What is Lido?
| — Lido is a user-friendly, decentralized platform that offers staking services for Ethereum. It takes away the burden of owning a minimum of 32 ETH or knowing the technicalities to stake ETH.
— In this article, we explore what Lido is, why it matters, and how you can stake in the safest way using the platform.
The Lido staking platform is breaking down the barriers to entry for making profits on your crypto – here, we explain why it’s great news for you.
If you’ve taken the plunge into the exciting world of cryptos, you surely aren’t new to the concept of passive income and how it can grow your wealth. Of all the options out there, cryptocurrency staking is the simplest to start with, and yet fairly complex.
Maybe, you’ve even considered crypto staking to grow your wealth while you eat, sleep, workout, travel, or do whatever you do. But all the planning in your head and the shower thoughts to stake cryptos and earn more cryptos wash away once you start assessing the barriers to entry.
As people who’ve had humble beginnings in the crypto space, we totally resonate with that feeling.
Courtesy of modern-day crypto platforms, doing just about anything with your cryptos — from sending and receiving to staking or lending — is significantly easier now than it was a few years back.
In this article, we will explore one such platform called Lido, and how it helps you easily and securely stake your cryptos and grow your wealth.
Why do we need Lido in the first place?
We’ll talk about Lido staking in a minute. But first, a little background.
Ethereum’s demand and the number of transactions have scaled so rapidly that its existing architecture is unable to manage the load appropriately.
To make the network more scalable, Ethereum is transitioning to Ethereum 2.0, which will replace the proof-of-work protocol with proof-of-stake (PoS). Instead of mining, PoS requires network participants to stake their ETH to become a validator and approve transactions on the Ethereum blockchain to earn rewards for their contributions.
But the barriers to do so shoot past the skyscrapers.
The minimum you must stake to become an Ethereum validator is 32 ETH (worth almost $100,000 at the time of writing). In addition, you’ll need a decent amount of technical knowledge to set up and run an Ethereum validator system on your computer. You’ll also have to run your system 24*7 to avoid penalties for your absence. What makes things worse is that if you stake now, your 32 ETH will be locked until withdrawals are enabled on Ethereum 2.0… and that may take almost two years. That will be a hard goodbye, won’t it?
Let alone all of it… For most of us, the first requirement itself is enough to strike ETH staking off the list of passive income sources.
Enter Lido staking.
What is Lido?
Lido is a user-friendly, decentralized staking solution that lowers the barriers to entry for staking. It enables you to stake even a fraction of an ETH on Ethereum 2.0 and earn a passive income.
Furthermore, it takes away the pain of understanding the technicalities or keeping your system running 24×7. To make things better, Lido offers Liquid Staking to solve the liquidity problem in traditional staking explained above. As part of this, Lido offers you another ERC20 token stETH on a 1:1 basis for the ETH you stake. And just like your ETH, you can trade and transfer your stETH across decentralized finance protocols.
Once you stake your ETH on Lido, you’ll be eligible for ETH rewards proportional to the size of your stake compared to the total staked ETH.
Now, you also know why a platform like Lido matters. It makes it easier for you to participate in Ethereum’s operation. It makes Ethereum more inclusive and decentralized. And this inclusivity opens doors for you to add a passive income stream. Win-win.
Note: The platform now also offers staking on Terra (LUNA) blockchain and aims to integrate into more blockchains such as Solana.
Why stake with Lido?
You may already be asking yourself, why Lido? Why not the myriad of other platforms offering staking services?
True. Many other platforms like Coinbase and Binance offer staking services. You can stake any small amount of ETH on those platforms too. The best part seems to be that you don’t have to integrate an external wallet because these platforms already hold your cryptos in their wallets.
Now, read that again… that’s exactly where the problem lies.
Crypto is all about ownership, decentralization, and security. But when you use a centralized platform, you put all of that at stake along with your cryptos. You trust a centralized platform with your assets. You give them the ultimate control.
It doesn’t seem like a good idea, does it? We know you love your cryptos and you’d rather keep its control in your hands than give it to some centralized entity.
That’s why a decentralized platform like Lido is the best way to stake your cryptos. It empowers you to stake and earn a passive income without giving up control over your funds.
How to use Lido
You can use Lido with a range of hot wallets such as MetaMask and Coinbase Wallet or with a cold hardware wallet such as Ledger Nano S and Ledger Nano X.
While the process of using Lido with a hot wallet is easy, the only problem is the security risk associated with hot wallets. A hot wallet remains connected to the internet, which exposes your private key to cyber threats.
So, how do you get the utmost security? By using a hardware wallet. And speaking of that, Ledger recently integrated Lido into Ledger Live, enabling Ledger Nano users to stake ETH directly from the Ledger Live interface. In addition, you can also buy, sell, exchange and grow your assets on Ledger Live.
This means, if you own a Ledger Nano wallet, you do not even have to leave the Ledger ecosystem to stake your ETH. Here’s how you can stake ETH through Lido using Ledger live:
- Open Ledger Live and go to “Discover.”
- Click on Lido to open Lido’s interface within the Ledger Live application
- Enter the ETH amount you want to stake and approve the transaction from your Ledger wallet.
It’s that simple. The best part is that your private keys always remain offline within the fortress that is your Ledger device.
The below table compares staking ETH through different types of services
Now is your time
If you own cryptocurrencies and if you’ve always wanted to add a passive income stream, staking can be a no-brainer.
With the option to either stake using Lido by using a hot wallet or Ledger Live’s own ecosystem, you have the utmost flexibility to choose what suits you best. But if you ask us, we always go with maximum security. And you know where that is.
Disclaimer: Exchange, lend, and other crypto transaction services are provided by third-party partners. Ledger provides no advice or recommendations on use of these third-party services.
If you’re wondering how to grow your crypto, check out our School of Block episode on decentralized finance – you’ll be hooked!