What does the company/project do?
Lido DAO (LDO) is an Ethereum betting application. Lido allows users to stake their ETH – with no minimum deposits or infrastructure maintenance – while participating in network activities such as lending to earn complex profits
Lido launched its betting app on December 19, 2020 with the creation of 1 billion LDO tokens. At the time of writing, the founding members of Lido DAO own 64% of LDO tokens. They are locked for 1 year, after which they will be transferred for 1 year. At the time of writing, the only unlocked LDOs in existence are the 0.4% airdrop distributed between early adopters and DAO treasury tokens.
Stake ETH and keep your tokens liquid: Deposit Ether into a smart contract and receive stETH tokens in return. You receive a staking reward for each day you hold these tokens in your wallet. They are completely liquid, so you can use them for your needs at any time – trade, sell, exchange, invest in DeFi projects, etc.
Stake any amount of ETH: The Ethereum 2.0 protocol allows you to stake multiples of 32 ETH. Lido is a more flexible and convenient solution than a standalone bet or exchange. With Lido, you can stake any number of tokens you have and earn rewards even on small deposits.
Support DeFi projects with stETH: stETH tokens, Ethereum’s liquid staking token on Lido, serve as the building block for new and existing Ethereum applications and protocols. For example, you can use it as collateral for lending services or other DeFi trading solutions.
In the case of liquid staking, the competitors are established providers such as centralized exchanges and other decentralized protocols such as RocketPool. DAO is a logical compromise between full centralization and decentralization, allowing the deployment of competitive products without full centralization and storage on exchanges.
Design Goals and Constraints
Staking in the first stages of Ethereum 2.0 means taking the risk that your ETH will be frozen until transfers become available in Ethereum 2.0 (stage 1.5 or stage 2), which is not expected to happen until next year at the earliest. Until then, no one will be able to withdraw staking ether or staking rewards and, for example, sell them on the exchange.
To verify the beacon chain, the staker must deposit 32 Ether, provide a verifier public key, and provide a withdrawal address where the staker’s assets and rewards will remain frozen until transfers are enabled. Until then, the only two actions you can do in the beacon chain are confirm and stop checking. During this time, stakers must run the validation infrastructure, as they risk lowering their stake if configured incorrectly.
There is a risk of loss or loss of reward that occurs if a validator is criticized for inappropriate behavior. This can happen, for example, due to a bug in the validator node code, or due to connectivity issues. This risk makes betting on Ethereum particularly unattractive in Phases 0 and 1, when the average reward player has to bear the market risk of not being able to cancel the bet.
Lido aims to allow users to stake on Ether without losing the ability to trade or otherwise use their tokens. Lido will be a decentralized infrastructure for issuing a liquid token that will have a degree of flexibility compared to self-staking.
The main goals of Lido:
To allow users to earn staking rewards without completely locking up their capital;
Offer users the flexibility to receive rewards for deposits smaller than 32 Ether and no restrictions on deposits other than multiples of 32 Ether;
To reduce the risks of losing a deposit due to software failures or malicious third parties;
Provide the stETH token as a building block for other applications and protocols (for example, as collateral for lending or other DeFi trading solutions);
To provide an alternative to staking exchanges, self-staking and other semi-reserve and decentralized protocols.
Lido is designed to be an easy-to-use, community-driven protocol. The protocol should keep track of changes in the underlying mechanisms of the block chain.
Structural components of Lido
The following is a general description of the components of the Lido staking protocol:
Staking Pool: A protocol for managing deposits, staking rewards and withdrawals
node operator registry
- stETH: A liquid staking token that maintains a balance corresponding to 1 to 1 of your beacon chain Ether share.
- DAO: Aragon DAO, which manages protocol parameters.
The staking pool is the main Lido smart contract. The contract is responsible for the input and output of ether; minting and burning of stETH tokens; delegation of funds to node operators; applying fees to staking rewards; and accepting updates from oracle contract. The node operator manager logic is separated into a separate NodeOperatorsRegistry contract.
