period.
Analysts pointed to the upcoming Ethereum upgrade ‘Shanghai’ which will allow ETH stakers to withdraw their deposits as the major catalyst for LDO and other staking platform tokens.
“As withdrawals are enabled, many believe more users will stake their ETH,” tweeted CroissantEth.
Most recently liquid staking derivatives have had a nice uptrend.
— ????????.eth (@CroissantEth) January 2, 2023
This is thanks to the Shanghai upgrade expected in a few months which will enable withdrawals of staked ETH.
As withdrawals are enabled, many believe more users will stake their ETH.
LDO +26%
RPL +12%
SWISE +66% pic.twitter.com/tl2d3KSlRC
As of 9 January 2023, over 30% of all ETH staked was on Lido making it the most dominant ETH staking platform in the world.
Risks of staking on Lido
According to Lido, the risks of staking with Lido are as follows:
Distributed custody: Funds staked on Lido are locked in smart contracts. The keys to enable ETH withdrawals are held by 11 individuals.
Smart contracts: There is a risk that smart contracts used for staking on Lido could contain vulnerabilities and bugs which hackers can exploit.
Technical risk: ETH staking on Lido is dependent on Ethereum’s proof-of-stake chain. There are no guarantees that it has been developed error-free, said Lido.
Adoption risk: The value of ETH and stETH is dependent on the growth and adoption of Ethereum.
DAO key management risk: Lido said over 600,000 ETH is held across multiple multi-signature accounts. If signatories lose their keys or get hacked or go rogue the funds risk becoming locked, said Lido.
Slashing risk: ETH staking comes with a slashing penalty where 1/32 of a validator’s ETH stake is immediately burned if the validator acts against the protocol rules. Validators risk losing their entire staked balance, said ethereum.org. Validator inactivity can also lead to slashing.
stETH price risk: The price of stETH can trade at a lower value than ETH on the market due to withdrawal restrictions.
Final thoughts
If you are interested in the Lido (LDO) token, you should always conduct your due diligence by reading the latest news, conducting technical and fundamental analysis, and studying a wide range of commentary.
Remember that your decision to trade or invest in any asset should depend on your attitude to risk, your expertise in the market, the spread of your portfolio, and how comfortable you feel about losing money. You should never trade more than you can afford to lose
FAQs
How many Lido coins are there?
LDO coins have a max supply of 1 billion tokens.
What makes Lido unique?
Lido provides liquid staking solutions which allow users to stake their tokens without locking assets.
Who owns Lido?
Lido is managed by the Lido DAO. The LDO token is used to vote on various Lido proposals and upgrades.
Markets in this article
Related topics
