How to stake Ethereum on Lido? (Liquid staking)

Understanding Liquid Staking with Lido

1. Liquid staking allows Ethereum holders to participate in network validation without locking funds or running infrastructure.

2. Lido is a decentralized, non-custodial protocol that issues stETH tokens representing staked ETH plus accrued rewards.

3. Each stETH token is initially pegged 1:1 to ETH but gradually appreciates in value as validators earn block rewards and tips.

4. stETH can be used across DeFi protocols for lending, borrowing, liquidity provision, and yield farming while maintaining staking exposure.

5. Lido’s smart contracts handle validator selection, slashing protection, and reward distribution automatically.

Step-by-Step Staking Process

1. Connect a Web3 wallet such as MetaMask to the official Lido interface at lido.fi.

2. Ensure the wallet holds sufficient ETH and enough gas (in ETH) to cover transaction fees on Ethereum mainnet.

3. Navigate to the “Stake” section and enter the amount of ETH to deposit into the staking pool.

4. Approve the token transfer and confirm the staking transaction through the wallet interface.

5. Upon confirmation, stETH tokens are minted and sent to the user’s wallet address immediately—no waiting period applies.

Security and Decentralization Considerations

1. Lido relies on a set of node operators vetted by the DAO, each required to meet strict operational and security standards.

2. The protocol uses a multi-signature governance model where voting power is proportional to LDO token holdings.

3. Smart contracts have undergone multiple audits by firms including OpenZeppelin, Quantstamp, and Trail of Bits.

4. No single entity controls private keys for validators; key management follows distributed threshold signature schemes.

5. Slashing penalties are absorbed by the protocol’s buffer reserves, protecting individual stakers from direct loss due to operator misbehavior.

stETH Token Mechanics and Usage

1. stETH balances increase over time as rewards accrue, reflected in the exchange rate between stETH and ETH.

2. Users can track real-time stETH/ETH ratio via Chainlink oracles integrated into major DEXs and lending platforms.

3. stETH is supported on Aave, Curve, Balancer, and Uniswap, enabling seamless swaps and collateral usage.

4. Depositing stETH into Curve’s stETH-ETH pool earns CRV and LDO incentives alongside trading fee revenue.

5. The token does not have an expiration date or redemption deadline—holders retain full custody and transferability at all times.

Frequently Asked Questions

Q: Can I unstake my ETH directly from Lido?A: No. Lido does not offer native unstaking because Ethereum’s consensus layer does not yet support withdrawals for solo stakers. Users must wait for the Shanghai upgrade’s withdrawal functionality to be fully enabled and then rely on third-party services or exchanges to convert stETH back to ETH.

Q: Is stETH subject to impermanent loss?A: stETH itself does not suffer impermanent loss, but providing stETH-ETH liquidity on AMMs like Curve exposes users to divergence loss if the stETH/ETH price ratio changes significantly.

Q: What happens if a Lido node operator goes offline?A: Lido’s system automatically rotates inactive validators and redistributes stake weight among healthy operators. Rewards pause during downtime but resume once the node recovers—no manual intervention is needed.

Q: Are Lido rewards taxed as income?A: Tax treatment depends on jurisdiction. In many regions, staking rewards received as stETH increments are considered taxable events upon receipt, even if not sold or converted.