Users will send ether to a staking pool contract in order to have stETH tokens minted in return. This ether will be distributed among the node operators to ensure even distribution and deposited to be verified by their validators.
The withdrawal credentials for this ether will be set to either the distributed storage threshold signature or, if withdrawals to eth1 addresses are accepted by the community, to an updatable smart contract that will process withdrawals when enabled.
Node operators also verify transactions on the beacon chain. The DAO selects node operators and adds their addresses to the NodeOperatorsRegistry contract. Authorized node operators must generate a set of keys for verification and also provide them with a smart contract. When ether is received from users, it is distributed in chunks of 32 ether among all active node operators.
Oracle is a contract that keeps track of the balance of DAO validators in the beacon chain. Balances may increase due to reward accumulation and may decrease due to reduction penalties and rates. Oracles are appointed by the DAO. The data is sent daily and is used to provide an accurate balance of stETH tokens for users.
On days when there were rewards, a small amount of stETH tokens are minted to node operators and to the insurance and development fund DAO, which constitutes a reward.
The staking pool contract contains a list of node operators, their keys, and the logic for distributing rewards between them.
Lido is implemented with minimal trust as a set of Ethereum 1.0 smart contracts. Lido allows users to earn rewards by staking their ether holdings without locking up capital or maintaining a validator node.
Lido consists of several parts:
Deposits and minting of stETH tokens;
Node operator register;
Beacon chain oracles and stETH token balance update;
Withdrawals (disabled until Ethereum 2.0 transfers become available).
To stake ether with Lido, the user sends ether to a smart contract and receives stETH tokens in return. STETH
tokens are a tokenized staking deposit. stETH tokens can be stored, exchanged or sold.
The stETH balance is based on the total amount of ether staked plus the total staking reward and minus the slash applied to
validators. All deposits in Lido are capped at 32 ETH and are assigned to node operators who verify the use of these deposits. Node operators never have direct access to user air.
The funds are transferred to the smart contract of the Lido protocol and then blocked in Ethereum. deposit agreement with confirmation of share of ownership. A threshold signature account controlled by Lido DAO is listed as a withdrawal address. Ether rates will only be displayed for transfers and smart contracts.
Unlike similar systems, Lido does not require node operators to pay an equal deposit when placing bets.
Instead, node operators selected by Lido DAO must have experience with asset staking, which will be complemented by slash insurance. This approach will allow the system to be more capital efficient.
Things to Consider When Buying Lido DAO
Investing in cryptocurrencies is a risky business and it is a good idea to research the coin you are interested in to make sure you understand the benefits and risks involved. Here are some of the key features of LDO that you should understand before buying it.
Distribution. While there are 1 billion LDO tokens, two-thirds of the tokens are currently locked by the founding members of the Lido DAO. After 1 year, the tokens owned by the founders of Lido DAO will be transferred to ownership within the next year. As of January 2021, only 0.4% of LDO has been unlocked.
Major sponsors. In December 2020, the European digital asset investment company KR1 invested US0.15 million in Lida in exchange for LDO tokens.
stETH versus LDO. According to the Lido website, Lido has two tokens: stETH token, which is a proxy for Ethereum, and LDO, which is a governance token. Think of the stETH token as a liquid alternative to spiked ether as it is freely transferable and tradable. stETH has the same value as Ethereum wagered on Lido. LDO, on the other hand, gives users the right to vote in Lido.
LDO is a native utility token that is used to:
Granting management rights to Lido DAO.
Management of parameters and distribution of fees.
Manage the addition and removal of Lido node operators.
The DAO determines key Lido parameters (such as fees) and performs Lido updates. Lido DAO members manage Lido to ensure its efficiency and stability. To be eligible to vote in Lido DAO, one must own its governance token, LDO. The voting weight of the LDO is proportional to the number of LDOs the voter makes in the voting contract. The more LDOs locked into the user’s voting contract, the more decision-making power the voter has. The exact mechanism of LDO voting can be updated like other DAO applications.
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