The most important thing to know about Lido Staking is that the average reward rate of Lido Staked Matic is 4.41% (as of the time of writing). This indicates that, on average, Lido Staked ETH holders gain approximately 4.41% if they keep an asset for 365 days. Maybe not so juicy, but it gets interesting. Last week, this percentage was at 3.15%, and the average reward rate as of 30 days ago was 2.82%. So how does it work?
How Lido Works
Lido DAO is a community that develops liquid staking mechanism for Ethereum. Lido software enables users to stake the network without having to maintain staking infrastructure or lose the usage of their capital. Staking with Lido is set to begin alongside Phase 0 of Ethereum 2.0. When a user uses a Lido smart contract to stake ether, they generate stETH (staked ETH) ERC20 utility tokens that correspond to their staked ETH balance on the Ethereum Beacon Chain, as well as any staking incentives or penalties connected with their validator key on the Beacon Chain.
Transactions are then enabled on the beacon chain, which has no set date but is projected to be more than 18 months away. Once withdrawals are approved, users will be able to burn their stETH to obtain their ether balance on the beacoin chain. Until then, stETH is both transferable and useable, unlike beacon chain ether. Don’t leave just yet as Lido has more parts to explain but before then let’s look at what Staking pool is.
What is Staking Pool?
Staking is the process of locking up your cryptocurrency assets to support the operation of a blockchain network. By staking your assets, you help validate transactions on a Proof-of-Stake (PoS) blockchain network. In return, you will receive staking incentives in the form of money or tokens. However, traditional staking has some drawbacks. Once you stake your cryptocurrency, it is locked up for a set amount of time, making it unreachable.
All you need to know about Lido Staking
The staking pool is Lido’s main smart contract.
The contract handles ether inputs and withdrawals, mints and burns stETH tokens, delegates funds to node operators, applies fees to staking rewards, and accepts updates from the oracle contract. The manager logic for node operators is isolated into a separate contract called NodeOperatorsRegistry.
Node operators verify transactions on the beacon chain.
Also, the DAO selects node operators and enters their addresses into the NodeOperatorsRegistry contract. Authorized node operators must generate a set of keys for validation and submit them with the smart contract. As ether is received from consumers, it is dispersed in 32 Ether pieces to all active node operators. The staking pool contract includes a list of node operators, their keys, and the algorithm for allocating rewards among them.
Oracle tracks the balances of the DAO’s validators on the beacon chain.
Balances might increase due to reward accumulation or decrease due to slicing and staking penalties. The DAO assigns oracles. Data is supplied on a daily basis and used to present users with an accurate stETH token balance. On days when there are prizes, a limited number of stETH tokens are issued to the node operators.
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