Lido

Lido is the largest liquid staking protocol in DeFi, holding well above 25% of all staked ETH since the Merge. A user deposits ETH and receives stETH, an ERC-20 representing their stake plus accrued rewards. The token rebases daily as Lido’s node operator set produces validator rewards, so the wallet balance grows automatically without any claim action. stETH remains transferable, composable, and is the dominant collateral asset across Aave, Morpho, Spark, and most major DeFi vaults.

The protocol’s architecture is intentionally curated: node operators are admitted through Lido DAO governance rather than via permissionless entry, which trades off decentralization for predictable validator performance. A “Simple DVT” module run via the Obol and SSV networks has been adding permissionless operators since 2024 to address that trade-off. Slashing risk is socialized across all stETH holders; in practice slashing events have been small and rare since Ethereum’s Pectra upgrade reduced their severity. The wrapped variant wstETH is the non-rebasing version used in most DeFi integrations to avoid balance-changing tokens breaking AMM math.

Lido has been continuously audited since 2020 (Quantstamp, Sigma Prime, MixBytes, Statemind, Certora), with a public bug bounty topping out at $2M for critical findings on the staking contracts. The most significant historical risk for stETH holders has been secondary-market depeg - during the May-June 2022 stress, stETH traded at a roughly 7% discount to ETH for several weeks before recovering. The peg is structural, not algorithmic: every stETH is backed 1:1 by a corresponding validator deposit, so depegs are liquidity-driven rather than insolvency-driven and tend to close as redemption mechanisms restore arbitrage.