Lido Staked Ether (STETH)

Staking and Rewards

Lido Staked Ether allows users to stake any amount of ETH without needing the 32 ETH minimum required for solo staking. When you stake ETH with Lido, you receive stETH tokens that represent your staked ETH plus daily accrued staking rewards. These tokens update daily to reflect earned rewards and can be held or traded like any other ERC-20 token.

Liquidity and Flexibility

Unlike traditional staking where tokens are locked, Lido Staked Ether provides liquidity by issuing stETH tokens that can be freely transferred, traded, or used in decentralized finance (DeFi) applications. This means you can earn staking rewards while still using your staked assets in other ways.

DeFi Use Cases

stETH tokens can be used across many DeFi platforms for activities such as lending, borrowing, providing liquidity in pools, collateral for loans, restaking, and yield farming. This expands the utility of staked ETH beyond just earning rewards.

Network Security and Participation

By pooling user ETH and delegating it to professional node operators, Lido helps secure the Ethereum network through its Proof-of-Stake consensus mechanism. It lowers the technical and economic barriers for users to participate in network validation.

Ease of Use

Lido simplifies the staking process with easy wallet integrations (like Ledger and MetaMask) and smart contracts that handle deposits, staking, and withdrawals. Users can start staking with just a few clicks without managing their own validator nodes.

Summary

Lido Staked Ether is a liquid staking token that lets users earn Ethereum staking rewards while maintaining liquidity and flexibility to use their staked assets in DeFi. It makes staking accessible to everyone, supports network security, and integrates seamlessly with the Ethereum ecosystem.

Advantages

• Lido Staked Ether allows staking any amount of ETH without needing the full 32 ETH required to run a validator node.
• Users receive stETH tokens representing their staked ETH plus rewards, which can be used in DeFi applications, providing liquidity while staking.
• The protocol distributes staked ETH across multiple professional validators, enhancing security and decentralization within its system.
• Lido offers a transparent fee structure, with users receiving about 90% of staking rewards after fees.
• It simplifies staking by handling technical complexities, making staking accessible to users without specialized knowledge.
• stETH tokens increase in balance daily as rewards accumulate, without needing manual claims.
• Lido is audited by reputable firms and continuously reviewed, contributing to its security.
• Users maintain control of their keys, as Lido is a non-custodial service.
• The stETH token is widely integrated into decentralized finance platforms, allowing for various DeFi uses.

Disadvantages

• Lido controls a significant portion of Ethereum’s staked ETH (over 28%), raising concerns about centralization risks for the Ethereum network.
• The value of stETH can deviate from ETH, especially before full Ethereum withdrawals are enabled, causing liquidity and price risks.
• stETH cannot be redeemed for ETH until Ethereum network withdrawals are enabled, which may take months after the Merge.
• There is exposure to smart contract risks and potential vulnerabilities inherent in DeFi protocols.
• Past incidents with node operators have resulted in slashing penalties, indicating operational risks.
• Converting between ETH and stETH can incur fees that reduce staking rewards, especially for small amounts.
• Holding stETH means you do not have sole control over your ETH, introducing some trust assumptions.
• The complexity of using liquid staking tokens in DeFi can be challenging for some users.

This summary should help you weigh the benefits and drawbacks of using Lido Staked Ether for your staking needs.

Founders

Lido Staked Ether was founded by Jordan Fish, Vasiliy Shapovalov, and Konstantin Lomashuk.

Backgrounds

• Konstantin Lomashuk is also the founder and CEO of P2P Validator and previously co-founded Satoshi Fund, a blockchain investment fund.
• Jordan Fish was a co-founder who left the project team in 2021.
• Vasiliy Shapovalov is a co-founder and has served as CTO.

Purpose

They created Lido and its DAO to solve issues with Ethereum staking, such as the high minimum staking requirement of 32 ETH and illiquidity, by introducing liquid staking solutions.

Investors in Lido Staked Ether

Lido has attracted investments from several well-known venture capital firms and crypto-focused investors:

• Andreessen Horowitz (a16z): Participated in a $70 million funding round.
• Paradigm: Involved in a $73 million private token sale.
• Coinbase Ventures: Also part of the $73 million private token sale.
• 3AC (Three Arrows Capital): Participated in early funding.
• Jump Trading: Early investor.
• Alameda Research: Early investor.
• Digital Currency Group (DCG): Early investor.
• Dragonfly Capital: Invested in treasury diversification.

These investors have supported Lido through multiple funding rounds, helping it become a leading liquid staking protocol for Ethereum.

Halal Status of Lido Staked Ether

• Community Opinion: According to discussions on r/IslamicFinance, the status of Lido Staked Ether is considered "grey but leaning towards Halal." This is because Lido provides a staking service, which is generally viewed as permissible, and offers a liquid token representing staked ETH.
• Staking Nature: Lido Staked Ether involves staking ETH in a proof-of-stake network, which supports network security and decentralization without involving interest (riba).
• Token Use: The stETH token received represents a share of staked ETH plus rewards, allowing liquidity and use in decentralized finance (DeFi) without locking the original ETH.
• No Explicit Riba: The service does not explicitly involve interest or forbidden earnings, aligning it closer to halal financial activities.

Answer: Yes, Lido Staked Ether is generally considered halal because it involves staking ETH in a way that supports the network and provides rewards without interest-based transactions.