Lido is a liquid staking solution that allows users to stake their ETH without locking their assets. It was introduced in 2020 when the Ethereum network was just beginning its transition to the Proof-of-Stake consensus mechanism. Lido was created with the goal of becoming a staking solution for ETH 2.0, allowing staked ETH to become liquid without any requirements concerning the amount of ETH users possess.
Lido functions on Ethereum’s Beacon chain that is running parallel to the mainnet and is the consensus layer of the network. Once a user stakes their ETH on the said chain they receive a stETH token in a 1:1 proportion. Staking rewards generated from the staked ETH will be reflected in the user’s stETH balance which is updated daily. The stETH balance represents the ETH rewards gathered on the Beacon chain. LDO is an ERC-20 token that acts as a governance token in the Lido DAO where the amount of decision-making power a user receives correlates to the amount of LDO they have locked in their voting contract.
In July 2022, Lido announced that it is planning to introduce stETH to Ethereum Layer 2 networks to enable liquid staking with lower fees and expand the possibilities of yielding within the DeFi space.