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How To Stake Tokens and Earn Passive Rewards Using Lido Finance

Table of Contents

Staking is an essential part of network security for all proof-of-stake chains. While Ethereum will soon be joining this category we already have chains like Solana, Polygon and Kusama that utilize this security model.

The problem for many investors is the lockup period that renders the staked tokens untradeable until the time lock expires. Thanks to Lido Finance most of these hurdles can be bypassed easily.

Getting Started #

Before you can stake tokens through Lido Finance make sure that you already have them in your wallet. Most of the above-mentioned tokens are staked on their native networks except Polygon which can only be staked on the Ethereum network. This means that Matic stakers on Lido will need to acquire ERC-20 Matic to participate.

Once the tokens are available for staking go to the homepage and select the token you want to stake by clicking on the “stake now” button.

Staking Ethereum On Lido Finance #

For example, if you want to stake Ethereum in the ETH 2.0 staking pool simply click on “stake now” and connect your wallet on the next screen. The connect button will become available in the top right corner of your screen. From here, enter the amount of ETH you want to stake and click “Submit”.

Once the transaction is confirmed your staked Ethereum tokens will start earning rewards, but the protocol will issue stETH tokens to your wallet automatically as well. These tokens are tradable on the market and have the same price as Ethereum as they only represent your position in the protocol.

This makes Lido unique because it allows users to earn staking rewards while technically keeping all of their staked tokens 100% liquid. In exchange, Lido charges a 10% performance fee on all occurred rewards.

Until Ethereum 2.0 is released all staked ETH tokens on Lido will be locked indefinitely. This means that there is no unstaking process available right now but with stETH being tradable at ETH prices simply selling the tokens on the market would serve the same purpose.

For other tokens like Solana, unstaking can be done on the same page simply by selecting the “unstake” option. Keep in mind that unstaking periods can vary depending on the token.

Understanding Lido Tokens and Tokenomics #

For every staked token Lido issues a “st” version of that token. For example, if you staked 1 Ethereum in the ETH 2.0 staking pool, you wouldl get 1 stETH token in exchange. The same goes for Solana, Kusama and others.

These tokens are issued at a 1:1 ratio and they represent your underlying position, very similar to LP tokens on decentralized exchanges. When users unstake their tokens from Lido the “st” version of the token is burned and the underlying tokens are given back to the owner.

Lido is also a DAO and it has a native governance token, LDO. Maximum supply of LDO is 1 Billion and it is used for governance on the platform. The more LDO tokens an address holds the more vote weight they will have.

Conclusion #

Lido is probably the most user-friendly Dapp on Ethereum because it only offers very few functions to users. Staking and unstaking tokens is very easy and straightforward so even complete beginners can get involved in no time.

The best part is that Lido makes all staked tokens tradable so all users can benefit from passive rewards from securing the available networks while having the ability to sell their underlying positions at any given moment with no waiting times and timelocks.

Updated on March 17, 2022
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