Last Updated on April 2022.
Why Lido?
Are you looking for the highest eth interest rate, without locking them or going on shady exchanges/platforms?
This is the safest and highest yield that I have found across crypto space in DeFi (i.e., excluding CeFi like BlockFi, Nexo and co.)
Lido’s benefits
Lido basically allows anyone to deposit ETH and stake their ethers, without the numerous restraints of staking directly in the Eth2 deposit contract (ilgliquidity, immovability, and inaccessibility).
Thanks to Lido, you will be able to stake your ETH and receive stETH (staked ETH) in return. These stETH will always be worth the same price as ETH. So Lido brings 3 main benefits:
- You don’t need to have 32 ETH in your wallet in order to stake (normally needed for directly staking in the eth2 deposit contract), any amount is possible.
- You can unstake the stETH anytime, simply swapping back to ETH. If you have deposited 1 ETH, you have received 1 stETH. You can get back 1 ETH anytime, whenever you will unstake.
- Finally, the main benefit, and why you are reading this article: you will earn (at the time of writing), 5.5% annual interest on your stETH.
Ethereum
$1,839.00
Staked Ether
$1,838.08
Lido’s mechanic
Where does the 5.5% apy come from, if the value of stETH is always pegged to ETH ?
Well, users who stake their ETH with Lido will receive daily rewards (once a day at 12PM UTC) in the form of stETH balance rebases. This is possible because staking rewards with Lido are socialized across all stakers. Hence why the stETH apy reward rate is lower than the apy reward rate from directly staking in the Eth2 deposit contract. But as stated above, staking in the eth2 deposit contract comes with a minimal required amount and a lock-in of the ETHs, unlike stETH.
As more of Lido’s validators are activated, the stETH reward rate will grow correspondingly and gravitate towards the full Ethereum staking rate.
Careful: This rebase works across integrated DeFi platforms like Curve and Yearn. UniSwap, 1inch and SushiSwap are not designed for rebasable tokens and as a result you risk losing a portion of your daily staking rewards if you provide your stETH as liquidity across these platforms.
More details can be found here. Don’t hesitate to follow Lido on twitter to stay updated.
Is Lido safe ?
The best resource to check the security of a DeFi platform is https://defisafety.com.
Make sure to follow them on twitter.
If you read their report on Lido finance, you will see that Lido is among the most secured DeFi platforms.
I particularly like that they are fully audited and open source. So they are as legit and trustworthy as you can get, in my opinion. The full report is available here.
You can actually see on Lido’s GitHub all the audits they have undergone.
But, is staking with Lido safe ? The staking with Lido is non-custodial, which means it is impossible for the network’s validators to access your staked funds. Lido uses a unique “distributed custody” solution in which the withdrawal key for all of the network’s validators has been split into 11 different parts secured by 11 different participants.
The 11 participants are very big DeFi industry leaders: Chorus One, Staking Facilities, Certus One, Argent, Banteg (yearn.finance), Alex Svanevik (Nansen), Anton Bukov (1inch), Michael Egorov (Curve/Nucypher), Rune Christensen (MakerDAO), Will Harborne (DeversiFi) and Mustafa Al-Bassam (LazyLedger)
Another sign that this platform is trustworthy is how much it is used! There is currently 730k ETH or ~$2.2B staked on Lido! You can follow these numbers on Dune.
On the 919k ETH locked in eth2 pools, lido with 730k ETH represents an astonishing 79% market share! It is clearly the most popular option among stakers.
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How to stake with lido?
The other nice thing with Lido, is that you can’t make it simpler. I can make a lengthy tutorial if you are interested, just let me know in the comments. Briefly, you just need a metamask address with your ETH, and go on the stake page of lido. On the following video, you will see a step by step tutorial. Enter the amount of ETH you want to stake, hit submit and verify the transaction with metamask. That’s it. I personally use metamask with my trezor wallet. Also, have a look at my best advices to stay safe with metamask.
Careful, ethereum gas fees are just gigantic right now. But, since late october, you can now directly buy stETH and stSOL directly from FTX! No more need to use Lido’s website! See just below the November 2021 update.
Update September 2021
Lido has now developed even further their offer! Lido has now introduced their Liquid Staking on Solana and Terra!
Solana
Solana earned its spotlight recently, as it promises 50,000 transactions per seconds (TPS), making it one of the fastest blockchain in the world. Solana’s ecosystem already has over 5 billion dollars in total value locked.
As we have seen in the present article, stETH token allows users to passively earn income (staking rewards in that case) without needing to actually be a validator of the ecosystem. In a similar fashion, stSOL now enables holders to passively earn staking rewards, currently at 3.7% apr. stSOL will also be usable on solana’s DeFI ecosystem, allowing added DeFi use cases such as lending, farming etc. For more details, head over to https://blog.lido.fi/introducing-liquid-staking-on-solana/ and to start staking, you can head over to: https://solana.lido.fi
Terra
Again, in the same fashion, bLUNA now enables holders to passively earn staking rewards with a 3.6% yield. bLUNA will also be usable on Terra DeFI ecosystem.
In addition, check this article where using Terra and Lido, your ETH can be used as collateral on the Terra blockchain to earn up to 42% on your ETH!
Token Yield (apr) stETH 5.0% stSOL 6.5% bLUNA 3.4%
Ledger
Users can now stake their Ethereum with Lido using Ledger! You can find Lido in Ledger Live Apps Catalog. Supposedly, your private keys remain tightly secured within your hardware wallet, guaranteeing a hack-proof experience. If you are interested in protecting yourself in DeFi, have a look at my different advices on how to stay safe in DeFi.
If you don’t have a Ledger yet, I highly encourage you to buy one. Better safe than sorry. If I convinced you, you can help my blog by using this referral link: Ledger.
Update November 2021.
Staking your eths has never been easier! Since late October 2021, there is no need to use Lido’s website anymore to stake, you can just directly buy stETH on FTX exchange and still earn the daily staking rewards!
You can now just sell your ETHs or SOLs and buy stETH or stSOL directly on FTX! It’s not for nothing that FTX is my favorite exchange!
Conclusion
So, if you are happy with close to 6% apr on your ETH to generate some passive income, with close to no risk, minimal DeFi interaction/exposition, I highly recommend using lido to stake your ETH.
Staking your ETH on kraken/binance for example will require you to lock your ETH, not ideal. With BlockFi, Nexo, Celsius and other CeFi, their higher interest rates come from risks of such lending platforms getting hacked/insolvent/scammed/incompetency behavior, that are usually not covered by their marketed “insurances”.
PS: if for whatever reason, lido.fi is not available in your country, you can also buy stETH on uniswap or curve.
PS2: All estimated APR/APY are likely to change by the time you read this.
PS3: Here is also a riskier strategy (but not degen) to earn up to 10% on your ETH!
Support me
In case you liked my take on Lido and learnt interesting things, or if you want to support me, please feel free to send me a coffee over.
