// GLOSSARY -- DEFI

What is Lido?

1 min read Updated

Lido is the largest liquid staking protocol, allowing users to stake ETH (and other assets) while receiving a liquid derivative token (stETH) that can be used across DeFi — controlling roughly 30% of all staked ETH.

WHY IT MATTERS

Lido solved Ethereum staking's accessibility problem. Before Lido, staking required 32 ETH and running a validator. Lido lets you stake any amount and receive stETH — a rebasing token that increases in balance as staking rewards accrue.

stETH has become deeply integrated in DeFi: used as collateral on Aave, traded on Curve, and accepted across hundreds of protocols. This composability is what makes liquid staking powerful — your staked ETH continues working.

The concentration concern: Lido controls ~30% of staked ETH, raising questions about centralization of Ethereum's validator set. The Lido DAO and community actively debate decentralization measures.

FREQUENTLY ASKED QUESTIONS

How does stETH work?
stETH rebases daily — your balance increases as staking rewards are earned. 100 stETH today becomes 100.01 stETH tomorrow (approximately). The token tracks 1:1 with ETH plus accumulated rewards.
Can stETH lose its peg?
stETH has depegged during extreme market stress (down to ~0.93 ETH in June 2022). It recovered as withdrawals were enabled. Short-term depegs are possible; long-term, stETH is backed by staked ETH.
Is Lido's concentration a problem?
Debated. 30% of staked ETH creates centralization risk for Ethereum. Lido uses a diverse set of node operators and is exploring distributed validator technology (DVT) to mitigate this.

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