What is LIDO?
The project was founded by Konstantin Lomashuk and Vasily Shapovalov. Initially, LIDO performance was checked in the Goerli test network. Steiling service earned on December 19, 2020. At the start of the project, LDO control tokens were released, which are used during voting.
In December 2020, the project attracted $ 2 million. The investors were Semantic Ventures, Parafi Capital, Terra, Stakefish, Staking Facilites, as well as the creator of Makerdao Rune Kristensen, the head of Aave Stani Kulechov and the founder of Synthetix Kane Warwick.
Subsequently, the Paradigm Foundation invested in LIDO 15 120 ETH, receiving 70 million LDO. Investment was approved by voting Tao. In March 2022, the service attracted $ 70 million from Andreessen Horowitz.
The first crypto actual acting for liquid stake via Lido was ETH.
What problems LIDO solves?
The Ethereum network gradually switches to the Proof-OF-Stake consensus algorithm. The key step in the process is the deployment of Beacon Chain, which began in December 2020. The network allows users to add funds to the staining.
ETH holders can become validators, which will allow them to form blocks and receive remuneration. However, to launch the node, it is required to have infrastructure and computational resources. ETH owners have the opportunity to receive passive income, delegating funds to validators.
Launch Ethereum 2.0 passes in several stages, which requires blocking tokens for a long time. Presumably, it will not be possible to use the means until the end of 2022. During the specified period, the validators have no way to receive remuneration.
Steakers can only enable or disable the network node. If the performance of the latter is not supported, validators may be subjected to lackey and other penalties.
The reasons for the functioning of the node can be non -standard software or loss of connection. These factors increase the risks of stakeing, since the premature withdrawal of funds is impossible.
Beacon Chain requires a validator of blocking the amount multiple of 32 ETH. This restriction is not essential for large investors. However, owners of small capital, for example 16 ETH, cannot become validators. The owners of the amount of less than 64 ETH do not have the opportunity to use a significant part of the steiking products.
Lido solves the problems considered. The service provides the delegation of ETH to reliable validators and allows you to deposit any amount, as well as use derivative financial tools.
How LIDO works?
Using LIDO, users block ETH in a smart contract, and in return receive Steth tokens. Market participants deposit any number of coins, which allows you to get around the restriction of 32 ETH.
STETH is compatible with decentralized applications from the Defi sector, which provides access to additional sources of income. Coins can be invested in liquidity pools, used as a pledge when receiving a loan, and also sold in the open market.
Token has high liquidity. It is a link connecting Ethereum 1.0 and 2.0.
Stayking service delegates funds to large validators. Income is distributed between the owners of the steth daily. This leads to a change in the balance of users, which takes into account remuneration and fines.
Lido charges a commission of 10% of the income received. Users will return the ETH invested and rewards after transactions begin to be carried out on the Beacon Chain network. In this case, the steth tokens will be eliminated.
How Lido works?
Lido is built on the basis of two structural components: staying pool and oracle.
Staying Pool is implemented using smart contracts on Ethereum. The interaction of the service participants is carried out in accordance with the above scheme:
Users deposit funds by sending ETH to the corresponding address. Smart contracts provide the release and burning of steth. With their help, funds are delegated by nodes working on the Beacon Chain network. Coins are directed by active validators in parts of 32 ETH.
Tao adds and deleys the addresses of validators from the list. To coordinate the operation of the nodes, a smart contract is used containing data about them.
Validators need to generate keys to Beacon Chain and pass them to LIDO. They also need to create a separate smart contract to obtain funds used for staining.
After the withdrawal of the assets becomes affordable, they will be sent to users’ addresses on the Ethereum 1 network.0 or 2.0. In the second case https://gagarin.news/news/no-vasil-for-now-cardanos-hard-fork-update-postponed/, Lido uses an account that is controlled by threshold signature. Tao decides to send the withdrawal of funds.
Oracle monitors the balance of validators in Beacon Chain. Interaction of the parties in the Ethereum 1 network.0 implemented using smart contracts in accordance with the scheme presented below.
