What Is Lido (LDO)? The Token Behind Ethereum Liquid Staking

Liquid staking changed how users participate in Ethereum’s proof‑of‑stake. Instead of locking ETH in a validator and waiting for withdrawals, liquid staking protocols issue on‑chain receipts that stay usable across DeFi while the underlying ETH earns rewards. Lido is the largest of these protocols on Ethereum, and its governance token, LDO, sits at the center of how the system evolves. This article explains what Lido does, how LDO works, why liquid staking matters post‑Shanghai and Dencun, and the risks to keep in mind in 2025.

Lido in a nutshell

Lido is a liquid staking protocol primarily known for Ethereum. Users deposit ETH, which Lido delegates across a curated set of node operators. In return, they receive staked ETH receipts: stETH (rebasing) or wstETH (non‑rebasing, wrapped). These tokens accrue staking rewards and can be used in DeFi while the underlying ETH remains staked. Lido’s core goal is to diversify validator operations and make staking accessible without running hardware yourself. See the protocol overview and documentation on the official site. Learn more on Lido’s docs.

If you’re new to staking on Ethereum, start with the fundamentals. Ethereum.org’s staking guide explains validator duties, rewards, and risks, and the Shanghai/Capella withdrawals that made validator exits and rewards withdrawals possible.

How liquid staking with Lido works

• Deposit ETH to Lido’s contracts and receive stETH or wstETH.
• Lido routes stake to multiple node operators via its staking router to reduce single‑operator risk.
• Rewards come from consensus‑layer issuance and block proposer rewards (including MEV), net of validator fees and the protocol fee.
• stETH is a rebasing token whose balance changes as rewards accrue; wstETH is a wrapped, non‑rebasing version preferred by many DeFi integrations. See stETH/wstETH design in Lido docs.

On the network side, rewards are influenced by factors like validator performance and block value extraction. For background on Ethereum’s MEV and its impact on rewards, check the developer documentation. Read about MEV on Ethereum.org.

Since the Dencun upgrade introduced EIP‑4844 “proto‑danksharding” blobs, L2s became cheaper and more active, accelerating use of wstETH across rollups and cross‑chain DeFi. EIP‑4844 specification provides the technical details.

What is LDO?

LDO is Lido DAO’s governance token. Holding LDO confers the ability to vote (or delegate votes) on proposals that shape the protocol, including:

• Adding or removing node operators and modules
• Parameter changes (fees, limits)
• Treasury usage and incentive programs
• Deployments, audits, and safety procedures

Critically, LDO does not represent a claim on staked ETH or protocol‑generated ETH rewards. It is a governance asset used in the DAO’s decision‑making processes. Governance happens via on‑chain and off‑chain venues. Explore Lido’s governance forum and Snapshot space for voting.

LDO’s initial supply was minted at genesis and distributed to stakeholders including the DAO treasury, early contributors, and investors; vesting schedules and allocations are detailed in official resources. See token details in Lido documentation.

Why Lido matters in 2025

• Accessibility: Liquid staking helps users earn staking rewards without running validators, while keeping capital usable across DeFi.
• Diversification: Lido’s router and modular approach aim to spread stake across multiple operators and configurations (including community‑oriented modules) to mitigate concentration risk. For ongoing discussions about broadening operator participation, follow the DAO updates. Read the latest on the Lido blog.
• Composability: wstETH is widely integrated on Ethereum L1 and L2, enabling lending, collateralization, and liquidity provisioning in protocols like Aave and others.
• Interplay with restaking: As restaking via platforms like EigenLayer evolves, the relationship between LSTs and restaked collateral remains an active area of research and risk management. Learn what EigenLayer is.

Risks you should understand

Liquid staking is not “risk‑free.” Before you buy LDO or mint stETH/wstETH, consider:

• Smart‑contract risk: Bugs or exploits in staking, wrapping, or integration contracts could lead to loss. Review audits and risk disclosures. See Lido’s documentation and resources.
• Validator performance and slashing: Poor or malicious validator behavior can cause losses to the stake set routed by the protocol.
• Oracle and accounting risk: Liquid staking relies on oracles and accounting mechanisms to track rewards; errors or delays can affect token balances or pricing.
• Liquidity and peg dynamics: stETH/wstETH trade based on market conditions; prices can deviate from ETH, especially in stressed markets.
• Centralization concerns: Large staking pools can concentrate governance or validator influence. The Ethereum community has explored mitigating ideas. For context, see thought pieces from ecosystem researchers like Vitalik on staking pool limits. Read Vitalik’s post on staking pool size and decentralization.
• Regulatory uncertainty: Staking services may face evolving regulatory scrutiny depending on jurisdiction.

For an overview of staking considerations, Ethereum’s official site provides baseline guidance. Ethereum staking risks and responsibilities.

LDO use cases and practical tips

• Governance participation: Acquire LDO via reputable exchanges and delegate or vote on proposals in the Lido DAO. Always verify proposal links via the official forum and Snapshot. Lido governance forum and Snapshot.
• Treasury and meta‑governance monitoring: DAO decisions can influence fee parameters, operator sets, and integrations—key for assessing LDO’s governance value.
• Risk‑aware DeFi: If you hold stETH/wstETH, understand where you’re deploying it (collateral, LP, leverage) and how liquidation and oracle mechanisms work in each protocol.

How to store ETH, stETH/wstETH, and LDO securely

Private‑key security is foundational. Hardware wallets help ensure transaction signing stays offline and tamper‑resistant. If you plan to hold stETH/wstETH or participate in LDO governance, consider a device that is open‑source, supports Ethereum and major L2s, and integrates smoothly with Web3 dApps.

OneKey is an open‑source hardware wallet brand focused on usability and multi‑chain support. It enables secure signing for Ethereum L1/L2 transactions and DAO votes via compatible wallets and dApp connectors, which is essential when interacting with staking or governance contracts. If you actively use liquid staking or DeFi, securing keys with a hardware wallet like OneKey reduces the risk of browser or hot‑wallet compromise.

Final thoughts

Lido’s growth reflects a broader shift in Ethereum: staking is becoming more composable, and governance is crucial for balancing accessibility with decentralization. LDO is the lever through which the community steers that balance. Whether you mint stETH/wstETH or simply follow governance, keep one eye on protocol upgrades (like Dencun’s impact on L2 adoption) and another on risk disclosures.

If you decide to hold LDO or use stETH/wstETH across DeFi, pair good protocol hygiene with strong key management. A hardware wallet such as OneKey offers a secure foundation for staking, voting, and everyday Ethereum transactions—exactly where liquid staking and DAO governance meet real‑world security.