Lido Staked Ether (stETH) represents Ethereum (ETH) staked in the Lido protocol, allowing users to participate in Ethereum's proof-of-stake consensus while receiving staking rewards.
Lido is a decentralized protocol designed to provide a liquid staking solution for Ethereum (ETH), allowing users to participate in the Ethereum network's proof-of-stake (PoS) consensus mechanism without the typical barriers. Instead of requiring a minimum stake of 32 ETH, Lido enables users to stake any amount of ETH through its platform. This democratizes access to staking rewards and network participation, making it accessible to a broader range of Ethereum holders.
By staking ETH through Lido, users receive staked ETH (stETH) tokens in return. These tokens represent a derivative of the underlying ETH that is staked and earning rewards on the Ethereum 2.0 network. stETH tokens are designed to be highly liquid and fungible, allowing holders to trade them on decentralized exchanges, use them as collateral in lending protocols, or participate in various DeFi applications. This liquidity is a significant advantage over traditional staking, where ETH is typically locked up for extended periods until withdrawal functionalities are fully enabled.
Lido achieves its liquid staking solution by leveraging a network of professional validators who manage the staked ETH and share the responsibilities and risks associated with validating transactions on Ethereum. This setup not only enhances security and reliability but also mitigates risks such as slashing, where validators can lose a portion of their stake for malicious behavior. Overall, Lido aims to enhance the utility of ETH by providing a flexible staking solution that aligns with the growing demands of decentralized finance (DeFi) ecosystems and broader blockchain applications.