An increase in the amount of funds occurs as a result of the payment of awards, and a decrease when receiving fines. The oracle collects data every day, which allows us to update user balance daily balance. After receiving with validators of remuneration, an additional issue of the steth is made.
Coins are distributed between all participants, and 90% of the income is received by users. The remaining revenues are divided in half between the LIDO treasury and the operators of the nodes. Thanks to smart contracts, a streaming service does not require confidence between the parties.
How the Lido tokens is arranged?
During the operation of the stake service, LDO, STETH and “derivatives” tokens of other blockchain platforms, such as Polkadot (STDOT) or SOLANA (STSOL), are used.
STETH (LIDO Staked ETH) is the ERC-20 standard token in Ethereum. The current issue of coins reflects the value of assets belonging to owners. The release of tokens occurs after the deposit of ETH and when receiving awards by validators.
LDO (LIDO DAO TOKEN) is the ERC-20 standard token designed for LIDO management. The maximum supply is 1 billion. The founders of the stake service received 64% of the specified amount. The first project participants went to Airdrop in the amount of 0.4% of the maximum emission.
At the time of writing, more than 290 million LDO is located. The tokens of the founders of the project are blocked for one year. Over the next year, coins will be put at the disposal of the owners. Accordingly, all tokens will unlock for two years.
Who controls Lido?
LIDO is controlled by Tao, which allows you to flexibly change the parameters of the staining service. The organization ensures the regulation of commissions, the adoption of updates and improvements. Voting mechanism can also be changed. When polls, users use LDO tokens, the weight of the voice is proportional to the number of coins.
Autonomous control allows the exclusion of malfunctions characteristic of centralized organizations reduces risks for users. Tao allows you to develop a project using funds from the treasury. The latter contained 35% of the maximum issue of LDO.
Service users or other entities may make proposals for the use of tokens. Tao can carry out additional production of coins for the collection of funds or for marketing purposes.
Who owns Lido assets?
To make ETH to the staying, you must specify the address on the Ethereum 2 network.0, which is used to withdraw funds. For the correct operation of the service, it is necessary to create a private key to access to the account. Its storage and use should be controlled by Tao.
To solve this problem, Lido uses a threshold signature. The latter is divided into 11 parts, each of which belongs to a certain subject. To access funds, a consensus of six or more participants is needed.
Such a decision does not require confidence in one person or company, however, it is necessary to trust most address owners. Threshold signature is a temporary solution caused by the features of Ethereum 2.0.
Among the owners of the address are many famous personalities and organizations. The signatories included: Chorus One, Staking Facilities, Certus One, Argent, Banteg from Yearn Finance, Alex Svanevik from Nansen, Anton Bukov from 1inch, Mikhail Egorve, Kristensen Rune, Will Harborne from Deversifi From Lazyledger.
The generation of the threshold signature keys took place from December 13 to 16, 2020, after which the account owners provided reliable data storage. After the technical capabilities, Lido intends to abandon this decision.
What cryptocurrencies support LIDO?
As of June 2022, in addition to Ethereum, the protocol supports the liquid steaking of several other coins:
- Solana (SOL);
- Kusama (ksm);
- Polygon (Matic);
- Polkadot (DOT).
Until May 2022, LIDO also had the opportunity to release derivatives on the security of Terra (Luna) coins, but the project removed this asset from the list of supported after its rapid depreciation. Subsequently, Tao Lido voted against integration into the protocol of the Terra 2 network.0.
How LIDO develops?
LIDO remains one of the most popular ETH stake solutions, and the protocol is included in the TOP-5 in terms of the volume of blocked funds.
Stayking service began cooperation with Chainlink. The developers added support for the price channel for the steth token. The tool will allow the use of a coin in Defi protocols. According to developers, the price channel can be applied to AAVE, Compound and Enzyme.
LIDO developers are involved in the development of Ethereum. In April 2022, the project allocated $ 6 million for the development of the ecosystem introduced the technology of distributed validators Ethereum 2.0.
Goldman Sachs analysts came to the conclusion that Terra collapse caused the “infection” of the steth token and strengthened the system risks of Ethereum, since LIDO accounts for about a third of the total ETH blocked in staining contract.